The barley market has seen an unexpected turn this year and caught many brewers by surprise.
“A large enough crop of malting barley and an uncertain malt and beer demand during the corona crisis depressed markets in the weeks following harvest ,” says H.M. Gauger in his newest market report. “It misled trade and industries to only see safe supplies and keep waiting for lower markets. Large short positions, particularly against LTA’s [long term agreements]of brewing groups, remained uncovered.”
In the course prices of malting barley indeed dropped to very low levels, only a few Euros above feed barley. “No surprise, much quality barley disappeared in the feed sector,” states Gauger. In addition, France, Canada and other countries sold larger quantities of feed and malting barley to China, which earlier imposed prohibitive tariffs on Australian barley. (inside.beer, 11.5.2020)
This all caused markets to rise steadily again and - with little hope for a turn-around - forced brewers to cover their shorts in 2020 barley, but partly also 2021 and even 2022 barley, mainly for pricing LTA’s “at insignificantly lower prices” than last year.
“Most forecasts are for stable or even firmer markets; and typical for bull markets, there is a certain nervousness that old crop supplies may be running out,” concludes Gauger.