UK: Malting barley premiums remain elevated

UK’s malting barley premiums reached record highs throughout the first few months of the season. In November, on average the gap between feed and malting barley eased slightly though remained historically firm. So, can we expect this to continue moving forward?

In the week ending 4 January (latest data), UK spot ex-farm premium malting barley was at a £78.40/t premium to feed barley, the highest recorded price gap so far this season, AHDB reported on January 9.

Looking at the supply and demand outlook of malting barley for the 2023/24 season, it can be expected that premiums will remain strong in at least the short to mid-term. Barley production this season was down 5% on the year and AHDB’s Cereal Quality Survey showed lower specific weights and screening levels compared to the previous season. Due to the poorer quality of the domestic crop, in AHDB’s latest supply and demand estimates, imports are expected to be above the five-year average at 87 Kt. However, total availability is still expected to be down slightly.

Despite the ‘cost-of-living crisis’ domestic human and industrial consumption of barley this season is forecast to remain steady and in line with last season at 1.985 Mt. This is largely due to expectations that demand for distilling will remain robust from increased capacity coming online last season. This season to date (Jul-Oct), total barley usage by brewers, maltsters and distillers is up 1.7% on the year.

Longer-term, the strength in premiums will depend largely on the 2024 domestic barley crop. As it stands, in AHDB’s Early Bird Survey, the total barley area is forecast to rise 4% year-on-year, with a climb in spring barley planting intentions outweighing a loss to the winter barley area. However, continued wet weather since the survey was first carried out means many farmers may not have been able to plant what winter crops they had intended. Therefore, it could be that we see an even larger spring barley area that initially estimated due to a lack of winter drilling (subject to seed availability). Similar patterns are projected for top European growers, France and Germany. In this case, as long as spring and summer growing conditions are favourable, heavier supplies next harvest could weigh on premiums longer term, though demand will remain a watchpoint.

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