Analyst Insight: BPS or June Survey – what should I believe?

• UK feed wheat futures lost a lot of the ground they made up on Tuesday, Yesterday. The old-crop, May-20, contract closed £0.90/t lower, at £153.25/t. Meanwhile, the Nov-20 contract lost £1.40/t, to close at £161.40/t.
• The pressure for markets follows an early view on Russian wheat production from the countries Agriculture Ministry. The ministry has suggested that the winter wheat crop could rise by between 3% and 5%, year-on-year. If realised this would result in a crop of 75.7-77.2Mt, the second largest crop on record (based on USDA production figures).
• In case you missed it yesterday, the updated results of the AHDB Early Bird Survey have now been published, and are available online. In tomorrow’s GMD we will give a view on what this means for production in 2020.

The latest Defra Basics Payments data was released this morning showing the total area of land eligible for direct payments in the 2019/20 cropping year for England. The data highlights some important and significant changes in crop areas relative to the Defra June Survey. Both surveys have their own statistical challenges, some of which were highlighted in David’s Grain Market Daily on Tuesday.

• For wheat, the BPS area is around 55Kha lower than that of the June Survey at 1.62Mha, carrying forward the estimated yields from the June Survey would suggest a reduction in English wheat production of 439Kt giving a potential UK crop of 15.8 MT . If this figure is to be believed then the free stock carried into next season would be significantly lower, leading to a much tighter market in 2020/21 than provisionally anticipated.
• For barley, the BPS data suggests a combined winter and spring area 25Kha less than the June Survey. Again, using June Survey yields would suggest a decline in barley production of 176Kt, giving a UK production figure of 7.9Mt. This would reduce the volume needed to be cleared in the second half of 2019/20, in order to clear volume before a significant crop in 2020/21.
• The difference between the oilseed rape figures from the BPS and June Survey is only 1.1%, however, with such a small 2019/20 crop this would still be an important shift for the market. Assuming the same winter and spring sown splits as the June Survey and carrying the yields forward would give a 16Kt drop in UK OSR production, further tightening the domestic market.

Delving further into the data

Looking into the data at a more detailed level, there are a number of discrepancies within the BPS dataset which need to be raised. The most important of these is the regional winter barley figures. One of the biggest selling points of the BPS is that it allows you to look at granular regional data.

However, the dataset when published this morning gave a plausible total for English winter barley, but a total of 14Kha if you sum the regions individually. This was just a data handling error which has subsequently been corrected but it raises question marks about the data set as a whole and the robustness of data handling.

Although not cereals and oilseeds, the data around potatoes also gives rise to further questions. We, at AHDB, publish area annually based on levy returns. Our data gives a potato area figure 10.5Kha lower than the BPS data and 17.9Kha less than the June Survey figure.

So which data set is 100% accurate?

Neither.

Many people will argue the merits of both sets of data, and both data sets have undeniable limitations. The June Survey is a sample survey and as such there will be an element of sample error. Also there is less regionally specific results. However, there are a couple of important points to raise in reference to the BPS data set too.

First, from 2021 onwards the BPS area payment is due to taper down. We have already seen a drop off in the number of claimants, and with an option to take a lump sum payment at any point during the next five years, you can expect to see the number of claimants continue to drop off.

Second, with the payment received for filling in the forms due to reduce as we move through the next five years, the incentive to spend time filling in the form rather than just accepting the pre-populated areas diminishes.

This leads me neatly on to my third and final point, the BPS forms are pre-populated with the previous year’s data, and you can then just accept the area from last year without affecting your claim. Defra highlight this challenge in their report;

“The BPS data is validated for the purpose of making correct payments to farmers and as such is concerned with total eligible areas and not individual crop areas. This means that any discrepancies between similar crops e.g. wheat and barley are unlikely to be picked up in the validation. BPS claim forms are pre-populated with the previous year’s figures, reducing the need for farmers to re-calculate their areas year on year.”

What’s more only 5% of the forms are actually inspected to ensure the correct land and crops are being claimed for. If Defra themselves don’t trust the data then why should anyone else!

I personally am more inclined to accept the limitations and potential sampling errors of the June Survey and use data that not only has more history to it, but also more longevity.

More important than which set of area data you believe to be true is the need for accurate data. As we move through a period of significant change for UK agriculture accuracy and consistency of data will be critical!

It is worth highlighting that 2020 is a Defra June census year, with that in mind we would urge all in the supply chain to engage with both the Defra survey and our own Planting and Variety Survey to give a full picture for cropping in what will be a challenging year.

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