Spring Seeds: Difficult season for spring barley

Enthusiasm for spring barley has come to a shuddering halt, as last year’s huge upsurge in plantings created a mountain of over-supply, slashing prices from more than £180/t to less than £80/t.

With contracts for 2010 as rare as hen’s teeth, even elite malting growers are wondering whether to plant, although at least one analyst believes growers should take a leap of faith (see right), while others are pointing to the huge area of winter wheat drilled in the UK and Europe, which may help move supply and demand back into balance.

Indeed, by harvest 2010 over-production anxieties may be fading, suggests Jonathan Arnold of merchant Robin Appel, Hampshire, with much of the surplus sold for feed, export or intervention.

But it is a huge surplus that needs shifting and maltsters are buying cheap crop now to buffer price reversals. Barley trading at sub-£80/t ex-farm, with negligible premium for malt, is a far cry from the decade-topping £180/t-plus commanded in summer 2008.

DEFRA puts total barley production in 2009 at 6.74m tonnes, 10% up on the previous year’s 6.14m tonnes. Two factors drove that. First, the sodden 2008 autumn left growers with vast swathes of land undrilled. Second, a record malting price mid-2008 enticed growers to boost spring barley drillings by almost a quarter, pushing the crop past 750,000ha.

Analyst Strategie Grains estimates 50% of spring crop and 27% of winter crop is malting quality, pushing UK malting barley production to 2.77m tonnes, compared with 2.42m tonnes the previous year, and well ahead of demand, which was up to 2m tonnes, but is tumbling in the recession.


Lower costs of production and the ability to spread workloads are reasons to consider the crop beyond gross margin figures, according to Andersons’ Graham Redman.

DEFRA data show brewers, distillers and maltsters used 231,000t of barley in July and August, 17% less than in the same period in 2008. UK beer sales fell by 4.5% over the first six months of 2009, with exports down 8.8%. The story is repeated in mainland Europe, where January to August beer sales in Germany fell 3.7% and demand in eastern Europe slumped 10%.

Consequently a 1m tonne UK malting barley surplus is forecast, almost double the previous year’s 0.65m tonnes. Record-breaking quality barley harvests in France and Germany have swollen continental stocks, too.

Such a surplus overhanging the market means even some purist malting barley growers are now walking away from the crop, says Openfield‘s seeds specialist Lee Bennett.

But, are there positives? “Our hope is we will start to see some recovery from recession in 2010,” says Mr Arnold. There is also the hope of a football World Cup spiking demand. “That can stimulate beer consumption, particularly if a home nation stays in to the later rounds.”

The weak pound could aid exports, although competition is stiff from within the EU and up to 7.5m tonnes from the Black Sea region. Intervention could help, in its last season for barley, its November price equivalent of £93t saw 5000t offered in the UK, and more than 350,000t in Europe, in the first few days of November.

But Strategie Grains is not optimistic. It reckons 2.1m tonnes of UK old crop will be carried over into next season, compared with 1.2m tonnes in 2009. “With such a carry-over there’s no real reason for forward contracts to be issued,” says HGCA analyst David Eudall.

Many growers have responded by exploiting an open autumn to drill extra wheat. “At a gross margin level second and even third feed wheats look more competitive than barley,” notes Mr Eudall. Trade estimates suggest winter barley planting is down 5-10% and substantially less ground will be available for spring planting.

Frontier seeds specialist Peter James agrees a market correction in plantings is likely, but believes traditional malting growers will persist. There may even be an upswing in prices, if stocks can be reduced.

Masstock‘s Barry Barker agrees the crop will drop from last year’s heady 750,000ha, to maybe 600,000ha, reflecting poor premium prospects and contract scarcity, particularly in England. “Scotland will see some contracts, because maltsters there need certain varieties and will put a price in the market to ensure they are grown.” But contracts will be rarer in England, prompting growers to focus more strongly on feed and straw output, particularly on mixed farms west of the A1.

Mr Bennett says it is a year for breaks and specialists. “Linseed is selling very well, spring rape is starting to kick in, and marrowfat pea contracts are selling like hot cakes. I think spring barley will really be restricted to land that is too thin to grow wheat properly, where growers know they can get a low-N malting sample.”

In the south Mr Arnold reckons malt remains a worthwhile target. His company expects to trade 60% of its barley on minimum price or premium over feed contracts, mainly with loyal growers. “For growers who know they can deliver a quality malting sample the crop can still stack up, particularly with straw worth £40/t last year and a declining area likely to push that higher this year.”

Norfolk malting barley specialist Teddy Maufe, co-founder of the Malting Barley Growers Confederation, suggests growers planting off contract are sabotaging the market not just for 2010, but for 2011 too. “They’re postponing the chances of us getting back to a reasonable price. If we all packed up growing barley right now, not just in the UK, but across the whole of the EU, we would probably still only just clear the surplus and get things in order for 2011.”

He urges growers to sow only if they have a contract at a viable price. “I think that means £115-120/t. Anything else is recreational sowing, merely adding to the barley mountain. You’d be better off putting land into voluntary set-aside and taking area aid.”

Merchants need to be responsible, too, he says. “They can flog seed now, which will lead to blood on the carpet come harvest, or they can be restrained and help rebuild the market for 2011.”

He has cut his Maris Otter winter barley area by almost a quarter, replacing it with carrots. He hopes a good track-record will see him hold his spring barley area, if a viable contract is forthcoming.

The paucity of contracts comes despite outgoing Maltsters’ Association of Great Britain chairman, Steve Haydon of Baird’s Malt, urging the supply chain to recognise how unattractive the crop is at its AGM in November. Maltsters want to support UK barley production, he stressed, recognising the value of ACCS and SQC product assurance, and the added costs of imported barley meeting Assured UK Malt status. But the international owners of the UK brewing industry seem surprisingly complacent.

So with most growers bailing out, is now the time to get in? “Remember the bounce-back post-2006, after the trough the crop had slipped into then. Volatility is probably going to be greater than ever,” notes Mr Arnold.

But Bob King of Crisp Malting thinks not. He expects it to be 2011 before stocks are used up and prices show any upswing. That is, of course, unless significant crop failures hit key producing areas in the meantime.


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