February 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.