PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 11:17 UK, 6th Mar 2014, by Agrimoney.com
UK wheat sowings bigger than thought, says Origin

UK farmers lifted wheat sowings even more than a benchmark survey this week showed – at the expense of rapeseed – Origin Enterprises said, unveiling results which sent its shares to a record high.

UK growers exploited "near perfect conditions on farm" to lift winter wheat sowings for this year's harvest by 23%, to about 2m hectares, said Origin Enterprises, the owner of the Agrii agronomy services chain.

The estimate compares with a forecast from the HGCA crop bureau on Monday of a 19% rise, to 1.82m hectares, in plantings in England and Wales.

The extent of the increases reflects the poor sowing conditions a year before, the tail end of 2012, the second wettest year on record for the UK.

'Rotational disruption'

However, Origin was more downbeat on winter rapeseed area, which it said had tumbled 15% to 640,000 hectares, a sharp contrast to the 3% rise to 703,000 hectares in England and Wales which the HGCA survey showed.

Origin said that the decline was "principally due to the impact of rotational disruption encountered last year due to unseasonal weather", with the poor weather throwing out growers' system of alternating, for example, wheat with rapeseed in long-term sowings schedules.

The HGCA said that "a combination of favourable conditions throughout the planting window and relatively strong gross margins has supported the place of the crop in many rotations".

Rising rapeseed price

Rapeseed prices have proven particularly strong of late, quoted on Thursday at nearly £320 a tonne on farm, up some 10% since the end of January, reflecting a similar rise in Paris rapeseed futures over the period.

The Paris May futures contract on Thursday touched an eight-month high for a spot contract of E410.75 a tonne, before easing back in late morning deals to $409.25 a tonne, a gain of 0.6% on the day.

Rapeseed prices have been helped by cold weather disrupting transportation in Canada, the biggest exporter of the canola variant, and by a rise vegetable oil prices, led by palm oil, for which production expectations have been cut by dryness in Indonesia and Malaysia.

Soybean prices too have been strong in Chicago, helped by tight US supplies, with importers not switching orders as rapidly as had been expected to Brazil, for which production hopes have been eroded by extremes of rain and dryness in major growing areas.

Upbeat outlook

Origin's comments came as the Irish-based group unveiled earnings of E3.53m for the six months to January, down 47% on a reported basis, but representing a rise once the disposal of Welcon is accounted for.

Underlying earnings per share, at 5.93 euro cents, rose 12.1% on a like-for-like basis.

In the core agri-services division, underlying operating profits near doubled to E4.0m, despite a fall to E517.6m in revenues, reflecting lower prices of the feed and fertilizer it sells.

And the group said that the higher level of winter plantings, "combined with crops that are well established, provides a strong foundation for the full-year result" in its agronomy operations.

In the farm inputs side, high dairy prices, encouraging farmers to boost pasture growth, and a return to bigger arable sowings "are expected to support" fertilizer consumption.

Origin raised its full-year earnings per share guidance by 3% to 53.5 euro cents, reflecting the completion of the purchase of Ukraine agronomy group Agroscope.

Market reaction

The results were viewed by John O'Reilly, at Dublin broker Davy, as getting Origin's financial year "off to a good start".

At rival broker Goodbody, Liam Igoe - restating a "buy" rating on Origin shares, with a E7.20 price target – said that "following reaffirmation of the progress in the current year… we are likely to increase our earnings per share estimate [for Origin] to about E0.54".

Origin shares hit an all-time high of E7.449 in early deals before easing to E7.39.5 in late morning trade in Dublin.

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