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On your radar > Food prices

Dry weather leaves brewers with malting barley supply crisis

By Guy Montague-Jones , 31-May-2011

A dry spring in much of Europe has sent malting barley prices shooting upwards – adding to the woes of brewers already under pressure from weak beer demand, according to analysts.

In the UK, one of the four leading European producers along with France, Germany and Denmark, spring barley prices for the coming 2011 harvest have risen from £183 a metric tonne last November to £235 in May.

Brewers spark recent jump

The dry start to the year, in the UK and France especially, has triggered this price hike, creating major uncertainty in the market. Stuart Shand, sales director at agriculture merchants Gleadell, said the market has “exploded” as one or two brewers have finally stepped in realising that “drought conditions were in fact real and ongoing”.

In recent times brewers have been holding off purchases because declining beer demand has made it difficult to predict future needs, HGCA analyst Jack Watts told this publication.

Such last minute buying practices could force some brewers to pay inflated prices in the current uncertain climate. Watts added that it is not just a question of quantity and price - the dry conditions may have compromised quality as well. Most buyers are therefore holding back if they can.

“UK maltsters have not entered the market as they know that there is little point as sellers have all but disappeared due to the concerns over expected yield,” said Shand.

Harvest should ease uncertainty

Watts added that the “situation is quite critical in the UK and Europe” and is likely to improve only when the combines begin to roll in July and the likely size of the 2011 harvest becomes clearer.

In the meantime the uncertainty and lack of trade in the market makes it difficult to reliably say where prices stand.

“Prices are now at record highs for the 2011 crop, although the price at any point in time is difficult to say with very few trades being done anywhere in the EU,” said Shand. “Actually getting a price that reflects this nominal market is not easy as buyers are rare and sellers even rarer. This makes for a market that will remain volatile until harvest.”

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