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UK, Polish crops in 'excellent condition', says Origin

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The owner of the Agrii agronomy chain highlighted the strong condition of crops in the UK, and "favourable" weather in Poland too, as it stood by earnings forecasts despite the tough industry conditions.

Origin Enterprises said that the development of UK crops had been "generally slower" this spring "due to lower average temperatures", with some sharp frosts recorded even in late April, offsetting unusually sunny daytime conditions.

Nonetheless, "crops in general are in excellent condition, with minimal losses to date," the group said, also highlighting the shift in UK sowings from winter to spring, in part fuelled by a desire for autumn herbicide applications against black grass, a growing weed threat.

Overall UK plantings of major crops, including vegetables, had fallen by 1.2% to 4.34m hectares, with a 2.5% rise in spring sowings not quite offsetting a 2.7% drop in autumn seedings.

UK upgrades

The comments come the day after the European Commission's Mars agricultural meteorology division, lifting estimates for European cereals productivity this year, nudged higher to 8.14 tonnes per hectare its estimate for the UK wheat yield.

The estimates for UK spring and winter barley were lifted to 5.81 tonnes per hectare and 6.73 tonnes per hectare respectively.

All three figures would fall short of last year's bumper levels, but come in well above five-year averages.

"Mild weather continued to provide good conditions for crop development," Mars said, adding that "substantial rain since the end of April helped to restore soil water levels, which were starting to raise concerns, especially in the southern UK".

Polish prospects

Origin Enterprises also noted "favourable spring weather" in Poland, the EU's third-ranked grain producing country after France and Germany, leaving crops "in excellent condition".

Mars also on Tuesday raised its estimate for Polish wheat yield this year by 0.09 tonnes per hectare to 4.53 tonnes per hectare, while upgrading the winter barley result by 0.14 tonnes per hectare to 4.33 tonnes per hectare.

Mars said that for Poland "the yields of all major crops are still forecast to be above the five-year average", adding that a shortfall in rain below average levels "is currently not critical as water demand is still relatively low and soil water content is only slightly below the long-term average".

'Twin challenges'

However, Origin Enterprises said that corn sowings in Poland, where it runs the Dalgety agronomy chain, had fallen "due to a combination of weaker output prices and a below-average yield performance in 2014".

And in Ukraine, where the group owns Agroscope, plantings will drop by some 1m hectares.

"With the majority of the 13.3m hectares of spring cropping expected to be planted over the coming weeks, total cereal and oilseed plantings are estimated at 20.5m hectares which is approximately 5% lower than last year."

Growers in crisis-hit Ukraine were "facing the twin challenges of tighter liquidity and higher cost structures on-farm", meaning that their "attention is increasingly turning to less intensive cropping".

Market reaction

Nonetheless, Origin Enterprises said that Agroscope had "performed resiliently" in the February-to-March quarter, raising both revenues and profits.

The Agrii chain had performed "in line with last year", while Dalgety reported a "solid" performance with "higher agronomy revenues and margins".

Origin Enterprises, reporting group revenues for the quarter up 9.4% at E560.9m, stuck by expectations of earnings for the year to the end of July coming in at 60.0 euro cents per share.

"Against the backdrop of a particularly tough prior-year comparative and a challenging environment for primary producers, Origin has delivered a resilient third-quarter performance," Dublin-based stockbroker Davy said.

Origin Enterprises shares stood 1.3% lower at E8.369 in afternoon deals in Dublin.


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