AS first crops of barley are cut around the country, growers are fast realising that the best market this season will be intervention.
But even that cannot be taken for granted, as some of the early samples seen by merchants would struggle to meet the 62kg/hl minimum specific weight, and have even more problems staying below 12% screenings and admix.
“At the very best, the barley crop so far is mediocre,” says trader Robert Kerr of Glencore. “Yields have been low, bushel weights have been low and prices are still low. At £62/t spot farmers are not selling unless they have to.”
Intervention is a much better option. At £81.41/t for November, that equates to about £75-£76/t, after allowing for haulage, inspection and margin. That still leaves about £15/t compared with todays values to cover the cost of holding grain until November, says Paul Toseland of Viking Cereals. This should be easily achievable.
But for those who fail to get intervention quality, or who have to move grain immediately, prospects for straight feed barley are grim.
Provisional estimates by Allied Grain point to a bigger “export” surplus than last year, after a big rise in carry-over stocks. Shipping director, Mark Hughes, says there are about 1.25m tonnes of barley in intervention and almost 800,000t in commercial stores.
Despite a smaller crop this year, he suggests there could be over 3m tonnes to dispose of after meeting home demand. This would require twice the level of exports achieved in 1997/98 to clear – a tall order given the state of the market.
“Spain has had a wonderful barley crop, with rain when they needed it and sun when they needed it,” says Mr Hughes. This has been the UKs principal outlet in recent years, but will certainly be taking less this year.
Further afield, the economic crisis in south-east Asia continues to stifle demand, while recent figures from the International Grains Council point to a bigger world coarse grain crop this season. So far, Brussels has made a tentative start to issuing export licences, though it has opened a special free market tender for 250,000t of Spanish barley, much to the chagrin of UK traders.
On the malting side, prospects are far from encouraging, too. Not enough samples have been seen to draw many conclusions, either on quality or price. But trade expectations are for “modest” malting premiums of £10 to £15/t – equivalent to £85 to £90/t based on November intervention values.
There is little doubt that maltsters remain under pressure and there will be little spot demand at harvest, except for best malting samples. “Over-capacity continues to dog us,” says Laurence Moses of Suffolk-based Muntons.
“Two to three years ago, south-east Asia was booming and China was the next hot potato. Everyone invested for that, but so far the demand has not materialised.”
Combined with the strong £ and disappointing export restitutions last season, maltsters have become more cautious, taking less grain on contract and reluctant to fill up stores at harvest before malt sales get under way in autumn.