A tight barley crop is closing the price gap with wheat, trailing by an average of just £9/t midweek, compared with £13/t a week earlier.
A smaller barley harvest, lower wheat production and higher domestic demand make for a firm outlook.
Brewing, malting and distilling demand is set to rise after higher use last year, alongside the marked rise expected in feed barley use.
See also: Find out how to grow more profitable barley crop in the face of rising inputs and volatile grain in our Know How centre
Spot feed barley averaged £167.50/t ex-farm on Wednesday (15 August), compared with feed wheat at £176.60/t. These prices were down by about £7/t and £4/t respectively on a week earlier, following a US Department of Agriculture (USDA) report which unexpectedly depressed prices.
- UK barley crop estimated at 6.7-6.9m tonnes (7.2m tonnes in 2017).
- Domestic barley for human and industrial uses this season is expected to rise, driven by an increase in productivity from brewers, maltsters and distillers, as well as higher compound feed demand, more barley fed on farm and more farmer-to-farmer trade.
- Total malting barley purchases rose by 11% in 2017 to almost 1.836m tonnes, according to the Maltsters Association of Great Britain (MAGB). This was the first uplift in volume in four years.
- Spring barley accounts for almost 85% of total malting barley demand.
- English barley accounted for 54% of supply, with Scottish barley providing the remainder.
Hang on to stocks
With quality less certain as the spring barley harvest moves north, the advice is to hang on to barley that may not make the maximum 1.85% nitrogen wanted by the brewing market, as specifications may be relaxed.
Malting premiums for maximum 1.85% N spring samples are between £20/t and £35/t, with the large range accounted for by regional variation in availability, distance to maltster and the level of competition from the feed market. For distilling samples, another £5-£10/t is possible on top of the malting premium.
Traders say that with a high base feed price and good demand, there is little risk in holding on to samples with poorer than full specification malting or distilling quality. Distillers usually require 1.6-1.65% N.
Market in stand-off
Growers have sold what they need to for the time being and shut the door on barley stores, said Gleadell trading director Jonathan Lane. “What needed to be moved has moved. The market is in a stand-off and barley is not trading freely.”
Domestic consumers are largely covered in the short term, but are going to have to pay up, said Mr Lane. Exports for the time being will be at the smaller end, as the availability was simply not there to fill big boats.
The USDA report has been met with surprise, with traders saying it failed to adequately reflect lower crop prospects in many European countries, as well as Australia and Canada.
Gleadell malting barley trader and sales director Stuart Shand said malting sample results were random and sometimes unfathomable, with wide variation between nitrogen content from the same variety on neighbouring farms.
However, brewers were not changing their specs so far, nor were maltsters, many of whom still had stocks of relatively high-nitrogen barley from last season.
At Openfield, Glenn Mason, head of grain marketing trading, said global barley supply and demand was as tight as it has ever been.
“The lack of forage means farmers will feed more barley on farm, even at these inflated prices,” he said.
Openfield’s senior malting barley trader, Richard Howe, said the UK was as competitive as anywhere on the malting barley export market. Domestic maltsters would want to keep the product here as much as possible, but if the UK has it available, there was a good chance of malting barley exports.