Malting barley markets have rebounded after 18 months of rock-bottom prices and are set to provide good returns for growers for the foreseeable future, according to Gleadell sales director Stuart Shand.

Lower yields and quality problems this harvest, on top of last autumn’s and spring’s reduced sowings, means supply will struggle to meet renewed domestic and export demand, he believes.

“The market suffered badly after the economic downturn as beer sales dropped globally,” he explains. “In the UK beer sales fell about 10%, and the distilling market was hit really hard, losing about 20% of sales.

“This happened soon after maltsters across Europe had expanded their capacity, and they’ve been running at about 70% for months.

“Brewers have been absent from the market for the 2010 crop – all the maltsters’ barley bins are still stuffed with malt.”

Hardly surprisingly, many growers shunned the crop last autumn after a season when ex-farm prices were up to £20/t below production costs. “Across Europe the spring area dropped 15%, and in the UK about 35%,” he says. “The winter malting crop was also about 20% down – there were no premiums to be had.”

Rocketing cereals prices following the drought in Russia have added to the market’s tight feel. Shippers have had to switch to the EU for feed barley supplies into Saudi Arabia and North Africa, tempting many growers to offload winter malting barley and harvest movement spring barley into the feed market.

“If you were offered £130+/t ex-farm for harvest feed barley, or £150/t for October-December, and there was no winter malting price, what would you do? It would be worth £155+/t if there were a malting home for it, but no one’s complaining – the price is far more than we were expecting.”

The spring crop is also worth good money – most is destined for export pre-Christmas and worth about £160/t ex-farm for January-March 2011 movement.

Russia has already bought a small amount of imported malting barley for the first time in years, and with yield and quality fears now rising in the rest of Europe, the market is set to get very tight, he believes.

“The malting barley crop is reported to have been hard hit in Russia and we expect a lot of European barley could go there. But they are still full of old crop so deliveries won’t begin until early 2011.”

It is possible that there will be less in Europe, too. “Sweden and Denmark had torrential rain in mid-August, and the trade is concerned that quality may have been affected. However, they still have plenty of 2009 crop unsold in co-op stores.”

If there is a big export demand it could leave domestic brewers ringing maltsters who would be scrabbling for supplies. But the market is unlikely to gather pace until late 2010. “Buyers for the big brewers, whose budgets have been decimated, won’t be in the market until their marketing colleagues tell them to.”

Harvest 2011 contracts may not be far behind. The market is currently being set by trading houses bidding on the crop, and is worth about £160/t for January-March 2012, about £45/t over feed, says Mr Shand.

Seed sales for this autumn are set to drop as much as 25%, which gives a good indication of growers’ intentions, he adds. “If borne out across the acreage, that would put huge pressure on the spring area and quality. If we assume domestic demand rises 100,000t to 1.75m tonnes and we still need 200,000t for export, we could end up with a shortfall.

“Unless we see a reverse in trends, the market will have a tight feel for the foreseeable future. That’s bad news for brewers and consumers, but good news for farmers and maltsters,” says Mr Shand.

• Prices correct as at 23 August.