Spring Malting Barley Bulletin

Against all the odds and predictions about ‘thin’ looking crops, the spring barley harvest was exceptional in many areas, no doubt lighter land and later drilled crops were adversely affected by the heat, but the 2022 harvest produced a ‘once in a lifetime’ crop in many areas. High specific weights, low nitrogen, zero screenings and huge yields seem to be the order of the day in many places and certainly on the chalk soils of the south. Things seem to tail off a bit the further east you go which is understandable given the Sahara like conditions we all endured. But even then, all crops so far seem to have responded to the long sunlight hours we witnessed in June. Amazing really given the amount of rain that has (or has not fallen), just shows what these modern varieties, Laureate in particular, are capable of. As always we have a large commitment of malting barley to move both domestically and into main land Europe to all of our usual maltster, brewer and distiller customers between now and July 2023.

Things have all been a bit of a blur since July as the harvest was mown down in record time, we have moved large volumes and seed processing has been in full swing to get seed back out for sowing, which, much like harvest has been pretty straightforward. Therefore, we have had little time to reflect on the harvest, look at a few salient points around the crop in store and of course the prevailing market conditions. With that comes the proviso that the markets are a complete unknown and comments herewith are likely to be undone by either geo-political or weather events, we all operate in a fascinating environment with so many different factors influencing the industry and the wider food & beverage market. It is worth bearing in mind that everyday there is a further net gain to the worlds population of 60,000 mouths to feed and quite clearly global food production is not as stable as it once was.

Markets

As a backdrop to talking about markets it is worth noting the following price ranges:

The Ukrainian situation seems to be completely entrenched and will continue to have a bearing on price volatility, talks are ongoing about extension of grain corridors beyond 22nd November with recent talk of a cap on tonnage.

A large tonnage of grain has been exported out across the Black Sea, there is clearly collusion between many partners with passage through the Bosphorous Straits very beneficial to Turkey, huge question marks remain, but a very large percentage of export demand and purchasing tenders are being snapped up Ukrainian and Russian sellers. This, coupled with large northern hemisphere harvests and lots of talk about global economic slowdown has resulted in a market well off its highs.

Economic uncertainty effecting current and future demand, bird flu, plentiful autumn grass and cheaper alternative origins are just a few reasons why domestic demand is slow, there is also no doubt that growers are also keen to move existing sales before they embark on fresh sales.

The area of spring barley sown for 2022 harvest is approx. 12% down from 2021 at around 660k.ha but yields are estimated to be way above average, as is the percentage of barley that will pass for malting. Therefore, we have seen the malting premium reduced dramatically over the last few weeks as the size of the crop throughout the northern hemisphere became clear. Subsequently many maltsters and their brewer customers have withdrawn from the market due to fears over demand going forward and extreme trepidation about power interruptions let alone huge cost increases going forward.

A brief overview of the Global barley crop

The French crop is very mixed with high screenings and high nitrogen in many areas as well as lower than average yields. Crops in Spain have been decimated by drought so they will be net importers of feed and malting barley. The Danish crop is good but nitrogens are very low and as the premium diminishes further more barley will be used in feed rations. As always, the Scottish crop is very good, a few later cut crops have had high N and germination issues but in the main it is very satisfactory. Australia is on the verge of cutting a very large barley crop but wet weather is now raising some serious questions over quality, this is worth watching. The Argentinian crop is very drought affected and will be well down on estimates. The Canadian crop has bounced back from the drought decimated crop of 2021 and they will be active exporters into the USA and further afield.

In summary, our vintage crop is no doubt in demand and although the market is far more comfortable than it was this time last year there is a nervous feeling to it going forward subject to how demand withstands the twin pressures of energy supply and consumer slowdown.

The outlook is clearly not rosy for the hospitality sector with huge energy price increases having to be passed through to an under-pressure consumer. The backdrop of rising interest rates, higher food and fuel prices will no doubt have an impact on where and how consumers spend any disposable income. Will more people entertain at home or will alcohol be one of the last things consumers cut back on? The brewing sector is more vulnerable than the distilling sector, with distillers looking to lay down spirit volumes that were lost during the pandemic and of course looking at a demand cycle that is working on 5-10-15 years in the future.

Sales of Scotch whisky are approaching pre covid levels with the export value rising to around £4.51 billion in 2021. More malting and distilling capacity continues to be constructed in Scotland with the barley area maxed out already. This bodes well for spring barley demand going forward and that is before a trade deal is hopefully completed with India, who are huge consumers of whisky but is currently subject to punitive import tariffs.

Crop 2023

Autumn conditions have been very favourable so it is clear that a large area of autumn sowing has been/is being completed. Spring barley, although a stellar performer this year and a cheaper crop to grow, still plays second fiddle to wheat in many areas and therefore the crop is being pushed back further into its traditional areas. Pressure on malting barley area continues and it is imperative that premiums/returns are kept at a level that rewards the risk and effort that goes into growing the crop. With such a volatile market and so many different markets to supply, malting barley needs a more and more ‘hands on’ approach, something which many companies are not able to offer. A more transparent, less contractual approach which offers support and access to premium markets is something we have pioneered over the years and allows us to pay more attention to your crop.

The base price remains one mechanic, generally tied to wheat and as we have seen over the last 12-18 months the premium can and will do anything. Premiums for crop 2023 currently stand at around £40/t, historically high but a reflection of uncertainty, Min-Max contracts look useful, as do contracts based on LIFFE wheat. Please do speak to your usual RAL contact to discuss these options.

Seed 2023

As with the commercial malting barley crop, we have some wonderful quality seed. It is all clear of seed born diseases and will therefore come out to you re-cleaned only. It is grown by top growers from breeders own, pure C1 seed, it will be certified to HVS protocols and will give your 2023 commercial malting barley crop a fantastic start.

Laureate is without doubt the No1 variety with Planet on the wane. Skyway looks good and will be a straight Planet, brewing only replacement. We have a limited amount of seed and commercial buy back tonnage available for those who want to split varieties or change from Laureate.

Ergot

We naively thought that this year would be an ‘ergot free’ year given the conditions during June, how wrong we were! It seems to be a perennial problem, grass margins, grass weeds, non-inversion tillage and weather conditions in each flowering season seem to be the main contributors. We can take a fairly pragmatic approach to small infestations of ‘grass’ ergot but cereal ergot or high levels of either, are a red light in the processing and food industry. Please keep a good visual check of your bulks to see if you can detect any.

Low Nitrogen

As stated before, this year’s spring barley crop is as close to perfect as we have seen for years. A word of warning however that last year some buyers were incorrectly penalising low specific weights on malting barley, this year there appears to be some penalising of low nitrogens, this should not be happening and is an issue that we, as merchants should be sorting, we suggest questions are asked as to why you are being penalised.

Barley in Store

The barley crop this year is pretty much clear of all physical defects, no splits, skinned grains, fusarium, pre-germ – the list goes on and it is an absolute joy to handle such a good crop again. Some barley was cut at below 10% moisture, unheard of, but not a problem. As nights get colder, please ensure you keep conditioning your crop to get temperatures down to as close to 10 degrees as you can. As and when the long-awaited rains appear and relative humidity increases it should be possible to blow some moisture into bulks and therefore raise moisture levels, be careful to keep monitoring for moisture when doing this. It is also worth remembering that the drier the crop the higher specific weight so dry grain is not all ’a loss’ to you and just imagine the costs you would have incurred if the harvest was a wet one!

December 6th 2022

Our Annual Malting Barley conference is on the 6th December this year at the usual venue, The Norton Manor Hotel, Nr Winchester. You will be more than aware that there are many important issues to discuss and we are delighted to have Jack Watts, NFU Chief Value Chain Analyst and Allan Wilkinson, HSBC UK, Head of Agrifoods. Joe Bagshaw, Syngenta, on crop 2022 results and husbandry insights. Kathryn Hamblin, Syngenta, on variety programme and Jonathan Arnold, Robin Appel Ltd on market update and values going forward.

Please save the date and respond to official invite when it is sent in November, spaces will be limited and we would urge you to find the time to come and get an insight into a such an important crop and a fascinating market.

Another extraordinary season awaits us all and we hope this gives you some brief details of some pertinent issues, as always if you need more details or have any queries please do get in touch.

We look forward to seeing you on the 6th December if not before.