August 30, 2012
A Fresh Perspective on UK Milling Wheat
By David Neale, Business Development Manager, Agrii
Escalating production costs and risks, uncertain premiums, growing workload pressures and attractive feed prices are all serving to undermine the confidence of even the most historically committed of UK milling wheat growers. To such an extent thata fresh industry-wide approach to quality wheat will be essential if sufficient domesticproduction is to be maintained.
Annual HGCA surveying shows a reduction of just under 20% in the area of Group 1 & 2 wheatsgrown in the UK over the past four years – from 650,000 ha in 2009/10to less than
530, 000 ha in the most recent season (Figure 1).
Figure 1: Group 1 & 2 Wheat Area
Source: AHDB HGCA Variety Survey Results
HGCA quality records further show 2011 was the best year for wheat quality since 2006 with 40% of Group 1 samples making the full 13% protein, 250 Hagberg, 76 kg/hl specific weight milling specification. This meant quality wheats were in reasonable supply despite the substantial shift away from milling wheat growing.
This year, however, things look set to be very different. Protein levels and specific weights, in particular, are widely expected to be disappointing.Fusarium infections have heightened mycotoxin concerns. And the atrociously wet summer meant a challenging, delayed harvest.
Overall, quality is likely to be far closer to the 10-year average than last year. And it mighteven be nearer to 2007 and 2008, when just 11% and 6% respectively of Group1 wheat samples made the full specification (Figure 2).So domestic supplies are set to be tight.
Figure 2: Proportion of Group 1 Wheat Samples Achieving Full Milling Specification
Source: AHDB HGCA Quality Survey Results
The current season’s difficulties and concerns are also making farmers less inclined to grow milling wheat; especially so in the face of increasingly attractive world feed wheat prices and expanding domestic feed grain markets for bioethanol.
The indicative margins our farm management specialists calculate on a regular basis for our agronomists to work with their growers, indeed, show millingwheat stacking-up relatively poorly against feed wheat production – even before the latest steeprises in world markets.
At a verymodest £155/tonne, for instance, a 10t/ha2011/12 Group 4 wheat is set to deliver a gross margin of £894/ha This compares with £723/ha for a 9t/ha Group 1 at the same price. Assuming it is paid on the entire tonnage, this means a premium of £20/t is required for margin parity.
However, if only 30% of samples make the full specification – in line with the 10 year average – our calculations suggest this premium will compensate for less than half the feed wheat yield difference at the base price of £155/tonne, making milling wheat a seriously unattractive proposition.
Under these circumstances and with such pressures on margins and workloads, it is hardly surprising so many growers are losing confidence in milling wheat. All the more so with the premium variations and intake deductionsthey encounter, not to mentionincreasing economic and environmental pressures on nitrogen and other essential input use.
In addition, of course, there is an urgent need to respond to the serious black-grass challenge facing up to 20% of the present wheat area and the legacy of the most substantial take-all and foliar disease season in recent memory; challenges which may well necessitate alternative cropping strategies in some cases, with particular consequences for the second wheat slot in which so many milling wheats are currently grown.
Our industry-leadingCo-ordinated Growing Systems (COGS)research into varietal capabilities and agronomyacross different soil types is enabling us todevelop very much more reliable recipes for milling wheat productionfor growers across the country;particularly so as far as meeting the protein specification – by far the most common reason for Group 1 sample failures – is concerned.
We have, for instance, established individual response curves for grain protein accumulation from applied nitrogen for key varieties on heavy and light soils over a number of seasons as the basis for far more precise agronomy.
Equally, extensive long-term black-grass and second wheat management studies are allowing us to support producers with the best possible guidance on maintaining winter wheat viability in face of the most importantagronomic challenges.
Through our work we’re able to establish early in an emerging variety’s life how good it really is and where it best fits. Added to data from breeders and official testing, this allows us to pick varieties that will best meet our customers’ requirementsand provide the best possible advice on their suitability for different rotational slots and conditions. It also means we can offerthe most timely agronomic support to help improve production efficiency and reliability in the faceof the increasing seasonal variability associated with climate change.
This detailed variety understanding furthermeans we can plan seed production, and work with buyers through our partners, Glencore and Scotgrain to secure ready markets ahead of a variety’s commercial availability. That way we’re able to ensure both sufficient seed supply and sufficient end-market demand.
In parallel, close working with wheat breeders through leading UK authority, Bill Angusis giving us a valuable edge inmaking the most of the much more rapid variety progress possible through excitingnew genetic technologies like genome mapping, marker-assisted selection, double haploidy and single seed descent.
Even so, allthis work alone won’t be sufficient to prevent the decline in milling wheat growing reaching a level at which it causes serious future supply shortages. It needs to beaccompanied by an altogether more sustainable and predictable approach to crop valuation and premium-setting.
Experience, after all, teaches growers that however attractive premiums may appear for the immediate season, they cannot be relied upon for the period over which they are having to budget (2013/14 sales for crops planted this autumn).
In recent years we have been involved in the development of a number of dynamic market-led examples for encouraging sufficient supplies of crops for value-added markets that could provide a model forthe new, more productive industry relationship we believe is vital for the health of UK milling wheat production.
Particularly attractive in this context are thearrangements that have been developed to encourage the reliable supply ofspecialist rapeseed and oats.
Closed-loop contracts have been developed between growers and OSR crushers for High Oleic, Low Linolenic (HOLL) rape to serve the healthy cooking oil market, and between growers and millers for naked oats for human food and high value animal feeds.
These offer fixedpremiaover standard rapeseed and feed wheat respectively for supplies meeting agreed specifications grown on specific contract; arrangements which provide growers with the assurance they will receive a set premium for a specific crop if it makes the required specification before they commit to growing it. And equally, from theprocessors’ stand-point that they can secure the supplies they need to serve their customers at a fixed premium over the commodity market.
In the face of the serious production, market and environmental pressures facing milling wheat producers, we no doubt that such a thoroughly joined-upindustry approach to marketing as well agronomy will be essential to the very future of UK milling wheat production.