'Fertiliser prices are three times higher than they were a year ago due to high gas prices, imported machinery has doubled in price over the last 10 years or so and new farm steel shed prices have risen dramatically, as has wood'

As I write this during the festive season on yet another dull, damp and foggy day, it's my time to reflect on the past year and more importantly to look forward to prospects for this coming year.

As always, the weather plays a major part in crop production and prices but here in Scotland spring never really happened and was then followed by one of the driest and warmest summers on record, which meant that harvest came and went without any weather issues and drying costs were kept to a minimum.

Yields were satisfactory, too, but one of the main issues was getting transport to move the grain off farm and haulage remains an issue still as drivers are in short supply and not helped by Brexit and being able to get labour from abroad.

Plans to reduce the number of seasonal worker visas for essential harvest work from 2023 onwards will lead to more problems this coming year, especially for Scotland’s fruit and vegetable sectors where this past year there was a lot of wastage due to shortage of labour to harvest crops. The Home Office had decided to maintain the number of visas at 30,000, but to cut numbers in future years.

There was an estimated labour shortfall of around 20% in 2021 and it is thought that the fruit and vegetable growers will cut back production going forward as they cannot afford to lose millions of pounds worth of crop which was just left in the field to rot.

In the past, the Scottish horticultural sector accounted for only 1% of land put down to fruit and vegetables, but accounted for 16% of total output. This will only continue if enough labour is available at harvest time.

In the past these workers mainly came from Eastern Europe and were hard working but since Brexit they do not get the tax advantages back home any more, hence the shortage of people and it could well be difficult to get skilled workers in future to not only pick the crop but deliver it to the marketplace as well.

Covid-19 has not helped either and with the different variants, such as Delta and now Omicron, this is causing labour shortages in all parts of industry.

Following on from the hot dry summer and an earlier than normal finish to harvest, this was followed by excellent autumn sowing conditions and will have resulted in a bigger winter planted area of oilseed rape, winter barley and winter wheat and currently all these crops look well in the field.

This will give encouragement for a good harvest crop next year and with Scottish farmers being assured by the Scottish Government that the current financial schemes and support will be in place until 2024, the weather will be the main factor that could affect the outcome yield for next harvest.

One area of concern, again due to Brexit, is the trade deals that are being done with non-EU countries, contrary to what we were led to believe by the UK Government.

Deals being done with the US, Australia and New Zealand will see some goods going out from the UK, but in the main it will not benefit farmers who produce crops, beef, lamb and dairy products and compete for business on a level footing. Canada, Mexico and India are all in negotiations for deals as well and over the next few years as they progress and possibly increase with other countries, it is going to be a different global marketplace.

Currency will have its part to play as well, even though the UK has left the EU, Europe is still a very important marketplace for the UK. Sterling versus the euro is the main issue, but the pound against dollar is an important equation as well.

This has a bearing on the price of goods that are sold off farm but also on the cost of inputs which have seen a big rise since Brexit and due to demand for fuel, car components, steel, gas, fertiliser, amongst many other products, which have been in short supply and resulted in long delays for delivery and not only because of shortage of haulage drivers.

As has been well documented, fertiliser prices are now three times higher than they were around a year ago due to high gas prices, imported machinery has doubled in price over the last 10 years or so and new farm steel shed prices, for example, have risen dramatically as well over the past year, as has wood.

However, following storm Arwen, last November, there will be any amount of wood coming onto the market over the next year which should see wood prices falling.

Another change last year that took place was when the potato sector took part in a ballot to discontinue their payment of levies to the AHDB. This was supported by more than 60% of growers and this levy has been in place since 1934.

Feed wheat prices have seen an increase over the past week due to several factors, which include the global supply and demand situation, weather in South America and finally the threat to demand from the rising Covid-19 cases due to the Omicron variant, with increasing social and travel restrictions which will see lower fuel demand, plus changes to food and beer consumption.

The weather in South America remained a threat to supplies, as they are forecast to account for 55% of global soyabean production this season and 15% of maize tonnage as well. Dry weather, due to a second La Nina weather event is current and dry soil conditions are affecting the developing maize and soyabean crops.

There are frost tolerance concerns in the Black Sea region, too, where in the Ukraine they have not got enough winter snow cover for their crops. With temperatures forecast to reach -10°C in the next few days, this could result in severe winter kill.

Australia has had plenty of rain to grow its crops and harvest is now well underway. There farmers are anticipating record canola (OSR) and wheat yields and to date have exceeded pre-harvest yield estimates.

Due to the various ongoing issues both here and globally this has seen the London Liffee feed wheat futures back up to levels not seen since December 2, with the May, 2022, Paris rapeseed futures rising to £583.50 per tonne.

Smaller than expected South American crops would further tighten supplies and push up prices again, but if there are further cuts in demand due to Covid-19, this could offset a smaller crop and cause prices to weaken so there is an air of uncertainty regarding prices in the future, especially with lower global grain stocks expected at the end of 2021-22 which will lead to price volatility.

Over the past week, March, 2022, feed wheat futures have risen by £5 to £226.90 per tonne, May, 2022, figures are up £9.50 to £232, and November, 2022, new crop is up £7.70 to £202.70 per tonne.

HMRC has released its latest trade data figures which show UK wheat imports continuing to slow down. At 119,300 tonnes, this is below the five-year average of 125,400 tonnes for October wheat imports and this brings the total wheat imports from July to October down by 19% from last season. Issues with sea freight appear to be partly responsible for these slow imports.

The UK wheat supply and demand balance remains tight with opening stocks at their lowest this century and Defra has revised the 2021 UK wheat crop down to 13.99m tonnes which will help to firm prices as supplies tighten even further. This applies to global stocks as well.

The latest forecasts show little room for error in terms of supply and demand as only small surpluses are projected at a total global level, equating to less than 1% of global demand for both grains and oilseeds. These surpluses depend on maize and soyabeans, as wheat, barley and rapeseed are all in deficit.

Total UK wheat availability is estimated at 16.89m tonnes, which is 2.36m tonnes higher than in 2020-21 but the second lowest since 2013-14.

Despite higher UK wheat production this year, availability is tight due to the tightest opening stocks this century and due to the slow pace of imports due to the sea freight issues and increased costs. As a result, import estimates have been cut to 1.45m tonnes which would be 40% down from last season.

Despite tight availability, wheat consumption forecasts are strong with human and industrial usage for 2021-22 at 7.28m tonnes which would be 11% up from last season. Animal feed usage is forecast up 20% year-on-year to 7.21m tonnes, which is close to the five-year average and with the price discount of barley to wheat closing considerably in recent months, a higher inclusion rate in rations is expected.

Overall, the wheat balance of total availability and domestic consumption is estimated at 2.06m tonnes which is just 441,000 tonnes more than in 2020-21 and is the third lowest total this century.

Total barley availability for 2021-22 is estimated down on last season to 8.25m tonnes due to a reduction in forecast production of 12% and opening stocks down by 22%.

Availability of oats for 2021-22 is up 13% to 1.31m tonnes due to increased production of 1.15m tonnes, and this is the largest crop since 1972 due to higher yields.

Maize availability is forecast down year-on-year for 2021-22 due to imports expected down by 26% to 2.12m tonnes as the import price of Black Sea maize is not competitive against domestic UK cereals.

So just to conclude, as always at this time of year, weather will continue to be the focus for cereal prices. The old crop supply is now more or less known and now the focus moves to the new crop.

But the new marketing year that starts in July, 2022, will see tight opening stocks and if the new crop prospects deteriorate for any reason, this will see markets firm once again. Although the northern hemisphere harvest is a long way off, crop development will be driven by things out of anyone’s control and as usual is normally weather related.