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Malting barley premiums to stay weak - for now

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Malting barley premiums will stay well below average levels for now, but could recover later in 2014 as the weak prices encourage a drop in sowings, with North America seen as a prime target for average reductions.

Evergrain forecast that malting barley premium over feed barley will trade at E5-15 a tonne for the first part of the year, thanks to the strong supplies created by "good-to-excellent crop results in all major growing regions" in the latest harvests.

"The world in 2014 will be oversupplied with malting barley," the Swiss-based malting barley trader said, in a price outlook which also warned of pressure on values of other crops.

"Premiums versus wheat and feed barley will remain low." The average premium in Europe is about E30 a tonne.

A range of countries, from Canada to Argentina, have enjoyed strong barley harvests, both in quality and quantity terms, which has depressed the premium over feed barley, itself undermined by the ample supplies of rival corn.


Acreage impact'

However, the premium "could improve to E10-30 per tonne" in the second half of 2014 as the low prices in the first half of the year encourage lower plantings for the next harvest, Evergrain said.

"We should expect a crop 2014 acreage impact, and a return to a more balanced supply situation in 2015," the broker said.

Evergrain has forecast a 5% drop in European Union spring plantings of malting barley varieties, in the main in the UK, where a poor 2012 for autumn sowings left a far larger-than-usual area unplanted the following spring.

RMI Analytics, the malting barley consultancy, has cautioned over a fall in area in North America too.

'Potential for an over-correction'

RMI said: "Early indications are for about a 5-10% drop in acres in North Dakota," a major barley-growing state, where farmers are increasingly turning to corn.

In Canada, "early estimates are for a drop of high single digits for barley plantings".

"When we look at the full North American barley complex, one can see the potential for an over-correction which could lead to sudden shortages if there are any yield issues in 2014."

Barley acres in Australia this year "could be down in the mid-single digits", given low prices, "and the likelihood of farmers carrying over 2013 barley in the hope of better pricing in 2014".


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