AS THE new year gets under way, we can take a look back at last year’s weather stats to see if there has been much change from previous years.
Two local farming companies in the Borders which have kept rainfall records for many years send me their results immediately after the new year has commenced and this year there are some interesting results.
The Aitchison family, who have been keeping rainfall records at Lochton, in the Borders, since 1903, said that 2016 rainfall was 730.5mm, compared to 681.3mm in 2015. Not many miles apart, Colin McGregor, at Coldstream Mains – who recently won the Food and Farming Industry award at the House of Commons for the title of ‘Progressive Farmer of the Year’ – had rainfall figures of 811.5mm in 2016 and 711mm in 2015.
The forecasters tell us that the trend is for the average rainfall to increase and during the last 25 years or so in the Borders region, the average has crept up from 611.8mm, or 24.09 inches to 771.2mm, or 30.36 inches per year.
Also interesting was Colin’s solar evaluation, which showed that sunshine hours were at average yield expectation for the first and last four months of the year and above expectation for May, June, July and August, even though I did not think we had a particularly sunny summer in 2016.
But are prices going to be a little sunnier for farmers in the coming year? So far, it’s been quite good news and UK feed wheat prices are set for the first year of gains since 2012, as at December 29, feed wheat futures were at £136.20 – that’s 21% higher than the same month a year ago when they were £112.60/tonne.
This was the fifth consecutive month that nearby feed wheat futures had gained on the year and 2016 was the first calendar year that this price series has recorded an annual average gain since 2012, despite a fourth consecutive year of record global grain output.
Currency volatility, especially in the aftermath of the Brexit vote, has helped to support prices. Since June 23, sterling has fallen 10% against the euro and 18% against the US dollar.
It is not just currency volatility that has been influencing UK markets this past year, a tighter supply and demand situation domestically has also had its part to play.
The wheat surplus available for either export or free stock was put at 1.85m tonnes, 55% lower than 2015-16. From July to October, the UK exported 860,000 tonnes of wheat, leaving 990,000 tonnes to either export in the remainder of the season, until next June, or carry over into 2017-18.
While the UK feed wheat market is set up for the first annual increase since 2012, US wheat futures are set to fall for the fourth consecutive year. Chicago wheat futures were 16% lower than in December, 2015, and December was the 17th consecutive month of monthly average losses on the previous year.
US prices have been weighed down by a fourth consecutive year of record global grain output, coupled with poor demand for US wheat, as well as ample domestic supply and the Chicago futures recorded their weakest finish to a calendar year since 2005.
One fact that should help is the latest increase in the blending requirement for biofuels added to conventional fuels, primarily ethanol in the US, is likely to support prices, that is assuming that this decision is not reversed by the new incoming government.
Following a change in president, last November, in Argentina, taxes and quotas on wheat exports were removed and the peso also devalued. These factors boosted the incentive to increase agricultural output and an increase in future of around 19% of planted area is expected.
Production there could reach 15.7m tonnes in 2016-17 which would be a 39% year-on-year increase to 5.23m ha.
Russian wheat production is put at 73.3m tonnes, which is 18.6% larger than in 2015-16 and already above already high output forecasts. The confirmation of higher output, combined with slower exports than last year is likely to weigh on prices from this typically highly competitive wheat exporter.
Between 1990 and 2016, Russian wheat output has increased by 22m tonnes, down partly to a larger planted area. In the 1980s, Soviet Russia was the largest wheat importer in the world buying more than 20m tonnes annually – fast forward 30 years and Russia has now become the No 1 world wheat exporter.
It is not only wheat prices that have been at recent high levels, but British blue-chip stocks closed recently at an all-time high, rising 14% in 2016, despite the FTSE100 index falling 4% at the beginning of this year due to a weak oil price and economic uncertainty following a near 5% fall in 2015. Oil, however, is trading at about $57, compared to below $27 last January.
Cumulative EU common wheat exports so far this season are now slightly down on the same time last season at 11.9m tonnes. This is due in part to the adverse weather earlier last year affecting key producing countries such as France. Exports are expected to be down year-on-year, however, during the first three months of the season, EU common wheat exports were above the previous two seasons.
The EU commission has now put the full season export total at 24m tonnes, which means that the EU has so far exported around 50% of that current forecast.