Malting barley demand down 29% year on year in June: Grain market daily

• UK feed wheat futures (Nov-20) picked up a little yesterday, gaining £0.85/t to close at £164.00/t. US wheat and maize futures also closed higher after falling sharply the day before.
• France has cut its soft wheat crop forecast by 1.6Mt to 29.7Mt, 25% lower than last year’s bumper crop, due to adverse weather and the smallest area since 1994. However, the 2020 crop would still be above the 27.6Mt harvested in 2016 after severe drought.
• Egypt again bought Russian and Ukrainian wheat yesterday, with purchases from this latest tender totalling 410Kt.
• Information on GB cereals usage in June, and so the whole of the 2019/20 season, is now available. From July 2019 – June 2020, GB animal feed production was 1.1% below 2018/19. Wheat usage by UK flour millers in 2019/20 was down 0.4% year on year and UK oat millers used 0.1% less oats.

In June 2020 UK brewers, maltsters and distillers used 116.9Kt of barley, according to AHDB’s latest statistics on cereals usage. This is 29% lower than June 2019 and the lowest June figure in our electronic records, which go back to July 1990. These figures highlight the continuing impact of the coronavirus on our industry.

It means that in 2019/20 a total of 1.77Mt of barley was used by the sector, 6.4% less than 2018/19.

This is very different story to what was expected before the full extent of the coronavirus outbreak became apparent. In February, Human and Industrial (H&I) usage of barley in 2019/20, which also includes a small amount of food usage along with usage by brewers, maltsters and distillers was forecast to rise by 2%.

By May, a drop of 5% in H&I usage compared to 2018/19 was forecast in the AHDB balance sheets, suggesting that at least 117Kt of barley demand had been lost due to the pandemic. The June usage figures, depending on food usage of barley, suggest that this figure could be slightly higher still. The end of season estimates will take into account the full season usage and trade data and are typically released in the second half of September.

Looking ahead to 2020/21

Pubs and restaurants were able to re-open in England from 4 July, with indoor service in Scotland from 15 July and in Wales this week. However, it’s far from ‘business as usual’ with consumer confidence impacted and social distancing measures reducing capacity.

Furthermore, the road maps for the different countries of the UK suggest that ‘business as usual’ seems unlikely for some time yet. Equally, local lockdowns could provide additional challenges. As such, it’s reasonable to assume that malting demand for barley will remain under pressure compared to pre-coronavirus levels in 2020/21.

These factors compound what could already be a challenging season ahead for barley. The large barley area planted for 2020, and an estimated sizeable carry out from this season (with many processors’ demands shored up to some degree with their 2019 purchases), looks set to keep supplies high.

Meanwhile, the possible tariffs UK barley exports face into the EU after 1 January (unless a trade deal is agreed) could shift export patterns. There will also be tougher competition for feed demand due to the global availability of maize, coupled with the zero import tariffs placed on maize post 1 January from the UK government. Together, these could all pressure barley prices for some time to come.

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