Farmers sitting with malting barley still in store from harvest 2014 could struggle to find a home for their grain, warns a leading grain trader.
According to GrainCo’s commercial director for Scotland, Charlie Birnie, the market for grain still in store in virtually non-existent as the stocks are so high.
“The domestic maltster has sufficient stock to see it past harvest 2015 and the currency is making exports difficult,” he said.
“The last time we were in this scenario a number of farmers didn’t put in crop and by harvest the price had risen by £50-60 a tonne. That could happen again but for most farmers their fixed costs are relatively high so to do nothing is more costly than sowing the crop.”
Malting barley contracted tonnage for this year’s harvest was around 15% lower than last year, he said.
“The whisky industry is still buoyant but the output is not rising as quickly as distillers had budgeted for and that has raised a few question marks. The maltsters are all sitting on lots of stock and they see this as a year to use up that stock and take in less grain,” added Mr Birnie.
Scottish maltsters use around 950,000 tonnes of barley per year to produce malt for the whisky industry, but the distillers use the equivalent of around 1.2million tonnes meaning around 250,000tonnes of barley is malted outside of Scotland for the industry.
Mr Birnie said: “If there is any logic the Scottish maltsters should be able to produce and supply malt to the distillers at a better price than malt coming from elsewhere.
“This will be a difficult year as the maltster is looking to bring stocks back into line with usage.”
Highland Grain chief executive Simon Barry said the final value for malting barley this year will depend on yield and quality.
He said: “Growers are recommended to get a contract, if possible, to offset the risk that both yield and quality are good, leading to a surplus of unsold barley.
“The malting barley export market used to be an important element for Scottish growers but this has definitely diminished over the last few years. It is always possible that quality problems could arise somewhere in Europe, leading to demand for surplus Scottish malting barley but we can’t really rely on that at this stage.”
On prospects for prices post-harvest 2015, he said: “If we assume that prices will be static between now and harvest, the 2015 harvest does not currently hold out the prospect of being a hugely profitable event for growers but we have been here before and things can change. In the meantime, growers should have realistic expectations, whilst finding ways to manage, or mitigate risk, in the event that prices stay low.”