Work together now or face a declining UK malting barley industry

The malting barley chain from grower to brewer needs to start working together now if the UK industry is to survive says a leading national malting barley trader.

"With the world malting industry in over-capacity and losing money it is easy to see why we have downward price pressure," says Gleadell Agriculture's Stuart Shand. "But UK brewers and maltsters need to turn away from a short-termism approach if it is to have a sustainable malting barley crop in the future."

Gleadell has taken the first steps in rebuilding confidence in the whole chain by initiating long-term supply agreements between grower, merchant and maltster or maltster/brewer. There are three types currently targeting winter malting barley. Each focuses slightly differently on local issues whilst being aware of the similar global picture.

"Arable businesses are disillusioned with the whole domestic malting barley market. Domestic brewers and maltsters have forgotten that growers are under no obligation to grow malting barley. Tighter acceptance terms and poor premiums have shattered the confidence of farmers, and they have reacted by simply walking away from the crop. We want to reverse that trend," explains Mr Shand.

The advantage to the brewer and maltster is a long-term supply partnership with some of the UK's top malting barley producers. Whatever the national crop quality they get the cream.

"The grower get a premium price as they are growing what the market requires and receiving world-class market information," adds Mr Shand. Gleadell is part-owned by the world's number one malting barley trading company Toepfer International.

Malting barley growers will achieve an above average premium at a level that is sustainable for long-term malting barley production. Working with the customer and using various Gleadell marketing risk management tools growers can easily lock into premium contracts or fix base prices providing an extra comfort factor.

Gleadell has already piloted the partnerships. The 2003 harvest price for Pearl winter malting barley, net to growers before any moisture allowances, was £77.00/tonne against the open market malting price of £74.37/tonne for winter and spring malting returns. The October/December period paid £94.50/tonne for Pearl against the open market winter and spring price of £86.18/tonne.

Mr Shand points out that most growers sell their malting barley forward. "Fixed prices achieved were more in the region of £70.00/tonne ex-farm for harvest and up to £80.00/tonne ex-farm for the October/December period."

But despite Gleadell's first positive steps the industry still has far to go.

"The UK may be part of the EU, but it is an island and isn't part of Euroland. This means our malting barley market has been cut off from outside influences and is suffering as a result. The UK malting industry is struggling with a strong £ and cannot afford to come under further cost pressure from a rising domestic malting barley price," explains Mr Shand.

The 2004 UK barley crop will be the smallest crop in recent years, with the winter acreage estimated at only 389,000 ha. This is a drop of around 29% from 2002 as farmers have switched straight to wheat and passed winter barley by. The trade is also talking of a 15% drop in the spring barley area from last year, and a 2% drop over the last real low in 2002.

This would lead to a very tight barley supply and demand and an even tighter malting barley supply and demand. Add to that without a local maltings in southern England, moving malting barley to a domestic market is costing growers up to £5.00/tonne in extra haulage charges.

Mr Shand believes growers and merchants currently see export homes as the more attractive proposition. The EU maltster sees the the UK as one of its main suppliers for quality malting barley and is working hard to build up their own long-term supply partnerships.

Gleadell estimates that around 250,000 tonnes of malting barley will be available for export off the south coast from the 2004 crop which would further tighten the already difficult domestic situation.