Outlook 2021: Many combinable crops will see OSR replacements

It has been a challenging year for all in the cereals sector, mainly determined by the lack of autumn sowing in 2019. Andersons partner Sebastian-Graff Baker looks at the year ahead for growers.

Very dry weather following the planting of spring crops compounded the worry, which for some has led to financial results they would rather forget.

However, for others, harvest was not as bad as had been envisaged and, combined with a buoyant marketplace, will not be the disaster first feared.

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On many farms, 2020 will see the end of oilseed rape. The dry period during establishment in 2019 combined with relentless cabbage stem flea beetle pressure led to some very poor results at harvest.

As a result, the crop area for 2021 harvest could fall below 400,000ha, although due to better autumn establishment, the amount written off could be less than in the past couple of seasons.

While this has been coming for a number of years, it really is a turning point on many arable units, with the crop having been a mainstay since the late 1980s.

Despite its inherent high cost base and other challenges, oilseed rape has been the most profitable break crop on many farms, as well as helping to spread harvest workload with an early start.

Pulses have well-known benefits to following cereals and many have achieved good results with peas and beans in 2020, but yields remain variable, so there is a risk associated with large areas.

Oats have a growing market on their side, but only spring crops fit grassweed situations and spring varieties are less favoured by the end user.

Linseed will inevitably spark interest again, with some trying winter crops as a direct replacement for oilseed rape with early sowing and harvesting.

Other options

Other options in mixed farming areas might include growing forage crops on contract for others or for sale and/or reintroducing livestock, working with others with the specialist skills and knowledge needed.

With alternative break crop gross margins £200-£245/ha lower than OSR, the obvious choice for many is to extend the rotation to include a greater proportion of cereals, minimising the effect of simply replacing OSR with a less profitable alternative.

On heavy soils, the most profitable (and sustainable) rotation will be two wheats after a break crop, followed by spring barley.

Others may even return to continuous wheat or cereals. This is more challenging on lighter soils, where second cereals tend not to perform so well. The key to minimising the financial effects is to look at the gross margin across the whole rotation rather than direct crop replacements.

As a result of the unique circumstances of 2020, many have seen that spring cropping is perhaps not as dreadful as they first feared.

Clearly, if you simply compare gross margins, in most cases there are negative financial implications compared with winter wheat/autumn cropping.

Overheads

Businesses need to build on the opportunity to consider their overhead cost structure (machinery and labour costs) in light of spring options; the flattening of work peaks reduces the need for overall capacity (machine sizes, horsepower, seasonal labour and so on).

As such, net margin comparisons could be more attractive. This is even more pertinent where businesses may be considering whole-field stewardship options as one of their break crop alternatives.

One example is an AB15 two-year legume fallow option under the current English Countryside Stewardship scheme, which may, in some situations, act as the break crop.

Given the five-year term of such agreements (and potentially longer if rolled into the Environmental Land Management scheme), businesses must make the hard decision to cut capacity and costs in the machinery and labour fleet to make sure there are positive financial benefits.

Comparing gross margins is only part of the story with the medium- to long-term commitments such schemes give. There is an ability to lower business risk and improve margins.

As a general rule, this will only work for average performers, or poorer land, where the risk-v-reward ratio remains higher. For top performers, and good soils, continuing with “full” cropping is likely to be the best way forward.

Productivity not scale

Productivity remains one of the key differences between business performance, certainly not scale.

It is simply understanding land capability and having excellent attention to detail. Scale and the balance between proprietors and employees can make a key difference; incentivisation and good management is essential to deliver returns in the top 25%.

These are often the result of multiple small improvements which, when combined, deliver large changes to the bottom line. Cropping poor land offers low returns and, more importantly, is high risk.

The changing support system (in England at least) means there is likely to be a significant shift in incentives over the next decade.

Support is already targeted at land uses such as growing food for wildlife and the permanent removal of carbon dioxide from the atmosphere – for example, through the Woodland Carbon Guarantee Scheme. It is expected that support will be further targeted at such uses.

Combinable cropping will remain a key enterprise where land selection and the application of resources (particularly labour and machinery) can create profits without subsidy.

Many businesses may need to be both more selective in what land they choose for combinable crops and also more broad-ranging in their overall land use.

Those that start planning for this now are most likely to create profits from both growing crops and collecting subsidy and, therefore, successfully navigate through the next five to seven years of uncertainty.