Concerns over European malting barley supplies, following a poor quality Scandinavian crop which caused "exploding" beer, ratcheted up a notch, as commentators flagged upbeat prospects for premiums, and imports.

Tests will later this month reveal more on the quality of Scandinavian supplies hurt by harvest rains which caused high concentrations of Fusarium, a fungus which stops kernel development in the field, and when used in brewing causes extreme effervescence, known as "gushing".

However, industry watchers raised doubts over the Europe Union's ability to avoid a shortfall of malting barley estimated by Openfield, the UK farming co-operative, at 200,000 tonnes, with Russia also short of supplies.

Grainexx, the German-based malting barley specialist, forecast that a "good portion" of Scandinavian malting barley would be downgraded to feed, "and the existing [contracts] have to be switched to other origins".

"Gushing potential and red kernels remain on the agenda."

'Absolutely tight situation'

That means that there is "an absolutely tight supply and demand situation in Europe, including Russia" for malting barley, Grainexx said.

Imports from Argentina, which is expected to report a record barley crop of some 3.3m tonnes for 2011-12, are "badly needed", and expected by RMI Analystics to hit 250,000 tonnes.

Within Europe, buyers will lower quality bars to take up more of crops usually considered more borderline. This year's French winter barley crop, for instance, looks set to be especially popular because of its early harvesting.

"We foresee the discount for French barley crop 2012 decreasing or even completely vanishing given the fact that: acreage will not go up in France, and may even decrease; and the French material is the first crop of malting barley available in Europe and will be badly needed," Grainexx said.

'Export opportunity'

In the UK, the clamour from the Continent for malting barley supplies is prompting exports of grain which, thanks to high levels of nitrogen, which causes clouding in beer, might normally be considered unacceptable by maltsters.

Last year's dry UK spring, notably in eastern areas, meant that nitrogen fertilizers were not taken up by plants during the growing phase, but when rains came later on, during kernel development, taking the nutrient directly into the grain itself.

"Though it could not be foreseen at the time, the poor quality of the Scandinavian crop has created an export opportunity that is a direct benefit to growers in the eastern region," Openfield said.

"In a normal year - if such a year exists - finding premium high nitrogen samples would be difficult, if not impossible, leaving growers to accept a feed values for malting varieties."

'Positive outlook'

Andrew Fisher, an Openfield manager, said that the outlook for the rest of 2011-12 was "positive" for UK barley producers, thanks to the "continued demand from mainland Europe".

Prices for UK malting barley had risen 16% year on year, with the premium over feed at about E30 a tonne, high by recent standards.

That contrasts with a decline of nearly 20% in prices of feed wheat on London's futures market.

The UK has some 175,000-200,000 tonnes of malting barley yet to ship out of an exportable surplus in 2011-12 of 300,000 tonnes, Openfield said.

On Sydney's futures market" feed barley values still remain cheap compared to wheat", despite recent rises, Luke Mathews, at Commonwealth Bank of Australia, said.