Malting Barley December 2020
Once again malting barley has shown its extraordinary ability to flip the form book on its head and turn a large theoretical surplus into a much smaller one or even a deficit! A combination of some late sowing, a very dry spring, June rains and a wet 2nd half of August has resulted in a barley crop with record high nitrogen levels, poor yields in many areas and some very weathered parcels of barley. All in all, absolutely not what was anticipated but how many times in the last few years have we heard and seen that?
On top of the rather mixed 2020 barley crop, a heady combination of extreme weather, Covid-19, Brexit, Tariffs and a few other pertinent issues provide us all with a fascinating backdrop to pick our way through. With the northern hemisphere harvest some 7 months away, a potential return to some sort of normality looming and a smaller EU spring malting barley crop, all these factors combine to make malting barley going forward look very interesting. However, there are a lot of hurdles to jump in the meantime; the two largest ones being the question of the level of demand destruction to beer and spirits caused by COVID-19 and the long-awaited outcome of Brexit talks by the year end. This bulletin will attempt to cover a few pertinent topics albeit briefly, however, please do feel free to respond on any point if you would like more detail or clarity.
With that in mind it is also worth noting that the Annual Malting Barley Conference will take place on the 8th December this year. As with many things in 2020 it will be rather different from its usual format and you will be able to enjoy it from the comfort of your own home. It will be a much reduced offering than normal but will still cover the key issues of a fascinating looking sector, more details to follow.
The Market
A huge area of English spring barley (795,000 ha) was going to produce a huge crop of malting barley, this has not happened and only Scotland and Denmark can boast good quality, large crops. The China/Australia feed barley embargo has also created a two-tier global feed barley market with China’s insatiable appetite for barley (1.34mt imported in October alone) draining the world supply and with reduced malting demand has had the effect of reducing malting premiums to unsustainable levels. Scottish malting barley was for a time worth the same if not slightly less than English feed barley and with stores north of the border still full of 2019 crop, some Scottish barley has found its way down to England and, subject to demand, more will follow. Many maltsters have carried large quantities of malting barley through from last year due to a drop in demand, this has helped offset the low calibration rate of the 2020 harvest but has slowed the movement of 2020 crop into maltings both here and in Europe, some 2020 barley is also quite dormant so this too has not helped.
With a UK barley crop of around 8.3mt there should be a large surplus of feed barley, the export pace so far has been way off last year and exports to Europe in 2021 hang in the balance, therefore we need to compete on the global market to get barley into third country homes. This brings us into direct price competition with many origins and we are unable to export to China due to weed seeds (primarily Brome), the large Australian barley crop means that they are looking to export into the northern hemisphere as they cannot access Chinese markets, this scenario could well spill over into 2021 crop. In the UK barley lags some way behind wheat and therefore our compounders will ‘max out’ on its inclusion in rations which will mean a sharp increase in barley usage. Current estimates suggest that upwards of 5mt of barley will be used domestically.
Malting barley premiums remain low against this backdrop of uncertainty, however 2021 is shaping up to be a very different year to 2020. We are constantly reminded that malting barley is always ‘jam tomorrow’ but when you look at the fundamentals of the potential 2021 crop size, a low carry out from 2020, the odd weather problem and a rebuilding of stocks it does show the potential for it to be another roller coaster.
Crop 2021 Malting Barley
As eluded to above the malting barley crop for 2021 will be much reduced from this year due to a kinder (marginally) autumn, we expect an area back around the 420-450kha mark (down from 800kha this year). A Brexit deal allowing tariff free exports will dictate whether we can export to Europe in the volumes we have been doing so up to now. There are some loopholes which will allow us to export some malting barley out of the south as long as its onward journey as malt is out of the EU, more detail on this later. We expect domestic demand should be back up toward the 2mt mark for distilling and brewing combined next year so you quickly get the picture that the supply and demand position will be somewhat tighter. Therefore, what varieties should you be looking at?
It is a two horse race at present with Laureate and RGT Planet leading the way, although it can be argued that we have gone beyond ‘peak Planet’. We have good demand for both Diablo & SY Tungsten as well, so these two varieties are also worth looking at. All these modern varieties are pretty sensational in terms of performance so it is all about what sort of quality you are able to produce. If you have the ability to produce lower nitrogen barley then it is worth setting out to achieve a distilling grade sample. If you are on heavier soils or more fertile sites then a brewing grade at max 1.90% N is the better option for you. Piling on lots more nitrogen, as some companies/agronomists recommend, is a complete waste of your money and is hardly compliant with the increasingly important carbon footprint of the crop. It also dramatically reduces your margin of error in achieving a malting specification (especially in a dry spring) and has been proven not to increase yield. Applying nitrogen in the seed bed and early emergence with a maximum of 140-150kg/ha should be your benchmark.
We will discuss varieties in greater detail on the 8th Dec and in a subsequent bulletin, however, as stated, the main stay of next years malting barley crop will be:
Laureate/RGT Planet/Diablo/SY Tungsten/SY Splendor
We have a whole range of marketing options for 2021 spring malting barley, along with movement periods from harvest through to June 2022. With so much going on we suggest you chat through these with your usual RA Ltd contact to go for an option that suits you best in terms of variety and flexibility.
It is very clear that amidst all the issues surrounding malting barley there is a clear need for you to receive industry led, impartial advice. Having spoken to many growers over the last few weeks it appears there is an increasing level of desperation by merchants to ‘get hold’ of tonnage with very little regard to what is actually happening in the market and what might actually suit you best. As a classic example of this many merchants have stated up until very recently that there are no malting markets for Laureate, we have been a lone voice in backing the variety for both distilling and brewing at home and abroad and have established some very good supply chains. It really highlights the importance of having in depth knowledge of the market as well as the advantage of being very much ‘on the ground’ when it comes to testing, analysis and placing your crop to the right home. Some spurious claims are also being made about exclusive opportunities to export malting barley next year. These opportunities are open to us as well and will allow malting barley to leave the south for European maltings. This will all become clearer when and if we have some more clarity on Brexit.
Seed Availability
We have limited stocks of top quality, pre rain barley seed of all the main varieties. All of our seed is grown from breeders seed and all with germination close to 100%. As you can imagine with the poor harvest in some areas, good spring barley seed could be quite hard to find with a lot of harvested crops showing poor germination, low vigour, high levels of ergot and weathering. We thoroughly recommend getting your name on what you need if you have not already done so.
Grain Sampling
Thank you to everybody who took samples of their barley as it went into store this last harvest, it does improve dramatically the level of accuracy when trying to assess grain quality. We have some improvements we can make for next harvest. In the meantime, we will talk to you about sampling stored barley if required prior to movement this autumn or next spring.
Bugs in store
A lot of barley went into store hot either from the field or post drying and we have not had many cooler nights. It is important to try and get barley temperatures down to as near 10C as soon as you can as and when ambient temperatures allow. Please also make sure all stored grain has pitfall traps inserted as bugs continue to be a real issue. The costs of rejections continue to mount and are not in anyone’s interest, therefore it is imperative we do everything we can to avoid them and treat any issues ‘in -situ’.
Ergot
This has been a real issue again this year and not easy to spot in samples, please keep a close eye on your barley bulks prior to movement. The food industry has increasingly strict protocols surrounding ergot and other fungal impurities and therefore a zero tolerance on intake.
8th December 2020
As stated earlier, the annual malting barley conference we co host with Syngenta will be a very different affair this year. It will take place ‘on-line’ and be condensed to around 2 hours. Jack Watts has kindly agreed to do his usual slot as well as a look forward to what 2021 holds for the industry, myself, Iain Hamilton and Catherine Hamlen from Syngenta will also do a 30 minute slot each on varieties and the latest on barley trials and results.
Please let us know if you would be interested in attending and we will forward you the link.
As we have outlined and you will be more than aware, the malting and distilling markets are probably the ones most affected by the Covid pandemic but feed base prices have been rescued somewhat by the Chinese buying spree. There have been some very interesting snippets lately as to how this will affect markets going forward with some major commentators talking about a re-positioning of commodity values. Whilst there are clearly no certainties anymore it is very clear that volatility is very much here to stay and there are plenty of reasons to remain optimistic about barley markets amidst all the inevitable changes going forward.
We wish you all a very Happy Christmas and New Year and let’s hope for better things for 2021 and beyond.
Please do contact your usual Robin Appel Ltd contact if you have any queries regarding anything we have raised herewith.
