The 2016 AHDB Planting and Variety survey shows an overall decline in the area of cereals and oilseed rape across England and Scotland. This overall decrease results from a sharp fall in the oilseed rape area for a second year running, plus slightly lower winter barley and wheat areas. However, the strongest GB spring barley area since 2013, plus higher oat levels have helped to balance the total area.
GB spring barley plantings for harvest 2016 have seen an increase of 6% since 2015. This growth seems to be part of a general trend towards spring planted crops due in part to the interest in cultural control measures for agronomic challenges such as black-grass and better relative economic returns.
Looking at wheat varieties, nabim Group 1 and group 2 varieties have increased this year and together account for an estimated 31% of the total GB wheat area, significantly higher than in 2015 when they accounted for 23%.
Looking forward to 2017 projected gross margins suggest improvements for oilseed rape and slight declines for barley. This may begin to offer the financial incentive to slow recent declines in oilseed rape area and increase in spring cropping.
Projected gross margins show first bread milling wheat coming out top at £708.00 which assumes a £20.00 milling premium. Next is first winter feed wheat at £662.00 and third is oilseed rape at £661.00. Winter malting barley comes out fifth at £513.00 and spring malting barley comes out ninth out of 12 at £493.00.
Among the key changes in this year’s estimates, compared with those made at this time last year are most forward price estimates have fallen again from those used this time last year except for oilseed rape where prices have risen.
This has meant that the projected margin for oilseed rape has seen by far the greatest gain year-on-year, now virtually on a par with first feed wheat based on the yields and costs used. This could be an incentive to halt the recent decline in oilseed rape area but no allowance has been made for area loss due to cabbage flea beetle issues.
Feed barley has been typically trading at a narrow price discount of less than £10.00 per tonne to feed wheat in the past two seasons but is projected at £10.00 discount now based on trade estimates. This has reduced the relative incentive to plant winter and spring barley crops slightly and from a purely financial standpoint, the main effect of this could be to slow down the increase in spring cropping.
All crops have benefitted from lower estimated input costs year-on-year though for many this has been swallowed up by lower projected crop prices.
The gross margin comparison is based on a snapshot of prices as at late June but prices can alter especially with the recent price volatility seen recently.
Despite the projected gross margins at current November 2017 prices there is a large amount of potential variation. Wheat would be favoured if both markets rose by their highest amount seen in the past five years, while rapeseed is favoured if both fell by the largest amount in five years.
To remain roughly equal gross margins, every £1.00 per tonne price movement in wheat would need to be matched by around £2.50 per tonne in rapeseed price.
Planting decisions for harvest 2017 will be imminent, if not already made and may be influenced by projected gross margins. Actual plantings this autumn and spring will be influenced by far more than just gross margins for the one year alone.
The key points to highlight are that the incentive to plant oilseed rape has increased the most year-on-year of all crops considered and the recent expansion in spring cropping, principally barley, could slow down with a weaker financial incentive.
Pulses have suffered the largest falls in projected gross margin from last year at £348.00, thereby lowering the incentive to plant the crop.