World: Malt markets remain tight

Worldwide, malting barley is in short supply. Bumper crops in Argentina and Australia have helped to mitigate the situation but a large surplus in the southern hemisphere is offset by a deficit in the northern hemisphere. Especially tense is the situation in North America and Mexico, and to a lesser extend also in Europe. In North America, China and Europe, 2- and 6row malting barley with a lower quality must make up for the deficit in good quality 2-row malting barley.

Due to high barley prices and the Christmas break most brewers have abstained from new purchases for the past two months and only a few purchases to fill gaps for the current year have been reported at skyrocketing prices of far above EUR 600 per ton ex works as reported by H.M. Gauger in his newest market report. The price that has nearly doubled during one year has caused heavy losses to those brewers and maltsters which were not covered for the running year. Although there were no names reported, it is believed that some maltsters, especially those who already had financial problems in the past, might have speculated for lower barley prices and who are now caught with their pants down. The same problem occurs to those brewers who need to buy additional malt because of a cautious buying philosophy due to the pandemic or another unexpected sales increase.

While most of the business in crop 2021 is already done, the barley cover is quite narrow and the industry on the northern hemisphere eagerly awaits a good crop 2022. Deliveries of malt made from new crop barley are expected much earlier this year than in previous years. It is expected that already in October most of the malt delivered from Europe and North America will be made from crop 2022.

Current business for crop 2022 malt trades about EUR 100 lower than today’s prices for crop 2021 malt. While this price level of the new crop is still much higher than in previous years, it is a bargain compared to the actual prices.

Brewers are now confronted with the question, if they should already cover their needs for 2023 at the present price level or wait for the time to come. “We are seeing an unprecedented period of high prices and elevated volatility across all aspects of the brewing supply chain,” says Brent Atthill, Managing Director of RMI Analytics. He pledges for a professional risk management that reduces price volatility and secures supply.

During the last years, climate change has increased the risk for a late sowing, a dry growth period, hail damage, flooding or a prolonged rainy season during crop that can easily drive prices up again to unimaginable heights. However, if the new crop on the northern hemisphere brings the much hoped-for relief, the price may well drop again.

It is clear that the next few months will cause a lot of stress to everyone involved.

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