Europe: Brewers may face tight malt supplies as EU farmers switch to grains for biofuel production

European beer brewers may face increasingly tight malt supplies later this year as farmers switch to grains for biofuel production, the head of a leading German malt marketing company said according to Reuters, April 5.

"Malt producers will have to change their thinking and accept that sufficient supplies of malting barley are not going to be automatic and that they will face increasing competition from biofuel producers," Jochen Mautner, head of Jochen Mautner GmbH, told Reuters.

A survey undertaken by his company estimates that European Union farmers were this year likely to plant two percent less spring barley, which is used for malt production which in turn is a key ingredient in beer brewing.

This is despite current high spring barley prices caused by last summer's poor crop which would normally have encouraged farmers to expand spring barley plantings. Instead farmers were believed to have planted more grains for biofuel production.

"This trend is understandable as farmers do not have such quality concerns with grains grown for biofuels," he said. "Poor weather at harvest time can substantially reduce the quality of spring barley and so hugely cut farmers' earnings." "With biofuels this risk is much lower, they can sell grains for biofuels even if it is poor quality following bad weather."

The move away from spring barley plantings is especially expected in countries with large biofuel programmes, said Mautner.

He estimates German plantings will fall by five percent this year, Denmark's by 11 percent and Austria's by 14 percent.

The fall in Denmark was of special concern as the country is generally a major exporter to the rest of the EU.

"Brewers and malt producers are already facing competition from biofuels for their raw material supplies and this will get stronger as biofuels are expanded," he said.

"Malt producers and even beer brewers will have to change their thinking as there may not be enough spring barley for them to buy in the commercial market. They may have to agree more advance contracts with farmers to compel them to grow spring barley." "This process is starting but it will have to be expanded."

Brewers and malt producers are already struggling with malting barley prices which have risen as much as 50 percent in the past year, while powerful supermarket chains and other big buyers are refusing to accept higher beer prices.

Old crop spring barley is currently quoted at around 240 euros ($320) a tonne for April delivery in Germany. Despite mild weather so far this year which could herald a good harvest, new crop prices are also high at 195 to 200 euros a tonne.

"I have the impression much more of the new crop than usual has been bought in advance this year," Mautner said. "The spring barley supply outlook for the new crop this year is tight despite the good weather and some malt producers have decided not to get caught out by scarce spring barley again and have decided to secure supplies in advance."

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