UK Barley Market

Two of the most popular conversations I appear to be having with our farm sellers at the minute are as follows:

“Will feed barley price improve beyond the current £135/T position?”

And

“Is this malting barley worth keeping, or shall I get rid as feed?”

I have therefore decided to dedicate this week’s column to a discussion of the above. Here goes…

Prior to this year’s harvest, 1.2 million hectares worth of barley was drilled here in the UK; the highest area since 2001 and 21% larger than the year previous. This is predominantly due to a shift to spring barley (a 46% increase on the year previous) following on from one of the wettest autumns for decades.

After what turned out to be a particularly favourable season, provisional results (courtesy of DEFRA) point towards a total barley crop of 7.1M/T; a 30% increase on 2012 and the largest crop since 1997. Furthermore overall quality was pleasing, particularly given some initial concerns.

Further afield, wider Europe (including the UK) is believed to have produced almost 60M/T of barley this season, 10% higher than 2012. However, judging by the local ex-farm premiums, the majority of this is expected to be of feed quality rather than malting.

Looking ahead, the impending Australian barley harvest is expected to be particularly good this year, due in part to some favourable September weather. Estimates are currently in the region of 8M/T. For Argentina a crop in the region of 4.5M/T should be expected – average but plentiful.

So, “will feed barley prices advance beyond the £135/T ex-farm position?”

If the above is realised, it would appear doubtful. At their best, post-harvest feed barley values have been at a £15 discount to feed wheat; at their worst, £32/T and the gap continues to widen.  

Supplies across wider Europe are plentiful and it would seem more than logical to negotiate barley movement prior to the Southern Hemisphere crop reaching the market place in the New Year.  

But what about malting barley; are good quality samples “worth keeping” for a malting purpose?

Demand from the brewing industry (for beer) may have slowed due to the cold weather and high prices, but demand form the distilling industry (for whisky) is ‘quite simply booming’. According to the Scotch Whisky Association, export volumes to the 5 largest importers of Scotch Whisky (France, USA, Singapore, Brazil and Spain) increased by 24% in the first 6 months of 2013 compared to the year previous. This equates to an additional 29 million litres worth whisky.  

Consequently, UK maltsters have had their busiest start a season in 23 years using more than 360,000/T of malting barley in July and August alone. The bulk of their requirement is for spring varieties, the majority of which were contracted and performed extremely well with regard to both yield and quality.  

Post-harvest interest has however been thin and other than the odd requirement, trade has been unusually quiet.

Regardless of the increased distilling demand compensating for the lack of brewing demand, the UK malting barley market is hugely over-supplied. Put simply, the UK is currently awash with one of the largest and highest quality barley crops we have seen for decades. Our maltsters, at least for now, can afford to be selective.

For those of you that can afford to keep well stored malting barley of the preferred varieties through to May/June 2014, then yes, a pocket of demand may well arise. For others, particularly those who are limited on space or who hold secondary varieties, it could be a risky option to hold stocks until the last minute to then be faced with trading a potentially over-supplied feed barley market.

Anyone for a whisky?

For more on this, please see this month’s issue of prospects from the HGCA via their website – www.hgca.com

http://www.hgca.com/document.aspx?fn=load&media_id=9181&publicationId=9412