Malting barley premium to 'stay high', after hitting 5-year top

22.08.2016

Are beer prices about to get fizzy?

Malting barley premiums in Europe, at their highest in nearly five years, look set to stay elevated thanks to the poor harvest, which looks to cut the bloc's pre-eminence as an exporter of the grain, besides in wheat.

While European prices of many grains have stabilised as the extent of the rain damage to harvests in Germany and, in particular, France has become apparent, malting barley values have proved particularly buoyant, given dents to hopes for both crop quality and quantity.

Malting barley prices have risen by 10.2% over the past three months in the French cash market, compared with a marginal fall in feed barley values, according to consultancy Agritel.

The increase saw the premium of malting barley to feed barley top E60 a tonne this month for the first time since 2011, and twice the average of the past year, according to Evergrain, the specialist malting barley house.

While values have since eased back to E56 a tonne they look set to remain above the multi-year average of E34 a tonne, the German-based group said.

'Rather tight'

"After years of abundant supply, the European and world supply and demand outlook on malting barley for the coming 12-18 months has especially tightened," Evergrain said.

In Europe in particular, "the premium is expected to keep trading significantly above the multiple-year average".

But globally too, "as the supply is expected to remain rather tight, we have to assume malting barley premiums to stay on the higher end of the range for a foreseeable future, with regional variations according to the regional availability".

However, the malting barley premium has been kept below the highs above E90 a tonne reached early in 2011 by supplies left over from last season, when the European Union had an exportable surplus Evergrain has pegged at approaching 2m tonnes.

EU woes

For 2016-17, the EU malting barley export surplus from spring crop has tumbled to a "marginal" 100,000-200,000 tonnes, with virtually no surplus from the winter crop.

That would demote it well behind Argentina and Canada in the export league, besides Australia, whose shipments may now top 3m tonnes, including supplies of lower-quality malting barley sent to China.

The decline comes as the EU is in wheat too, thanks to a poor harvest, expected by many observers to lose top rank in exports to Russia, which some see shipping 30m tonnes in 2016-17 after a record harvest.

"Both winter and spring malting barley crops in France and Germany suffered from excessive rains and lack of sunshine hours," Evergrain said, also noting that, by contrast, "the Scandinavian spring crop was penalised for weeks by unusual drought conditions".

Germany, the EU's top consumer of malting barley thanks to its large brewing industry, could be poised for imports of some 1m tonnes this season, although better-than-expected yields and quality have boosted the exportable surplus in neighbouring Denmark to similar levels.

UK results

Evergrain factored in an exportable surplus of some 400,000 tonnes for the UK, as yields and a higher proportion of crop meeting malting specifications offset much of the impact of smaller sowings.

Consultancy Adas said last week that "most malting [barley] crops are meeting specification" in the UK, albeit with only some 20% of the harvest completed so far.

Separately, traders at a major European commodities house said that the UK market was "waiting for a clearer picture to emerge.

"To date, yields and quality have been variable, but with warm dry weather forecast to return… the picture should start be a lot clearer soon."


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