(Agrimoney) – UK farmers sowed more wheat, and less rapeseed, than a key survey suggested, data from Origin Enterprises showed, as the group unveiled flat profits in its core agriculture division, despite “extremely challenging” conditions in Ukraine.
Origin Enterprises, the owner of the Agrii agronomy chain, said that its data suggested only a small fall, of roughly 50,000 hectares to 1.95m hectares, in UK sowings of winter wheat.
Survey data last week from the HGCA crop bureau pegged winter wheat plantings in England and Wales, responsible typically for 94% of UK area, at 1.69m hectares.
That represented a 7% fall, compared with the area harvested last year.
Spring sowing surge?
However, Origin Enterprises pegged UK winter rapeseed plantings down 10% at 620,000 hectares, a five-year low, and a significantly bigger decline that the 1% drop suggested by the HGCA survey.
Indeed, the HGCA survey showed more winter sowings of rapeseed, at 633,000 hectares, for England and Wales than Origin Enterprises estimates for the whole of the UK.
Origin Enterprises, which attributed the sharp drop in rapeseed sowings to “the impact of agronomic and rotational planning”, said that the fall in plantings of the oilseed “will be largely offset by a switch to cereals and other crops”.
Indeed the group forecast “an increased level of spring cropping for the 2015 production year, with total winter- and spring-planted hectares expected to be broadly equivalent to last year”.
The finding concurs with an HGCA conclusion that there will be a “greater reliance on spring cropping by the arable sector for harvest 2015”.
‘Positive on fertilizer volumes’
Origin Enterprises said that the prospects of strong spring plantings, after a drop of some 3% to 3.1m hectares in sowings of the main winter crops, boded well for its performance for the second half of its financial year, which ends in July.
Besides agronomy services, the group also sells inputs such as seed and nutrients, and said that it was “positive regarding full year fertilizer volumes”, despite a potential setback from low milk prices.
“We do anticipate a level of reduced fertilizer application in the livestock sector in the UK, largely reflecting the lower level of returns being currently generated by dairy farmers,” the group said.
While acknowledging a “challenging” time for farmers from “volatile” markets for agricultural commodities and for inputs, a dynamic exerting “significant pressure on the incomes of primary producers”, Origin Enterprises stood by expected for full-year earnings of 60 euro cents per share.
“The cropping profile established to date provides a good foundation for the seasonally more important second half of the financial year when some 90% of earnings typically arise.”
Profits ease
The comments came as the group unveiled underlying earnings per share of 5.80 euro cents for the August-to-January half, down from E5.93 per share the year before, despite a rise of 2.7% to E531.6m in revenues, all in agriculture, and boosted by acquisitions.
Like-for-like revenues fell by E27.9m, undermined by “lower feed and fertiliser prices, lower crop marketing volumes and prices”, which more than offset increases in takings in agronomy services, and increases volumes of fertilizer sold.
Operating profits in agriculture were flat at E4.1m, although showed a E1.1m increase on a like-for-like basis, excluding the Ukrainian acquisition, Agroscope.
“Trading conditions are extremely challenging against the backdrop of the current political unrest and economic uncertainty,” Origin Enterprises said.
“Underlying crop investment spend for the 2015 production year will be lower than last year, with total planted hectares forecast at approximately 20m hectares.”
Market reaction
The results were termed “solid” by Dublin-based stockbroker Davy, which restated an “outperform” rating on Origin Enterprises shares.
“In light of the current budgetary challenges faced by arable farmers, Origin’s interim result is robust and reinforces our belief in the resilience of its business model,” Davy analyst Cathal Kenny said.
The shares stood 0.6% higher at E0.78 in morning deals in Dublin.
