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While the outlook for new crop grains and oilseeds is bullish both globally and domestically, growers are being warned that increases in input costs will eat into profits and will be even more of an issue for 2023 crops, particularly with Basic Payment Scheme changes.

The warning came during the AHDB Spring Grain Market Outlook on April 27. Arable market manager Vikki Campbell said she feared next year would be the point when many more growers would be hit by fertiliser costs, particularly after order books open this summer.

Her colleague, senior analyst Megan Hesketh, agreed that while the sectors were currently seeing good 2022/23 prices, costs of production would rise, and margins would be squeezed. She explained that global supply and demand balances for grains had been tight even before the current war. The outlook remained bullish but prices would be volatile, and markets were very reactive to news.

Overall, we do expect prices to relatively supported,she said.

For global oilseeds, senior analyst Anthony Speight said that rising crude oil prices had positively impacted vegoil and oilseed. The situation between Ukraine and Russia both of whom account for 80 per cent of global sun oil exports would continue to affect markets, particularly as it had affected Ukrainian processing and port facilities.

There is some spring sun seed sowing in Ukraine, but a lot is in eastern parts where field work is limited and access to inputs such as fuel is difficult,said Mr Speight.

While US farmers were expected to plant 4 per cent more soya area, in South America, a second successive La Nina weather event had reduced output, particularly of soya. Across America, farmers were also facing fertiliser availability issues.

Domestically, the UK wheat area is forecast to be up 1 per cent, with barley area falling by 4 per cent, said senior analyst Millie Askew. There could be a sizeable wheat crop this summer, but with a tight carry-in.

The UK grains market would see some change, she explained, saying that both the UKs wheat bioethanol plants Vivergo and Ensus are expected to be running at full capacity next season, while for livestock feed, a reduced pig herd and tight laying sector would impact. However, the brewing, malting and distilling sectors are expected to be operating at pre-pandemic levels.

Domestic prices are very strong due to the global situation and are expected to remain so if current conditions continue.

Domestic rapeseed prices increased more sharply than those in the EU due to low availability, but Ms Campbell warned that UK farm margins would be less than their EU equivalents due to seed costs. Prices towards harvest may soften slightly, depending on the weather, she said.

Supply and demand for rapeseed was tight even prior to the war, driven by a poor Canadian crop, and major exporters had low stocks.

Crushers are actively looking for alternatives to Ukrainian sunflower and, even where stocks are available for export, the infrastructure is now very challenged. She expected oilseed prices to remain supported until at least the first half of the new crop marketing year.

But while prices for 2022 and 2023 crops look good, Ms Hesketh warned that there would be an ongoing impact on cost of production and margins; price rises would not compensate for higher input costs.

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Advice for the short-term

• Question, daily, whether what you are doing is really necessary; review and reassess everything
• Shop around there may be less to gain, but it will provide some reassurance you are getting the best deal
• Work out what you can afford do some price sensitivity analysis on your farm
• Adjust fertiliser and chemical application rates and timings use to help work out rates on your farm

Source: Mark Topliff, AHDB farm economist