As the 2020 cereal harvest draws to a close in some areas of the UK, farmers, merchants and analysts try to draw some conclusions as to how the harvest season has fared in order to try and make some calculated decisions for the 2021 harvest.

Of course many of those decisions were taken before harvest started in order to sort out rotations, order seed etc for immediate winter planting of winter oilseed rape, winter barley and winter wheat. A lot of OSR and barley had gone into good warm seed beds and there's evidence of this good start coming through the ground already.

We have seen some reports of exceptional yields of wheat and barley being measured off the combine, but once the totals are cut and dried, only then do you get the true figure – in many cases they do not add up to the euphoric figures off the combine monitor.

Covid-19 has seen input costs and end prices differ this year and fertiliser and fuel will have contributed to lower costs overall for 2020 harvested crops. However, any savings that may have been made, will have been outweighed by lower yield in many cases.

Nitrate fertiliser prices have been dropping since last autumn due to weaker demand, plus lower gas prices meant lower production costs. Fuel prices collapsed due to reduced demand because of the Covid-19 pandemic which pushed down crude and, consequently, red diesel prices.

As a result, according to AHDB figures, winter wheat costs per ha are estimated to have fallen by 3% on average due to the reduction in these key input costs and both spring barley and winter oilseed rape costs are down 4%.

On the other side of the coin, however, average 2020 yields are being reported as significantly down on 2019. Wheat yield is down by as much as 18%, spring barley down 6% and oilseed rape by 11% year-on-year.

When these provisional yields are taken into account, the cost per tonne to produce winter wheat in 2020 is estimated at £156 per tonne, which is 19% higher than last year. Despite estimated spring barley costs per tonne around 3% higher than last year, they are still predicted to be lower than in 2018.

With average oilseed rape yields falling over the last three years, due mainly in many cases to cabbage stem flea beetle issues, the cost per tonne is thought to be an increase in 2020 of around 8% on last year.

So, with a difficult year and poorer yields, the lower input costs have been swallowed up and has meant that in especially wheat and oilseed rape crops the unit costs of production have gone up.

Now for some better news. UK liffee November, 2020, feed wheat futures rose at the end of last week, closing at £177.75/tonne. That as a gain of £3.35 from mid-week and £7.25 over the full week.

This was due, in part, to the renegotiations going on with Brexit, driving domestic markets higher due to a weakening currency. Last weekend, £1 equated to €1.080 which was as a result of sterling falling by 3.7% last week against both the euro and the US dollar. Moving forward to next year, May, 2021, futures currently stand at £178.95 per tonne.

Going back to costs of production of winter wheat between 2018-2020, this figure stood at £144/tonne compared to £156 for this year. With liffee feed wheat futures for November, 2021, currently trading at around £154/tonne this means that wheat is currently trading at a break-even to a small profit.

The harvested GB wheat area for this year is expected to be the lowest in more than 40 years, due to the extreme wet weather last autumn, and is expected to get back to the average of the previous five years of 1.802m ha compared to 1mha this current year.

There are other factors which will help production, such as the scrapping of the three-crop rule and a large area of currently uncropped arable land. There are, however, other issues on the horizon, such as black grass control and a lack of suitable rotational crops, such as oilseed rape, to give a good entry for wheat.

AHDB released its first quality figures for this year’s UK cereal harvest for samples up to mid-August. Only a third of wheat samples met the Nabim Group 1 milling specification, compared to last year when 55% met the spec'. This was due in part to a large amount of rainfall in England in August and will mean that wheat imports from Germany and Eastern Europe will be sucked into the UK – prices were recently quoted at £193.50 per tonne for October.

In the event of a no-deal Brexit, low and medium grades of wheat, excluding durum, imported into the UK would incur a £79.00/tonne import tariff after December 31, so there will be an urgency to import as much as possible before then.

Barley tonnage for the last two years has been huge and as a result has traded at a large discount to wheat, which between August and October last year was around 10%. But since last November, this has grown to 17% discount, or between £35-£40 per tonne.

To put this into perspective, with November, 2021, wheat futures at £152/tonne, even at a 10% discount delivered barley will be around a £137/tonne discount to wheat.

The average cost of production of spring barley from 2018-2020 stands at £163 per tonne, which is significantly above the ex-farm price at present.

As the spring barley harvest has progressed, though, yields are better than pre-harvest expectations. England had planted 1m ha of spring barley this year and for every 0.1/ha yield increase, this moves barley production up by 100,000 tonnes. As a result the UK exportable surplus has increased over the past few weeks as harvest progressed.

The UK barley export programme is well behind 2019, despite the UK having a similar sized exportable surplus. As Brexit approaches, there is a strong need to export as much as possible before the year end when tariffs could come into play. Currently, a weak sterling gives the UK a competitive advantage but there is strong competition from Australia and Canada.

On the malting barley front, Scotland managed to produce samples acceptable for the maltsters compared to parts of England which suffered from poor weather during their spring barley harvest.

A lot of malting samples were around 1.75-1.83% nitrogen which is higher than ideal for malting but some UK maltsters have moved to a higher nitrogen specification, which will see a lot more barley being accepted for the export brewing market up to 1.85% N, rather than heading for the feed heap.

With the Covid-19 situation appearing to be getting worse again, resulting in smaller social gatherings this will reduce the amount of alcohol being consumed in pubs and could see a reduction once again in demand for malt and malting barley. In July this year, malting barley use was down 22% compared to July last year with usage at only 120,000 tonnes.

Since the UK voted to leave the EU four years ago much of the domestic oilseed rape price has been significantly supported due to a weakening of sterling against the euro. Due in part to the cabbage stem flea beetle issues in 2020, the cost of production has increased to £372 per tonne due to the loss in yield – currently the price of oilseed rape delivered Liverpool is £357.50/tonne, which is £8.50 up from September 4.

The area of oilseed rape for 2021 is expected to reduce again and so OSR crushers have had to look elsewhere for tonnage and a large tonnage is expected from Australia where the latest crop forecast is for a 47% increase up to 3.42m tonnes, which could add 1m tonnes extra to Australia’s exportable surplus. Timing might be an issue, though, as Australian supplies will not be available to crush in Europe until early 2021. The UK rapeseed crop was estimated to be 2.17m tonnes from harvest 2017, but is forecast to be as low as 1.12m tonnes from this year’s crop. That leaves and import gap of 700,000 tonnes.