Jun 12, 2017
The 2017 crop season is well underway with seeding advanced or completed in many of the major barley exporting countries. We now head into weather market season as analysts monitor the conditions on a weekly basis to assess the impact on projected yields and quality. We present a summary of seeding progress, crop conditions and market indications in each area.
Australia continues to move their record 2017 barley crop with some reports suggesting China may import over 7 MT (of malting and feed). Recent export activity has slowed somewhat which may be due to logistical issues more than anything else. Seeding conditions in Australia are looking favourable due to recent rains in the East where seeding progress exceeds 75%. South and Western Australia are somewhat drier with seeding approaching 60% complete (remember there is not a limited seeding window as there is in the Northern Hemisphere). Successful seeding and germination depends primarily on moisture conditions.
The European malting barley market has been quiet with few sellers. With seeding completed weeks ago, the weather over the next few weeks will impact the market one way or the other as crop development is assessed. Previously, conditions had been too dry and too cool. Some 2017 crop estimates have put total EU barley production below last year’s 60 MT. That may prove to be pessimistic. Generous rainfall last week across most of Western Europe and expected warming temperatures should advance the crop significantly. However, continued rains will be necessary in the coming weeks as conditions are drier than normal. Conditions in Spain, where rainfall has been sparse, are much worse. Spanish barley production may fall 30% from last year’s 9.27 MT.
The only significant barley market activity recently has been the 1.5 MT Saudi Arabia tender (for July shipment) . Most of this is expected to be supplied from the Black Sea countries. However, cool temperatures in Russia have delayed seeding considerably which may firm up values to the point where Russian barley is not competitive. Russian barley exports are running well behind last year’s pace (2.7 MT to date versus 3.9 MT in 2015-16). In Ukraine, spring barley seeding is just completed but development has also been slowed due to cool temperatures. Harvest of winter barley should begin by late June.
Argentina has experienced heavy rainfall in recent weeks which has delayed corn and soybean harvests and subsequently barley seeding. Some trade sources suggest barley area could decline further if farmers opt for wheat or even corn and soybeans (as a winter crop) due to the wet conditions. However, there is also an argument for more barley area due to its shorter growing season. Much will depend just how wet conditions are and farmers’ assessment of which crop is best suited.
Barley seeding in the U.S. is nearing completion which is about two weeks behind normal, due to rainfall and cool weather. In Western Canada, barley seeding continues to lag behind average, also due to cool temperatures and wet conditions. However, recent warm temperatures are now advancing progress rapidly. The areas that continue to struggle with conditions are Northern Alberta and Northern Saskatchewan. Forecast warm weather should enable rapid progress but there could be an increased vulnerability to poor harvest weather including frost.
Feb 24, 2017
Plentiful world grain and oilseed stocks continue to weigh on the overall grain markets which in turn is keeping pressure on malting barley prices. In this context the barley market situation is not bullish although current weather conditions and lower seeding projections could lead to higher values going into next year.
Australia’s record crop, including an estimated 13 million tonnes (MT) of barley, has resulted in plenty of logistical issues as they try to move the crop to market with container equipment supply apparently next to non-existent. Feed prices have increased about US$ 10/tonne is the past week following a 1.5 MT Saudi tender, and with plentiful malt barley supplies the malt/feed price spread has narrowed, although with China returning to the market following their New Year holiday there may be some price support.
The European malting barley market continues to be relatively quiet. Supply of good quality malting barley is tight (particularly in France) but demand is slack as is brewers’ demand for malt. The 2016 crop values are at a premium to new crop 2017 prices. Exports of total EU barley through January, 2017 are only 2.7 MT versus 6.38 MT last year. The winter barley crop is generally in good condition with total 2017 EU barley production expected to increase to 61 MT. However, Western Europe has had limited rainfall which, if it persists, could begin to affect the crop as spring approaches and temperatures warm. Currently, the greatest market activity is with Scandinavian and UK barley that are being traded domestically and to other EU buyers.
The Black Sea (Russia/Ukraine) winter barley went into dormancy under good conditions. However, the Russian crop experienced very cold weather in January with inadequate snow cover in many locales. Therefore, some winterkill may have occurred. Russian barley exports through January this year are at 2.14 MT versus 3.34 MT last year. To date, Ukraine has also experienced cold conditions but snow cover may be adequate for protection from winterkill. Overall, crop conditions in Ukraine have improved and their 2017 total barley production has increased to 10 MT. Any crop lost to winterkill is typically re-seeded to other crops in the spring so that remains lost barley production.
Argentina has completed their summer crop seeding which should bode well for timely harvesting pending the amount of rainfall at harvest. An early harvest can encourage wheat seeding over barley if returns are similar, however currently barley is at a discount. Some analysts expect 2017 barley area to fall 20%. Argentina’s good quality 2016 crop should fill the domestic malting demand and the import requirements of other South American countries (about 1 MT in total).
Statistics Canada Dec 31 barley stocks were 6.4 MT versus 5.7 MT in 2015. However, the domestic malting/brewing industry is dealing with yet another year of limited supplies of good quality malting barley. Conversely U.S. malting barley stocks are ample and it is expected that the amount of 2017 malting barley production contracts in the U.S. will be down significantly this spring. The Canadian situation has resulted in uncompetitive prices for the world market which is limiting exports.
Sep 14, 2016
With much of barley harvested in Europe, analysts are revising production forecasts lower along with estimates of available malting barley supplies. On August 26th the EC released updated forecasts lowering the barley crop to 59 mln tonnes versus their July forecast of 62.1 mln tonnes (60.7 in 2015). Barley across much of France and Germany is reported to have disappointing yields and test weights, with the winter crop in France particularly hard hit.
In Canada the barley harvest is approximately 50% complete with early indications of variable quality. On August 26th Statistics Canada raised its projections of Canadian barley production to 8.7 mln tonnes from its previous forecast of 8.2 mln tonnes, however private forecasts put the crop at 9-9.5 mln tonnes.
In the US the barley harvest is almost finished, well ahead of normal. Higher yields than last year will offset some of the drop in seeded acreage however total production is still projected to fall to around 4.1 mln tonnes compared with 4.7 mln tonnes in 2015.
In Argentina barley seeding is nearly complete with area projected to be down significantly from last year as rain prevented producers from seeding. The Argentine barley crop is projected by the USDA to drop significantly to only 3.0 mln tonnes compared with 4.9 mln tonnes in 2015.
Recent rains in Australia have improved crop conditions setting the stage for another good crop in 2016 with projections for barley output at over 9 mln tonnes compared with 8.6 mln tonnes in 2015.
In the Black Sea (Russia/Ukraine) barley harvests have gone relatively well with output up year over year. UkrAgroConsult is projecting Russia’s barley crop at nearly 18 mln tonnes compared with 17.4 mln tonnes in 2015, and Ukraine at 8.9 mln tonnes of barley versus 8.25 mln last year.
Jul 5, 2016
The highlights of the past two weeks include firming European barley values due to concerns over disease pressure from continued rains. Meanwhile Western Canada received very timely rains and warm weather to advance crops toward an optimistic outcome. Australian barley areas have mostly received good rains with the exception of South Queensland and Northern New South Wales. Prices have been steady as there has been some Chinese demand.
Continued rains in central Europe (France) have resulted in disease issues (fusarium) and lodging of winter barley stands. There are fears that fusarium may also be prevalent in spring barley as conditions were wet during flowering. Heavy rains in Germany have also raised similar concerns. Even if the fusarium problems are not as severe as some expect, protein levels will undoubtedly be on the low side. Rains in Eastern Europe have been substantial but in a positive way as the crops are now looking good after a dry start. Spain is looking forward to their best barley harvest in years as production could hit 8 million tonnes. UK weather conditions have been positive and the barley crop is progressing well. Their market is also firming due to concerns over the French crop. Conditions in Denmark continue to be much too dry with yields now projected to be below average and protein levels higher than average. The latter point might actually be beneficial to counter the low proteins of the central European crop. Overall, farmers are hesitant sellers of new crop while the trade is looking to get some coverage.
Argentina barley seeding is in its early stages after wet weather delayed the soybean and corn harvests. We still expect the barley area will still be down dramatically as the export tax system makes wheat more attractive to grow and sell.
The Black Sea (Russia/Ukraine) barley crop is looking much better as recent warm dry conditions replaced excessive rains. The spring crop is looking especially good while the winter crop has suffered some problems.
Conditions continue to be excellent in the U.S. barley growing states. Crop advancement exceeds the five year average and the crop ratings have a high percentage in the “good to excellent” category. Rainfall amounts have been ideal and the irrigated areas have sufficient water supplies.
Western Canada has received very beneficial rainfall and relatively warm temperatures which have advanced the crop. Private production forecasts have increased the crop size to near 9 million tonnes. A large percentage of the crop is now classified as good to excellent. Domestic feed barley values have been steady as pasture conditions slowly recover.
Apr 25, 2016
Malting barley supplies in Australia are relatively tight this year given smaller than average selection rates from the 2015 crop. A dry, hot finish during last year’s harvest negatively impacted crop quality. Currently conditions are quite dry in Australia which may favour barley plantings over other crops such as canola.
In Canada there will be virtually no malting barley carry over this year after two consecutive years of poor harvest weather resulting below average supplies in both 2014 and 2015. However Statistics Canada recently projected barley area to rise in 2016, likely the result of good expected returns for malting barley, though many areas in Western Canada are dry with rains needed in coming weeks.
In the EU malting barley supplies are sufficient given last year’s large crop, although some lower grades may have been absorbed into the feed barley market where strong export sales have narrowed the premium for malt quality. Barley export licenses issued by the EU reached 8.1 mln tonnes last week, 1.2 mln tonnes ahead of last year. Spring seeding is advancing well and the winter crop is in good condition.
In the US, a large carry over from last year’s excellent crop has meant lower contracting this year. This will result in a smaller area seeded to malting barley with existing carry over stocks expected to make up the difference in the event of lower production. Barley seeding progress is reportedly close to the 5-year average.
Mar 10, 2016
Canada en route to doing 1 million tonnes of barley to China this year
China imported a record 8.3 million tonnes (mln T) of barley in 2014-15, 4.9 mln T from Australia and 895,000 tonnes (T) from Canada, while most of the balance came from France. However the majority of the barley imports were feed quality with annual Chinese demand for malting barley imports estimated within the range of 2.5-3.0 mln T.
In 2015-16 barley imports in the first 7 months of the marketing year, from July to January, totalled 5.7 mln T. Of this 1.3 mln T came from Australia compared with 644,000 T from Canada and just over 3 miln T from France. Again much of this barley, particularly from France but also some from Australia and Canada, will be feed. But with strong demand for Canadian malting barley this year, more exports are expected with Canada en route to doing a record 1 mln T of barley to China in 2015-16, of which some 600,000 T will be malting barley, also a record.
Comparing monthly stats from last year to this year, barley imports have been considerably lower in recent months. This is likely due to a drop off in feed barley purchases as the AQSIQ in China, which provides import approvals, has tightened protocols making feed barley imports difficult. As a result, China is likely back to buying primarily malting barley for the foreseeable future.
China beer market growth curtailed
Due to rapidly increasing disposable income and growing drinking age population, China has become the world’s largest beer market by volume, while the United States remains the world’s largest beer market in terms of value. However there has been a lot of talk of slowdown in China’s brewing industry of late. After reaching over 500 million hectolitres in 2013 (one quarter of world output), production of beer in China dropped for the first time in 25 years to 492 million hectolitres in 2014, and is estimated to have fallen again in 2015 (2015 figure below is projected). A sluggish economy combined with greater interest in mid to premium quality beer has limited the absolute growth in beer volume consumed and therefore produced. In spite of this, China’s beer market remains robust and the shift to mid and premium quality beer is likely to be a boon for Canadian malting barley exports as buyers look for better quality raw materials to meet demand.
Snow beer the largest brand in the world by volume
In addition to international brewing groups such as Carlsberg and AB-InBev, China Resources Snow Breweries, Tsingtao Brewery, and Beijing Yangjing Beer are the dominant players in China. The two biggest are China Resources at 23.3 percent of the beer market in China in 2014, with Tsingtao Brewery second at 18.4 percent. Together the five big players control over 80% of the Chinese beer market. In 2014 China Resources produced 107 million hectolitres of Snow beer making it the world’s largest beer brand at 5.4% of the global market, its total volume is higher than the combined volume of Budweiser (4.6 billion liters) and Budlight (5.0 billion liters). Together with Tsingtao Brewery and Beijing Yangjing Beer, these three Chinese brewers produced 10.1% of world beer production.
The recent purchase of SABMiller by AB-InBev, to create the world’s largest beer company, will have implications for China. A deal worth over US $100 billion, the takeover is the largest in history in the area of consumer goods. However the acquisition also means SABMiller will have to divest itself of the Snow brand. China Resources picked up the brand for a bargain price of $1.6 billion, about a third of its valuation. The new brand will make China Resource by far the largest brewer in China.