Analysis Countus Arable Farm Index
Start of the sales season starts on a completely different foot
While the arable markets for potatoes, onions and wheat have switched to the new crop, the Countus Arable Index is also adjusting. The 2019/2020 season starts on a completely different footing compared to 1 year earlier. The difference of the Index is no less than 31.6 points.
In the transition week between July and August (week 31), the Countus Arable Farm Index out at a level of 74,7 points. Never before in the past 5 years has the arable barometer been at such a low level at this time of year; only in the starting year 2004 was the Index (with 57,3 points) much lower.
hefty drop
What is the reason for this sudden drop? When we look at the course during July, a varying level is noticeable. In week 30 the highest level was still achieved (85,3 points), but 1 week later it was the lowest level (74,7 points). The Arable Farm Index continued to fluctuate between these 2 levels.
The Arable Farming Index calculates with provisional area figures of 2019. This means that the ware potato area has increased by 4,1% and that of seed onions even by 9,5%. The wheat acreage increased by 8,9% and the sugar beet acreage decreased by 6,4%. The fifth crop in the Arable Farming Index (seed potatoes) also increased slightly: +1,33%. However, the Index uses Bintje seed potatoes; the surface area of this variety has decreased by almost 40%.
New area figures
What is the role of the acreage figures in the Arable Farming Index? The Index says something about the return of the arable sector. For this, 1 January 2004 was used as the zero point (100 points). Ware potatoes, yellow seed onions, wheat, sugar beet and Bintje are used as a construction plan. If the acreage of a crop increases, its importance increases and the financial result of the cultivation weighs more heavily in the total mix. For example, the price of the ware potatoes weighs much more heavily than that of the Bintje seed potatoes, because the Bintje variety only comprises 1% of the seed potato area.
At the moment, the increased seed onion area has a negative influence. The acreage weighs more heavily, while the onion price for the 2019 harvest is at a much lower level than 1 year earlier. Beurs Emmeloord recorded the first seed onion price ex-land on 7 August. Onions are not included in the July Index, because there was no trade. This also explains the huge drop.
Falling prices
The potato futures market, as the index's flavoring agent, has had a major effect on the course. On July 23, the price of the April contract peaked at €20,80 per 100 kilos. Of this, €31 was left on July 15,40. The wheat quotation shows a slight downward trend, but on the physical market it still stands above €170 per tonne.
It is still uncertain how August will turn out. After a difficult period on the potato futures market, it looks like the situation will be more positive at the end of August. It is difficult to say how the onion market will evolve. Wheat prices are expected to remain fairly stable, with a small decline in the offing.
Change ahead?
The Arable Farm Index bounces more often after the old season has ended low. This was also the case last year. However, the tipping point is earlier in most years, around week 29. It is possible that 2019 will make a comeback when the main harvest starts and the market has a better idea of the yield and quality.
Niels van der Boom
© DCA Market Intelligence. This market information is subject to copyright. It is not permitted to reproduce, distribute, disseminate or make the content available to third parties for compensation, in any form, without the express written permission of DCA Market Intelligence.