To All Growers of Malting Barley

Now that planting of the 2022 UK spring malting barley crop is pretty much completed, we can have a look at shedding some light on the last few weeks of the 20-21 season, the onrushing 22 harvest and a few pointers on the 2023 harvest as cropping plans start taking shape.

The last few weeks have obviously had a huge impact on commodity prices across the board and thrown what was already looking like a tight barley market into complete disarray, the implications of what we have witnessed on our TV screens will have huge ramifications for many years to come in all sectors. It is not just the travails of the supply of raw food materials but huge questions now surround food affordability, future farm policy and the green agenda that was being rolled out. Most of the questions are unanswerable at present but worth spending a bit of time outlining a little about what we do know and trying to create a backdrop for you, in which you can see the wider picture and react accordingly.

Rather ironically Lenin was quoted as saying some 100 years ago ‘There are decades where nothing happens and then weeks where decades happen’. Having been through Brexit and Covid as well as a few tricky harvests it would have been very welcome to have some sort of return to normality with a decent crop, demand rebuilding post covid and no more ‘seismic’ events. Well, that is clearly not going to happen and we are faced with even more volatility and huge question marks over fertiliser, fuel pricing and availability, let alone ongoing logistical issues and some inevitable weather issues, god forbid we get a wet harvest!

There is so much to set out, I have done it in bullet points to prevent pages of words and have only pointed out major issues as we see them, as always there will be other extenuating factors that will play a part going forward. Any further detail required, please do ask.

Crop 2021

• European barley stocks at record lows.
• Demand rebuilding nicely from Covid – will increased prices curtail demand for beer/whisky? People drink more in times of hardship/recession!
• Premiums have gradually increased during the season especially when the Canadian situation became clear last autumn. The war has now lifted feed prices but squashed premiums to less than half what they were. Malting barley still being exported from UK, will be until June.
• Argentinian and Australian barley has been arriving in European ports from their large harvest and in turn filling maltsters demand. Likewise European barley has been heading to Canada following their drought-stricken harvest.
• Large void on global markets with circa 17mt of Ukrainian corn removed from the market.

Crop 2022

• Open autumn and mild winter have led to large wheat sowings throughout northern hemisphere – therefore lower area of spring barley to be sown in main producing countries.
• Large deficit looks unlikely to be filled from the 2022 crop.
• Spring wheat seed sales and area looks like it will increase.
• All eyes on the weather as crops develop, dry conditions starting to be a concern in some areas.
• Job to know what to believe will happen with new crop plantings and production in Ukraine but estimates of 30-50% lower area to be planted and lack of inputs and fuel will restrict production – result is feed grains will remain supported.
• At these elevated levels malting premiums will have to stay attractive to avoid barley. heading down the feed route. Current premiums are circa £30-£40/t.
• Very good demand for 2022 malting barley crop as post covid recovery continues worldwide.

Crop 2023

• Higher growing costs will focus minds as to rotational changes.
• Winter malting barley contracts look very attractive against feed barley.
• Increasing demand for winter malting barley.
• Big decisions and questions to be asked on purchasing fertiliser and availability of inputs with huge question marks on input prices v forward wheat prices.
• Continued fallout from Ukrainian situation will impact supply and demand – current 2023 wheat prices are around £40/t below 2022 prices.

All in all, a very uncertain and volatile situation which sits outside most of our levels of experience but forms the basis for yet another uncertain season. At least in the current scenario we are not battling with the unknowns of Brexit or covid type scenarios. However, on top of the dreadful Ukrainian situation, global weather remains a real but little talked about threat to quality and quantity of malting barley. Therefore, you need to proceed with caution, using min-max or premium type contracts in order to protect yourself. Selling quality crops at a fixed price must be done with utmost caution and very important for you not to exceed say 25% of expected production.

Malting Barley Sector

One of the problems the industry is facing is an exodus of staff as traders and forwarders retire or become disillusioned with the complexities of the grain trade and haulage. This leaves the merchanting and malting sector a bit bereft of experienced staff and desperately needing to recruit a younger generation of people to come into the industry. This same issue is troubling across many sectors with farming and haulage facing exactly the same challenges. However, the continued drive toward digital platforms and on-line trading might suit feed grains but will not suit quality crops such as malting barley. It is imperative that between us we get a better handle on the quality of the crops you harvest.

2023 Harvest

We have an array of contracts for winter crops for sowing this forthcoming season, all highly competitive and showing positive margins against indicative input prices, with a flexible approach to pricing.

Crop Sales

With the recent surge in markets, many contracts for all sorts of crops are now below the current market price, a situation which can prove highly emotional. Selling forward is a decision that growers make and whether at fixed prices or on a range, it is clearly an attractive proposition on the day. As we all know a lot can happen and markets rise and fall for all sorts of unknown reasons – if only we could have an insight into what tomorrow brings. With this in mind could you please check on the contracts you have with us, we are due to start a monthly statement system to ensure everyone is clear as to what has been transacted.

In the meantime, if you have any queries please do not hesitate to get in touch with your usual RA Ltd contact or here at the office at Waltham Chase on 01489 896388 or enquiries@robin-appel.com.