Digital Re-print - July | August 2012

A fresh perspective on UK milling wheat

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FEATURE

A fresh perspective on UK milling wheat

by David Neale, Business Development Manager, Agrii, United Kingdom

scalating 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 that a fresh industry-wide approach to quality wheat will be essential if sufficient domestic production is to be maintained. Annual HGCA surveying shows a reduction of just under 20 percent in the area of Group 1 & 2 wheats grown in the UK over the past four years from 650,000 ha in 2009/10 to less than 530, 000 ha in the most recent season (Figure 1). HGCA quality records further show 2011 was the best year for wheat quality since 2006 with 40 percent of Group 1 samples making the full 13 percent 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.

Overall, quality is likely to be far closer to the 10-year average than last year. And it might even be nearer to 2007 and 2008, when just 11 percent and six percent respectively of Group 1 wheat samples made the full specification (Figure 2). So domestic supplies are set to be tight. The current seasons 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 milling wheat stacking-up relatively poorly against feed wheat production even before the latest steep rises in world markets.

At a very modest 155/tonne, for instance, a 10t/ha 2011/12 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 percent 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 deductions they encounter, not to mention increasing economic and environmental pressures on nitrogen and other essential input use.

Meeting milling specifications

In addition, of course, there is an urgent need to respond to the serious black-grass challenge facing up to 20 percent 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
Grain

2012 outlook
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.
24 | July - august 2012

Figure 1: Group 1 & 2 Wheat Area Source: AHDB HGCA Variety Survey Results

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FEATURE Added to data from breeders and official testing, this allows us to pick varieties that will best meet our customers requirements and provide the best possible advice on their suitability for different rotational slots and conditions. It also means we can offer the most timely agronomic support to Figure 2: Proportion of Group 1 Wheat Samples help improve producAchieving Full Milling Specification Source: AHDB tion efficiency and reliHGCA Quality Survey Results ability in the face of the increasing seasonal second wheat slot in which so many milling variability associated with climate change. This detailed variety understanding furwheats are currently grown. Our industry-leading Co-ordinated ther means we can plan seed production, Growing Systems (COGS) research into and work with buyers through our partners, varietal capabilities and agronomy across Glencore and Scotgrain to secure ready different soil types is enabling us to develop markets ahead of a varietys commercial very much more reliable recipes for milling availability. That way were able to ensure wheat production for growers across the both sufficient seed supply and sufficient country; particularly so as far as meeting the end-market demand. In parallel, close working with wheat protein specification by far the most common reason for Group 1 sample failures is breeders through leading UK authority, Bill Angus is giving us a valuable edge in making concerned. We have, for instance, established indi- the most of the much more rapid varividual response curves for grain protein ety progress possible through exciting new accumulation from applied nitrogen for key genetic technologies like genome mapping, varieties on heavy and light soils over a marker-assisted selection, double haploidy number of seasons as the basis for far more and single seed descent. precise agronomy. Equally, extensive long-term black-grass Encouraging sustainable crop and second wheat management studies are valuation allowing us to support producers with the Even so, all this work alone wont be sufbest possible guidance on maintaining winter ficient to prevent the decline in milling wheat wheat viability in face of the most important growing reaching a level at which it causes agronomic challenges. serious future supply shortages. It needs Through our work were able to estab- to be accompanied by an altogether more lish early in an emerging varietys life how sustainable and predictable approach to crop good it really is and where it best fits. 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 for the new, more productive industry relationship we believe is vital for the health of UK milling wheat production. Particularly attractive in this context are the arrangements that have been developed to encourage the reliable supply of specialist 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 fixed premia over 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 the processors 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-up industry approach to marketing as well agronomy will be essential to the very future of UK milling wheat production.

Grain

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July - august 2012 | 25

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