The current situation at the world grain and malt markets can be described as the (im)perfect storm of events, according to Brent Athill, Managing Director RMI Analytics.
In a presentation held at this week’s RMI Brewery Conference in Antwerp, Belgium he explained that grain prices were even high before the recent war in Ukraine.
Major driving force was China, which was cut off from several of the six major barley supply regions (being Argentina, Australia, Canada, Europe incl. UK, Russia and Ukraine).
China first implemented an 80.5% tariff on Australian barley imports as a result of an anti-dumping and countervailing duties investigation by the Australian government. (inside.beer, 11.05.2020) This equaled a ban on barley from Australia which was before one of the major suppliers of China and raised the need to source from other origins.
Another source for import barley disappeared in 2021, when a drought in the US and Canada forced North America into a barley import requirement itself.
Now, with the recent war in Ukraine a third source for barley imports partly disappeared, as about 500,000 tons of barley from Ukraine will not be available at least for this year. Russia and Ukraine accounted for about 27% of all world barley trade in 2021.
Looking from a perspective of brewers, the situation is also bad but not that bad.
According to Athill, the annual global barley production amounts to 147 million tons of barley but only 25 million tons are needed for malting. This shows that there will be no shortage in malting barley. Only under special conditions like now with higher overall grain prices, maltsters and hence brewers need to pay also higher prices for the barley and in other years with unfavorable weather conditions the industry might need to lower the quality requirements for malting barley to achieve a higher selection rate.
Even from a historical perspective, the barley balance does not look unfavorable. Grain breeders and farmers have been able to steadily increase barley production over the past decade, barring seasonal fluctuations, to keep up with the growth in beer consumption.
Another point not to worry are the malting capacities. Despite the fact that Ukraine and Russia are considered the granary of Europe, both account for only 1.925 million tons or 7% of the global malting capacity. Taking into account that both countries together also account for 5% of world beer production, the impact of a lack of supplies from these countries on the world market, while severe, is not life-threatening.
In 2022, capacity utilization of the global malt industry is estimated to be at 91%, a recovery of more than 4% from last year which was heavily affected by the pandemic. Athill sees malt capacity utilization tightening and the need for new capacity investments over the coming years, triggered by an economic recovery and further growth of beer consumption.