Farm Ireland

Thursday 23 November 2017

Tillage sector caught in eye of global storm

Contractor Michael Nolan harvesting Fuego variety beans recently for Stephen Kelly, Booldurragh, Fenagh, Co Carlow. Photo: Roger Jones
Contractor Michael Nolan harvesting Fuego variety beans recently for Stephen Kelly, Booldurragh, Fenagh, Co Carlow. Photo: Roger Jones
Fiona Thorne

The George Clooney movie The Perfect Storm could be used as an analogy for the 2016 global harvest versus the Irish situation. In the movie, various weather fronts converged which had dramatic consequences for Clooney's fishing vessel.

The weather conditions on the global scene have meant that the 2016/17 ­marketing year is set to yield the world's largest cereal crop on record.

Unfortunately, like ­Clooney's boat in the movie, this set of events did not spell good news for the Irish cereals sector. While good weather ­internationally yielded bumper crops, the same weather and set of conditions were not ­experienced in Ireland.

Based on provisional ­harvest estimates for Ireland, a decrease in production over 2015 figures is forecast. While final harvest figures will not be available for some time yet, it is clear that the Irish situation is at odds with the world's cereal balance sheet.

The fact that this year's global record harvest is following on from three previous bumper harvests is what is really affecting the market situation, stock levels and ultimately price.

Unfortunately, demand growth continues to lag ­behind supply growth which results in rising carry out stocks. As we all know, the end result of a build up of stocks is lower prices.

So the combination of the lower yields in the Irish cereals sector, coupled with lower international and Irish prices, has led to a very negative set of ­consequences in income terms for the average Irish cereal farmer in 2016.

Irish harvest estimates

Also Read

Best estimates from ­Teagasc at the moment, set out in the provisional harvest estimates, says the forecasted decrease in production is a result of a combination of reduced areas (-7pc, see Table 1) and lower yields.

The yield outrun has been mixed. Winter barley and winter oilseed rape yields have been described as "generally disappointing", whereas winter wheat and earlier sown spring barley yields were some bit better, but not on a par with 2015.

Winter barely production is expected to be down by as much as 13pc compared to 2015, with winter wheat down 5pc.

The latest estimates from the USDA puts total global production of wheat and coarse grains for the current year up by over 80 million tonnes on 2015/16 production and up over 30 million tonnes on 2014/15

This story of a significant upward movement in world grain production is forecast despite the decrease in EU wheat and barley production, predominately due to disappointing yields in Western Europe.

The lack of sunshine coupled with heavy rains in the spring coincided with fertilisation and grain fill which are critical phases in terms of yield formation. This caused damage on a large scale in France, where all the main soft wheat growing regions saw yield losses.

Consequently, the French soft wheat harvest has been described as calamitous, with production down over 25pc on last year.

Even the latest USDA WASDE update for September has done very little to uplift the market.

The biggest development from the latest report was that the forecast for global wheat exports were revised up by over 2 million tonnes, with increases for ­Australia, Brazil, ­Kazakhstan and Ukraine offsetting a 1 million tonnes reduction for the EU.

Total carry out stocks in 2016/17, which is the real decider in terms of price formation, is forecast to increase by nearly 100 mt since the 2013/14 marketing year.

Fiona Thorne is an economist with Teagasc

Indo Farming