The 2018 malting barley harvest in the EU is now complete and it’s the earliest harvests for many years. But why?
The primary reason for the EU completing an early harvest this year was the drought which North Western countries in the EU endured this summer, which led to spring barley crops maturing at a much quicker rate than they would in usual circumstances.
Harvest results for spring barley from all over the EU have shown the crops to be of very variable N2 content and below average yields. Significant quality (high N2) and yield issues have dominated the spring barley harvests in Sweden, Denmark, Northern Germany, Poland Czech Republic and Austria. Only France has recorded a satisfactory spring barley harvest this year with crop quality recorded as good and yields average.
Let’s take a look at what’s been happening in the UK…
From the UK perspective and with specific regard to England, very variable N2 is prevalent and yields too are variable.
Certain regions such as Hampshire/Dorset/Wiltshire/Yorkshire have produced better than average crops whereas the East & West Midlands/Lincs/Suffolk and areas within Norfolk have produced very mixed quality and below average yields. Most certainly, the supply/demand of the 2018 crop EU malting barley remains unclear.
With regard to Scotland and those crops grown for the distilling sector, it is fair to say that the Scottish spring barley harvest has mirrored much of England/EU in that variable N2 and variable yields are the dominant features.
There is not one Scottish region this year that has been immune from producing high N2 barley. The most difficult regions have been Angus/Tayside/Perthshire/Fife and parts of Aberdeenshire where good growers have produced crops averaging 0.2 – 0.3 N2 higher than usual (in the 1.65 – 1.90n2 range).
Better crops with lower N2 (averaging 1.50 – 1.70n2) have been recorded in the Black Isle/Easter Ross/ Moray Coast and those regions south of the Forth. The net result for all involved in the Scottish spring barley supply chain in 2018 has now become similar to the English & EU supply chain for the brewing industry.
Given the volume of barley lost to high N2 this season (in excess of 1.85n2) and the lower yield, it is questionable as to whether there is sufficient supply of spring malting barley available to meet demand and this is factoring into the equation that trade & maltsters are already accepting higher N2 barley at intake.
So, what does this mean for malting and distilling barley?
With regard to the current market values of malting barley, it is apparent that the market is very strong for those barley’s which meet full specification. With reference to the brewing sector, analysts within the trade are forecasting the EU supply/demand balance sheet is in deficit to the tune of 0.6MT of full specification malting barley and this is why we are witnessing much higher values as opposed to last season.
Current values of UK malting barley is 25% – 30% higher than harvest 2017, it is unlikely that the value for full specification malting barley will fall. Currently, we have seen winter malting barley trade £185.00 plus ex farm for harvest with the value for the same product put at £200.00 ex farm basis Jan 2019 movement. Current values for full specification distilling barley we see in the market are in the £220.00 – £225.00 ex farm for harvest movement. Values for spring barley for export (FOB market – Max 1.85n2) are in the region of £200.00 ex farm October movement.
And the feed grains market?
We also have to take into consideration the current value of the global feed grains market. Although not hitting the peaks of mid-August, the global feed grains market appreciated some 20% in value during the summer months as the drought in the EU set in.
Production issues of feed grains were also reported in Russia, Ukraine and although harvesting is still to commence in Australia, the worst drought in living memory in eastern Australia has forecasters downgrading production of wheat and barley. These production issues combined together have meant that the global feed grain market is well supported and will continue to be so until we see a correction in the supply of global feed grains.
If we look at the UK feed grains complex, both feed wheat and feed barley have traded some 30% higher in relation to the same time last year. The value of feed barley has remained static since early August trading in the region of £170.00 – £175.00 ex farm (£125.00 – £130.00 in 2017) with feed wheat trading for the same period at £180.00 – £185.00 ex farm (£140.00 – £145.00 in 2017).
So overall, a challenging year; the consequences of which will be felt for the months ahead. More than ever, this highlights the need for planning and making informed decisions.
Want to discuss this in more detail? Get in touch with us to discuss the most suitable options for your business.