02 June, 2006

EU: Malt production costs are to increase this year, analysts said

According to recent specialty reports on malt production, the European malt market is undergoing serious changes. And there are victims to be listed among market actors who find themselves affected by such severe market conjuncture.

Following the example of Weissheimer, IMC (International Malting Cooperation) had expressed its willingness to abandon the problematic European malt market. This strategy is likely to result in closing its Northern France, Lille 150,000 t malt capacity factory and to inspire upcoming closures of malt facilities in France and other EU countries.

Nevertheless, European malt demand of 8.1 million t is satisfied by a nearly equal malt supply, or recent estimates say that further malt production facilities closures will balance malt production capacities and malt needs through eliminating excess capacities caused by the building of new factories and declining export opportunities. Exports of malt are steadily growing despite significant fall to Russia, reports say. Exports of malt to other regions represented a growth incentive, as the 2005/2006 exports campaign demonstrated.

Further, the energy supply cost raised malt production costs through inducing a higher malting barley price calculation. It is estimated that the energy price increment will generally determine a EUR 7 – EUR 11 increase of the cost of producing one tonne of malt compared to 2005.

The forecasts concerning this year malt market evolution are yet quite optimistic. In the same time, malting barley production costs are very unlikely to diminish. In result, malt production costs and price levels are generally high. Price levels however do not provide satisfying profit margins.

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