UK: Malting premiums set to come under pressure

The Agricultural and Horticultural Development Board (AHDB) is confirming a squeeze on malting premiums relative to feed barley prices, Agriland reported on March 7.

Figures that relate to the end of 2024 point to the spot, ex-farm malting premium, relative to feed barley, averaging £19.20/t

This is down from the late autumn period, when the premium averaged £24.60/t, and November 2023 when it reached £66.70/t.

According to AHDB analysts, ample supply of UK malting barley, and relatively weaker demand, are both key factors weighing on the premium this marketing year.

Barley usage by the brewing, malting and distilling (BMD) sector totalled 892.7kt from July to December 2024 this season, down 7.6% on the same period last year.

Total cereals usage by the BMD sector is forecast to decline this season on levels from a year earlier. This decline is due to a downturn in demand, and is partly driven by the increase in the cost of living, as well as the longer-term trend of fewer younger people choosing to consume alcohol.

According to Kantar analysis, retail volume sales of beer and lager remained flat during 2024 following challenging declines during 2023.

Higher prices have meant volume growth has been hit, against the backdrop of consumers watching their finances.

There has also been 4.6% volume growth for non-alcoholic beer during 2024, on the back of rises in 2023.

Meanwhile, Mintel marketing analysis points to a moderation of alcohol consumption, a trend that has grown since 2022. Moreover, it is set to further increase in the near future.

UK spirits’ volumes sales also continue to dip, with affordability a key consideration for consumers for which finances may remain tight.

Another bearish factor is sluggish export demand. Full season barley exports are forecast by AHDB at 500kt, down by 36% from last season. Exports from July to December totalled 257.2kt, a 37% drop from last year, according to HM Revenue and Customs (HMRC).

Looking ahead, AHDB’s Early Bird Survey (EBS) of planting intentions, carried out last November, suggested the winter and spring barley areas in the UK could fall by 1% and 13% respectively on the year.

This could mean that we head into the next marketing year with a smaller domestic crop. However, currently, 2024/25 ending stocks are expected to be well above average, and as such, it’s unlikely supplies will be particularly tight next season.

As a result, if demand also remains steady, as expected, it’s unlikely we will see much support in premiums over the coming months.

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