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Bumper EU barley crop bodes ill for malt premium

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Evergrain forecast a decline in European malting barley premiums as it lifted expectations for the bloc's production surplus this year for a second time, with benign conditions expected to product an above-average yield.

The European Union will produce an exportable surplus of spring malting barley of 984,000 tonnes, the Swiss-based trading house said, lifting its forecast by 162,000 tonnes.

The revision, which followed an upgrade two months ago, reflected an improvement to 8.51m tonnes, from 8.35m tonnes, in the forecast for spring malting barley output, in turn down to improved prospects for the barley crop overall.

The forecast assumes that 30% of EU spring barley is deemed suitable for malting, in line with the five-year average, with weather, and particularly the perennial risk of harvest-time rains, still possessing the potential to cause significant swings in that figure.

'Strong yield'

European output of barley overall could hit 58m tonnes, Evergrain said, raising its estimate by 2m tonnes, to a level above that from many other analysts, such as the US Department of Agriculture, which forecasts a 55.7m-tonne crop.

Strategie Grains estimates output at 55.9m tonnes, while the European Commission last week pegged the harvest at 55.44m tonnes.

Evergrain, citing evidence from crop visits, said that the EU spring barley yield was on track to hit 4.11 tonnes per hectare, topping the EU average by 0.23 tonnes per hectare.

"The combination of excellent planting conditions makes us feel comfortable to forecast such a strong yield," the trading house said.

The European Commission's Mars agricultural meteorology division last month pegged the spring barley yield at 4.04 tonnes per hectare, compared with an average of 3.94 tonnes per hectare on its estimates, although it is expected to revise its crop data this week.

Price impact

The prospects of a strong harvest, which is just beginning in Spain, but is some still one to two months away in northern Europe, have already begun to be felt in barley prices, which have also been weighed by lower values of other grains.

"After many months of price support, we begin to see barley prices start to weaken and factor in the highly likely global barley surplus that will be built for next year," Evergrain said.

Malting barley prices in France, the EU's top malting barley exporter and a much-watched market, have lost some of their premium over feed barley too, with the advantage falling from more than E50 a tonne to E40 a tonne for new crop over the past month or so.

"For a while, the market did get support from concerns over the crop in France," which sent prices in the port of Moselle to E230 a tonne.

"But now the market is more comfortable. There is still some room for the malting barley premium to come down further," Mr Wree told Agrimoney.com.

The average malting barley premium in France is E25-30 a tonne.

The comments come ahead of the start of a tour of the French barley crop by consultancy RMI Analytics, which in late May said that "crop conditions look excellent throughout Europe with the weather varying between cool temperatures, rain and longer sunny and dry periods".

FranceAgriMer, the official French crop bureau, on Friday rated the domestic spring barley crop at 69% in "good" or "excellent" condition, down 1 point week on week, and 3 points year on year, but a strong figure nonetheless.

By Agrimoney.com

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