Malting barley rally collapses as UK sowings jump

24.07.2013

Data showing a jump in UK spring barley area to its highest in some 30 years has blunted a rally in malting barley prices which, thanks to concerns over European heat, defied last week's slide in grain markets.

Malting barley futures closed at E236.00 a tonne in Paris on Monday, up 5.5% in less than a week, and contrasting with a falls in wheat prices in major markets.

Chicago corn prices fell 2.5% over the period.

In Europe's cash markets, the outperformance was even stronger, with prices "soaring E20 a tonne last week", Matthias Wree at malting barley consultancy RMI Analytics said.

Tour findings

The increase reflected concerns over the impact of heat in Europe, which compounded concerns over the state of the crop in Germany, a major malt consumer thanks to its sizeable brewing industry.

"A crop tour in Germany found crops did not look as good as people thought," Stuart Shand, sales director at UK-based Gleadell Agriculture, told Agrimoney.com.

"With ideas of high temperatures in Europe in the next few days, that brought people with short positions back into the market to buy.

"Prices went up E15 a tonne just like that."

Protein question

Talk of some quality concerns from the French cereals harvest may have contributed, with, as broker FCStone noted, "continued reports of lower-than-expected protein from early French harvest results".

Mr Wree said: "Distillers will always go for lower protein, but for continental brewers, the picture is more complicated, and some will prefer higher levels."

However, there are some doubts over whether the French harvest talk is being inflated by a desire to revive prices which, for wheat, hit a contract low on Tuesday for the Paris November lot, falling below E190 a tonne for the first time.

FCStone said that the market talk of disappointing French milling wheat quality was "in contrast to what we are hearing from out contacts on the ground.

"In fact, we are hearing of good quality offerings in southern France, with a good volume of offer also."

UK sowings soar

And malting barley prices, now trading 3% below Monday's close, have also taken a knock from an official estimate that British area of spring barley, the main source of the country's malting supplies, will hit 922,000 hectares this year on a harvested basis.

That figure, the highest since the early 1980s, represents a jump of more than 50% year on year, reflecting the extent of land left unsown in the spring thanks to dismal autumn planting conditions.

It was also higher than published estimates of 800,000-850,000 hectares.

"There were plenty of people talking privately of a bigger figure, but were afraid of going public because an increase of the extent that has now been confirmed just seemed to sound so unlikely," Mr Shand said.

Soaring exports?

The UK spring barley data, factoring in a yield of 5.4 tonnes per hectare, and a malting barley selection rate of a bit over 40%, imply production of more than 2.0m tonnes, a figure not far off that expected from France, the EU's top malting barley producer.

Market talk is of a UK exportable surplus of some 400,000 tonnes, compared with a token quantity last year, estimated by Evergrain at 15,000 tonnes.

Mr Shand said: "Prices are now down E10 a tonne, they have lost most of their gains."

However, it was unlikely the UK malting premium would fall below about Ј10 a tonne, "or farmers will just sell into the feed market".


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