Farmers in the European Union, producer of 20 percent of the world’s beer, will reduce malting barley output this year after growers planted more feed grains, according to RMI Analytics.
Production of malting-grade barley, usually planted starting in March in the EU, may drop 13 percent from a year earlier to 8.8 million metric tons in 2013, Matthias Wree, managing partner at RMI, a Lucerne, Switzerland-based research company specializing in raw materials for breweries, said in an interview. Output of winter barley, typically used in livestock feed, may rise 7.8 percent to 25 million tons, he said.
Farmers planted more feed barley after spot-market prices rose in the past year, while malting barley futures traded in Paris dropped 9.9 percent over the same time. The premium for malting barley over feed in western European spot markets is the lowest since 2003, Wree said.
“The premium of malting barley over feed is historically low,” Wree said by telephone today. “We had an extremely tight feed market and also a very good malting barley crop in Europe in 2012, so both things came together at the same time.”
Malting barley futures for delivery in March rose 3.4 percent today to 245 euros ($328) a ton on NYSE Liffe in Paris. Feed barley prices don’t trade on futures exchanges in Europe. Spot-market feed barley in Creil, France, a European benchmark, was up 6.6 percent in the past year as of Feb. 12, according to the U.K. Agriculture & Horticulture Development Board, a Kenilworth, England-based researcher that tracks grain prices.
EU barley stockpiles may slip to 6 million tons by the end of the 2012-13 marketing year on June 30, the lowest in at least 10 years, according to the European Commission. Total spring barley production, including malting and feed varieties, may be about 30.4 million tons in the 2013-14 season, down from 31.7 million a year earlier, Wree said.
Malting barley production in the EU was 10.1 million tons in 2012, compared with the previous three-year average of 8.4 million tons, Wree said. Farmers planted more crops than usual last year after a cold snap killed some winter grains, leaving more fields available to be replanted in spring. Feed barley prices rose last year after drought in the U.S. damaged corn supplies and boosted global demand for feed, he said.
Malting barley in western Europe commands a premium of about 10 euros to 15 euros ($13 to $20) a ton over feed-quality barley on the spot market, less than the normal price difference of about 35 euros to 40 euros a ton, according to RMI’s Wree, who previously worked as a trader at Hamburg-based agriculture Alfred C. Toepfer International and on SABMiller Plc’s commodity procurement team.
Brewers typically contract grain six months to a year in advance, so higher costs may not be passed to consumers until 2014, said Francois Sonneville, an associate director for Rabobank International’s beverage team in Utrecht, Netherlands. EU countries produced 37.6 million tons of beer from barley in 2011, compared with global output of 184.9 million tons, according to the latest data from the United Nations’ Food & Agricultural Organization in Rome.
“If I were a brewer I would be quite worried about what farmers are going to plant this year,” Sonneville said by phone on Jan. 30. “If you look at prices at the moment, feed barley might be more attractive to grow than malting barley.”
Heineken NV Chief Executive Officer Jean-Francois Van Boxmeer said Feb. 13 on a call with reporters that he expects a “small increase” in input price inflation this year after an 8 percent increase last year, mainly driven by malting barley. The shares of Amsterdam-based Heineken, the world’s third-biggest brewer, have climbed 10 percent this year compared with a 5.7 percent gain in the STOXX 600 Food & Beverage Index of 28 companies.
“Malt costs for brewers will remain relatively high in 2013,” Wree said. “There’s not really a reduction foreseen against 2012.”