28 June 2002

Wheat under the spotlight

DUE to some bad planning and poor time management on my part, I find myself writing this report on the morning that most people in England will be fixed firmly in front of their television screens watching England play Brazil in the World Cup quarter finals.

My feelings, like those at the beginning of another farming year, are full of hope and optimism, I shall switch on the commentary at about half time to see how the team is progressing, but otherwise content myself with a blow by blow summary from farm staff when they come back to work at full-time.

This is also the day when members of A1 Farmers roll out their crops to the scrutiny of their neighbours to compete for the honour of the Best Field of Wheat Award and also the Worst Crop on the Farm trophy. Although a relatively light hearted occasion there are some fairly serious undertones because costs are discussed and estimates of yield and profitability assessed.

Easton Lodge is not looking as well as it might this year and I shall be struggling to show any field of wheat that would be worthy of the Chairmans cup. I fear that the combination of an average yield and poor price will drag the gross margin down below £700/ha (£283/acre) for the first time in many years.

We have sold no wheat forward for 2002 harvest. But about 80% of the oilseed rape has been sold for July/August as available at £132/t, delivered to a local store. This was a deal done about three months ago and fits in with our grain store management to have rapeseed off the farm early and at times and days to suit us.

The winter barley is grown on contract with malting premiums above the price of feed and could also be moved at harvest, but at prices below £55/t for feed being quoted I am tempted to wait. I have a price of £70/t in my budget but this would clearly not be available until early new year on present predictions.

Talking of trading, brings me to the subject of last years wheat crop. We harvested an estimated total of 930t harvested off 116.76ha (288 acres) to yield a little under 8t/ha (3.2t/acre).

This total is split between 66% Malacca Group 1 full specification milling wheat, 11% Abbot Group 2 and 23% Claire soft feed wheat. The strategy was to sell the feed wheat early and once tested to hold on to the milling wheat.

We had in fact sold the Claire in advance of harvest for £75/t collection August as available and half was at sellers call to fit in with combining. On the day feed wheat peaked at around £80/t albeit it briefly on the back of a weather market. But we were satisfied with our deal and more than 200t was moved off farm hassle-free.

Even before harvest had finished there was talk that rain had affected Hagbergs and specific weights and the August spot price rose to £90/t for Group 1 wheat and £100/t was quoted for collection just after Christmas.

Gold dust

Full specification bred milling wheat was described by one trader as "gold dust". But by September the price had gone off the boil as feed wheat prices began to drop and millers, anxious about a shortfall of quality wheat in the UK and with advantageous exchange rates, began to buy from abroad to cover their needs. Even for June £100/t had gone off the traders board.

The market remained relatively stable through to Christmas with £95/t for June being a more realistic price. Through January the price continued to fall off slowly so that by early February we decided to secure just under half of the Malacca at £90.50/t with collection in June extending to July 12.

As the market continued to be fed by German imports the price fell off still further heading towards the perceived new crop price of £70/t. By March the price had fallen to £80/t for June and milling premiums had dropped with a bump.

We made the decision to hang on to the balance of our Group 1 wheat being reminded of the phrase "gold dust" some months earlier I felt that our full specification bread wheat would come good in the end. Surely prices could not drop any further?

During April although prices fluctuated nothing too dramatic occurred but by mid-May the June price had dropped still further to match the new crop at £70/t. Phrases like "going to the wire" are not in my normal vocabulary and the risk of having to carry over 300t of wheat over into another season were not an option with our tight storage facilities.

We baled out and managed to sell the balance of last years wheat harvest at £70/t for collection extended to mid-July.

Provided there are not too many deductions our average selling price for wheat should end up around £78/t for harvest 2001. Our budget was for £86/t a shortfall of some £7440.

Our accountants in the past have been kind enough to compliment our selling strategy – I fear that there will be few Brownie points awarded when the accounts are audited this year.

Sell feed

The advice from the trade after harvest last year – sell feed and hold milling was sound, my mistake was to hold on for too long in the belief that gold dust would always command its price and who could have believed that Group 1 wheat would fall from £100/t to £70/t in the space of nine months.

Its full time and to cap it all I have just heard that England have lost. &#42