At the time of penning this article, a Brexit deal had still not been agreed – so we go forward next week into uncharted territory and one wonders where we will be at this time next year.

Defra has set out its stall with what it wants to achieve and between 2021 and 2028 is planning a range of measures that will see a renewed agricultural sector, producing healthy food for consumption at home and abroad, where farms can be profitable and economically sustainable without subsidy!

This includes farming and the countryside contributing significantly to environmental goals, including addressing climate change.

By 2028, the aim is for farmers to be running sustainable businesses that do not need to rely on public subsidy.

The transition period will start on January 1, 2021 and from then until 2027, Defra will gradually reduce and then stop non-targetted direct payment and farmers will be paid to improve the environment, animal health and welfare, and reduce carbon emissions.

There will be three levels of support aimed at paying for sustainable farming practices, creating habitats for nature recovery and making landscape-scale changes such as establishing new woodland and other ecosystem services.

There will also be significant grants made available to support farmers to reduce their costs and improve their profitability, to help those who want to retire or leave the industry and to create new opportunities and support for new entrants coming into the industry.

Farmers will see their receipts under Direct Payments progressively fall, but they will have the opportunity to access new schemes as that happens.

The Common Agricultural Policy was launched in 1962 and the aim was to ensure that farmers made a reasonable living, guarantee a stable supply of affordable food and help tackle climate change.

Each year, the Scottish Government administers the subsidy payments to farmers and as of this year, Scotland has the lowest amount of direct farm funding per ha of farmland in the EU, but payment to individual units, rather than by ha, in Scotland has one of the highest rates of direct farm funding.

Brexit is not the only major development to take place this January, but the result of the recent US presidential election and the inauguration next month of Joe Biden is expected to help US global exports and agricultural prices.

But this could see higher costs for farmers as well, as the president elect aims to promote the use of biofuels, such as ethanol, which will see more demand for maize use, which is a main animal feed sources.

However, this will come at a cost to farmers as more strict environmental laws come into force, such as limiting the use of fertilisers and may well affect potential yields but farmers are expected to be subsidised to compensate for lower productivity and other greening restrictions.

Commodity prices in the US are expected to rise along with the extra biofuel demand, partly due to the growing requirement of China to import more commodities from America, such as maize, where its requirement will be 33m tonnes next year and rising to 55m tonnes by 2023.

So, both the US and South America will use more biofuel potential to supply, instead, China’s needs for more soyabeans and vegetable oils. That should result in higher commodity prices.

There has been mixed reaction to the recent World Agriculture Supply and Demand Estimates (WASDE) report by the USDA. Initially, the forecast for global stock of wheat, maize and soya was cut and this saw a sharp rise in US wheat futures.

Almost simultaneously, the forecast for better supply prospects for this coming year saw the rally that began in June for Chicago wheat futures fall by 9% overnight.

USDA published its final world balance sheet estimates for 2020 with production estimates for wheat of 773m tonnes and maize at 1.143bn tonnes, which were both similar to previous estimated reports.

Global wheat markets will see pressure from improving production estimates in Australia, Canada, EU and the UK. Meanwhile, Australian wheat production is forecast to increase by 106% from last year to 31.2m tonnes and its barley tonnage by 33% to 12m tonnes. If realised, both would be the second largest on record.

Canada is forecast to produce 35m tonnes of wheat as its wheat harvest nears completion, which would be 7.7% higher than last year. With more Australian barley coming up for export, this will also see increased competition for UK barley exports into North America, especially if UK barley is subject to tariffs into the EU post-December, 2020.

Latest estimates put EU and the UK soft wheat production next year at 143m tonnes when last year the total was 127.9m tonnes. This increase is due to better planting conditions and expected higher yields for the UK, France, Germany and the Balkan region.

All the UK winter sown crops this past autumn were planted earlier and became much better established into good seedbeds compared to last year and yields are looking to be much improved.

This has resulted in new crop wheat futures being much lower than old crop prices, which leaves no incentive to store the 2020 wheat crop beyond the end of this marketing season.

At time of writing, new crop November, 2021, futures stand at £161, November, 2022, is at £156.70 and May, 2021, old crop futures are at £199.90 per tonne.

As it appears increasingly unlikely that the UK and the EU will reach a Brexit deal for January 1, 2021, price volatility will increase for the UK domestic market as sterling lost 2% against the euro and prospects for imported EU wheat becomes a distinct possibility.

Price volatility is also being caused by Russia possibly implementing additional quotas of 17.5m tonnes to control wheat exports. Prices there have reached record levels due to 20m tonnes of wheat exports since July.

This had resulted in depleted wheat and flour stocks for domestic usage.

Compared to the forecast increase in global wheat production, Russia’s recently sown autumn wheat crop is still suffering from dry soil conditions and temperatures falling as low as -20C has resulted in 22% of its crop being rated 'poor' – the worst since 2013 for this time of year.

It's also not been helped by 13% of the planted seed failing to emerge, which equated to about 2.5m ha of cropping.

Brexit, though, means that uncertainty continues to dominate the UK feed and malting barley market. A potential tariff of €93 per tonne on UK exports to the EU would be hugely damaging for exports, though they are continuing for the moment.

The AHDB released its latest UK cereals trade data recently and so far 140,524 tonnes of barley exported in October took the total for the season to 412,719 tonnes.

In October, the UK imported 167,000 tonnes of wheat, taking the season total from July to October to 855,000 tonnes, which is 40% of the full season forecast. Without a deal by the end of this month, there will be a £79 per tonne tariff on imported EU feed wheat.

Barley is maintaining a wide discount in comparison to other feed grains and continued strong domestic demand is forecast to be up 17% from last year. Its usage by UK brewers, maltsters, and distillers from July to October decreased by 13% year-on-year.

Some 43% more barley, 51% more maize and 17% less wheat was used for animal feed in October, compared with the same period in 2019 and so it's not surprising to see a large increase in barley feed usage given the current £46 per tonne discount to feed wheat.

In some recent weeks the discount was nearer £50 and that compared to £30 per tonne last June. Over the past five years, around 75% of all cereals used in animal feed production was wheat and so far this season, just 67% of the total was wheat. Barley took up the slack and is currently at 24%.

The weakening value of sterling and a €10 price increase in EU rapeseed markets helped increase UK domestic OSR prices back to all-season highs. UK delivered rapeseed into Erith recently rose to £375 for February, 2021, delivery and prices again were helped by a weaker sterling against the euro.

EU and UK rapeseed production could reach 18.20m tonnes next season, which would be up 1m tonne from last year’s poor crop. Currently, this season’s crop is put at 77% in 'good to excellent' condition.

As this is my last contribution for 2020, it just remains for me to wish everyone a happy festive season and prosperous New Year.