More on spring seed decisions

Choosing which spring crop to grow this year – or whether to sow anything at all – is probably harder than ever. Suzie Horne opens this Spring Seeds Special by asking the views of several commentators

Soil conditions, fertiliser prices, contracts availability and crop prices are all key considerations in spring crop choices for 2009.

Huge variations in all these factors mean the range of predicted gross margins from various sources has never been so wide, making decisions even trickier than usual.

“Difficult and not profitable,” is how Sentry Farming director Richard Peck sums it up. “Looking at the margins, it’s not going to be easy. There’ll be a huge area of spring crops going in and choice is limited.

“I think contracts will be essential for some of the area to manage the risk of low prices if markets get overdone. But costs need to be known to ensure you’re not growing a crop that will make a loss.

“Spring barley will feature hugely, but maltsters know this and contracts are £120-£130/t. Margins will be tight at those levels.

“The big influence is the input price of fertiliser. Most businesses have already purchased and, to compound the problem, urea is now in free-fall and available at £240/t, having topped out at £480/t. And that’s before you start looking at P and K prices.

“Linseed looks okay, but contracts will be essential, as there will be lots grown this time.

“Hard red wheat looks fantastic on paper. Yield is the key, as the quality seems there when we’ve grown it before. We’ll try some, but in reality the best crops will be on the best land, drilled in good conditions in late autumn. However, you don’t need many tonnes at the price offered, so it’s probably worth a look. But in my experience it doesn’t deliver on average-to-poor soils.

“Beans hardly stack up and are so volatile. If prices held up and we could consistently get 2t/acre it would be a yes, but they’re pretty risky for a large acreage,” says Mr Peck.

Spring crop choices – factors to consider

  • Volatility in prices – look for contracts to reduce risk by getting a price you know offers a margin
  • Seed availability – it is limited for some options
  • Margins – they look good on peas, but can you get the quality and cope with a harvest clash?
  • Budget sensitivity – cater not only for changes in yield and price, but higher harvesting costs on crops such as peas, beans and linseed
  • Storage – how big a range of crops can you cope with and still have marketing flexibility?

The wheat area is expected to be down, but by how much is hard to tell because of confusion over drilling rates, says Masstock’s Barry Barker.

“Seed orders have been quite good, but thousand grain weights have been higher and so have drilling rates. Most merchants have sold at least as much or more wheat seed as last season. Barley sales are generally matching and may be slightly higher than last year, while oilseed rape is down for many people and at best about the same.

“Peas offer the highest potential margins, especially if you can get a human consumption buy-back contract on a variety like Genki, Kahuna, Princess or Kabuki. But these are being reassessed and are not widely available. Management is not easy and, as with any premium pea, appearance is all important. Values on blue peas can drop from £250/t to £110/t if you end up with a badly split and bleached sample.

“Seed availability limits this market, so if you’re planning a premium variety, secure your supply.

“Linseed saw some good early contracts at a 10% price premium to oilseed rape and I think this will continue. We’ll probably see a slightly bigger linseed crop this season. A lot of crops made 2t/acre in 2008, but yields are very variable,” warns Mr Barker.

TAG’s Andrew Wells believes some options could be worse than not sowing at all, unless prices improve significantly between now and when the crop is sold.

“Gross margins don’t look exciting for many crops, particularly as we’re expecting much larger spring barley and spring bean acreages in 2009, which will reduce premiums for malting barley and human consumption or export beans if these haven’t already been secured.

“There’s no doubt that the area of non-cropped land will be larger in 2009 than in 2008 – how much larger depends mainly on the spring weather.

“If soils are in poor condition following the last combinable or root crop it may be better to take the fallow option, repair the structure properly when conditions are suitable, control any grassweeds with glyphosate and be ready for establishing wheat or oilseed rape in the autumn,” he says.

TAG’s gross margins include 60kg/ha of phosphate and potash to all crops at a total cost for P and K of £139/ha. Nitrogen is priced at £1/kg or £345/t for ammonium nitrate, while seed is all costed as purchased C2 equivalent. Agchem input is based on expected use and forecast prices for spring 2009.

“Peas look to have the best potential on suitable land,” says Mr Wells. “Good selling prices are available and the crop avoids the need for expensive nitrogen. But quality peas probably need to be on a buy-back contract to secure seed and lock into selling prices and premiums.”

Peas are usually harvested at the same time as wheat. So growers should be prepared to stop cutting wheat to tackle them at the right time to maintain yield and quality, and they must be able to dry and store the crop effectively, he adds.

“Of the spring cereals, milling wheat and malting barley offer the highest gross margins, but all are below £400/ha and will not provide much profit once field operations, drying and storage costs are included.

“My gut feel is that milling wheat will be in more demand than malting barley. So this could be the year to go with the spring wheat option, although decent quality home-saved seed may be scarce after the 2008 harvest washout.

“Spring beans look unattractive unless favourable selling prices and premiums have already been locked into. As a speculative crop they could be a financial disaster, as oversupply looks inevitable.

“In areas where there’s high demand for maize for animal feed, growers should consider putting in maize for silage or grain, crimped or whole. This could be a very attractive spring-sown alternative to the traditional spring combinable crops. However, weed control costs can be significantly higher now atrazine has gone, and growers must be aware of the increased DON risk for following wheat crops.”

While peas look the most attractive option, Strutt and Parker’s Will Gemmill warns that to get yield and quality the crop needs good soil conditions at drilling and good harvest weather.

“Beans are more resilient that peas and can cope with a coarser seed-bed and with a good quality sample you could get a small export premium.

“Although better contract prices were available for linseed a couple of months ago, this is still an option, as it is a late driller. Our linseed margin is based on a price of £260/t. Spring oilseed rape will go in mainly to patch up, as it doesn’t stack up on its own merits.

“If I was growing a spring cereal, it would be milling wheat, although hard red wheat (HRW) is worth a look. There’s a slight yield penalty on HRW, but the price, £200/t in mid-December, more than covers that.

“Oats stack up reasonably well. But remember they tend to be cyclical in that in a year when prices look good, people tend to pile in, so look for a contract. Naked oats also are quite attractive,” says Mr Gemmill.

Some of the highest margins for certain crops, such as beans and linseed, come from the 67th edition of the Agricultural Budgeting and Costing Book, published by Agro Business Consultants, a sister company to consultant Andersons.

“The margins were produced at the end of September and the prices now look rather high, as markets have fallen since then,” says Richard King of Andersons, who edits the costings book. Nitrogen in these margins is around £390/t.

“On the question of leaving land fallow, we don’t think there will be much increase beyond the usual area. With recent volatility in markets, the view is that it is better to at least have a crop to sell and hope prices pick up, rather than do nothing with the land.

“Of course, unless the grower has a very flexible overhead structure, such as high reliance on contractors for fieldwork, simply not growing a crop doesn’t often actually cut out that much in the way of costs.”

Gross margins (£/ha) for spring crop options 2009

TAG

Strutt & Parker

Sentry

Agro Business Consultants

Milling wheat

375

525

345

405

Feed wheat

240

Ð

Ð

Ð

Malting barley

369

490

449

472

Feed barley

187

350

271

316

Oats

220 (F)

390 (M)

312 (F)

352 (M)

Peas marrowfat

712

740

213 (F)

419 (F + £20 prem)

Peas micronising

753 (large blue)

630 (large blue)

 

 

Beans

126 (F)

300

213

464

Oilseed rape

125

310

229

269

Linseed

181

315

406

526

Fallow

-12

– 12

Ð

Ð

F=feed, M=milling