Spring Seeds: Malting contract crucial

The recent call from Douglas Reid, chairman of the cereals committee of the Scotch Whisky Association, for longer-term contracts to bring a measure of stability to the malting barley industry has been welcomed by Scottish cereal growers.

But farmers are likely to vote with their feet by sowing less malting barley next spring unless Mr Reid’s words are translated into action by Scotland’s whisky industry.

“We don’t want to get to next June with crops in the ground and find we’re going to lose £80/t on every tonne we sell,” said NFU Scotland arable crops committee chairman, John Picken.

“Distillers need to come out and tell us what they need and we as farmers should only be sowing varieties if we have an assured market and know the price we need to cover our costs.”

With a 2m tonne surplus of barley hanging over the market, a reduction in whisky production as a result of global recession and intervention being withdrawn next year, Mr Picken sees little prospect of the market for malting barley improving – unless next year’s crop is hit by bad weather.

“The consensus in the trade seems to be there will be little improvement in the market until 2011,” said Mr Picken.

Mr Reid’s call for longer term supply contracts came at the HGCA’s 
Scottish Outlook conference at Perth where HGCA chairman Jonathan Tipples offered to act as a facilitator to bring distillers, maltsters and growers together to hammer out the future of the industry.

“All parties in the supply chain must have economic viability,” said Mr Reid.

As a representative of the 55 distillers in the SWA he was prohibited under competition law from speculating on future prices, he said. But he rejected a suggestion distillers were undermining the UK market by importing malting barley from abroad.

“It just isn’t true that large quantities of barley come in from abroad,” said Mr Reid. “More than 90% of the barley used by Scottish distillers is grown in Scotland. The industry is committed to using Scottish Quality Cereals wherever possible and barley is only imported when the quality of product is not available on the home market.”

In 2008, the Scotch whisky distilling industry bought 470,000t of malting barley and 530,000t of other cereals, mostly wheat.

The long-term outlook for whisky was positive, Mr Reid said. “Demand for Scotland’s premium brands will grow worldwide as we come out of recession.”

Traditional markets for Scotch whisky in Europe and USA remained strong and the emerging markets of Brazil, China, India, Vietnam and Russia offered tremendous opportunities for the future, he said.

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