Analyst Insight: UK Wheat Production Revised Lower – but did we already know this?

This morning Defra have released key updates to the June Survey area data. This is after a detailed investigation into both the June Survey and BPS dataset following the variance in English crop area reported between the two surveys in early February.

Headlines:

• English Wheat area in June Survey revised down to 1,619kha from previous estimate of 1.668kha.
• UK wheat production lowered to 13.555Mt from 13.953Mt previously estimated.
• UK Barley Production revised 111kt lower to 6.510Mt due to 19kha reduction in area in revised June Survey.
• UK Oilseed rape production lowered by 62kt to 2.012Mt as area reduced by 18kha to 583kha.
• Area revisions drive down production numbers, yield figures are relatively unchanged for 2018 at 7.8t/ha for wheat, 5.7t/ha for barley and 3.4t/ha for oilseed rape.

Why would the June Survey need to be revised?

To explain the revision, a small subset of responses for the 2018 June survey were found to have included total business crop area rather than breaking down into individual holdings. Where this was apparent, Defra has adjusted the calculation to account for this.

To ensure that this variance does not happen again, Defra are taking action for the 2019 June survey. Holdings sampled for June 2019 that are a known to be a part of larger business have been asked to complete a survey form that relates to each specific holding within the business. Subsequently, there will be new validation checks to ensure that any returns for a holding which is actually quoting total business area will be queried and clarified.

 “The greater divergence in areas [between the BPS and June Survey] for 2018 has been attributed to the provision of business, rather than holding, level responses from a sub-set of respondents to the 2018 June Survey. When the data for this sub-set of responses are corrected, the June Survey crop areas have been revised down” Defra - Revisions to the June Survey crop areas – 31st May 2019

But why is there still a variance in the BPS and June Survey? It is worth reiterating at this point that the BPS dataset is still defined as an experimental dataset and this is only the second year that the comparison to the June survey has been made.

Defra provide three key reasons for the differences between the June Survey and BPS dataset.

1. Thresholds: The June Survey includes a greater number of smaller farms than the Basic Payment Scheme. To claim under the BPS, a farm business must have at least 5 hectares of eligible land, for the June survey the threshold criteria reflects a much wider range of farming activity which may allow sub-5 hectare land parcels to be included.
2. Coverage: There has been falling uptake of the Basic Payment Scheme since 2015. Horticulture, poultry and pig farms are much less likely than other farm types to claim BPS. The area of crops covered by the BPS has fallen by 2% since 2015.
3. Survey vs administrative data: By its very nature, there is an element of uncertainty associated with any sample survey such as the June Survey. For wheat this is generally +/-2% of the published area and this is shown at the time of publication.

What does this all mean?

For many the reduction in cropping area for England and production levels will not be a surprise. For the season so far, it has been thought that wheat production has been overstated and the release of information today more reflects the sentiment of the marketplace.

Indeed, a month ago we released our own analysis of the English wheat area. By making assumptions about stocks and exports in order to reverse engineer an area figure, I calculated the English wheat area of 1,621kha.

With the majority of the old-crop season now complete, and the new production estimate closely aligned with expectations, I don’t foresee any great impact upon the old-crop price volatility. Indeed, old-crop market had been steadily falling to meet new-crop levels prior to the recent bullish trend. This indicates an, on the whole, a comfortable end-of season supply position.

However, the data variances do continue to raise questions regarding the need for accuracy of data for the wider industry. For our part AHDB will now proceed with three key aims to add clarity on the 2018 and 2019 seasons.

Firstly, the next UK balance sheet is planned to be released next Wednesday (5 June). This balance sheet will include the first estimates of ending stocks and total exports for the season. Following this we will re-calculate our Early Bird Survey results by 7thJune; the original results would have been based on the original June Survey area figures. It’s worth remembering that the Early Bird Survey is a planting survey based on intentions in October/November.

We are currently producing our next Planting & Variety survey which will be released in early July. This will be the most robust and clear source of new-crop planting data available so far.

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