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CASTLE MALTING NEWS in partnership with Polish
12 May, 2022

Malting news World: Maltsters safeguard business from barley price increases but no insurance or hedge was possible for increased transport costs - analysts

Maltsters had become used to safeguard their business by working back to back – malt sales vs. barley cover - on priced contracts. Long-term agreements left the market price risk of barley to buyers, H. M. Gauger GmbH said in their May report.

Maltsters also covered all or part of their gas and electricity needs by long-term contracts with their respective suppliers. Natural gas is the major energy source for the malting industry, for about 85 - 90%. The March 31 import price of EU natural gas was US$42.39/MMBtu vs. US$6.13 a year ago, an increase of approximately 600%. The industry was not fully covered for such an increase of the production cost, only partly for 2022, most certainly for the year 2023 and beyond.

Absolutely no insurance or hedge was possible for the increased transport cost. On the ICE exchange Brent Oil costs US$105/bbl. vs. US$65 a year ago. Consequently negotiations take place to increase earlier contract prices for the risen cost of energy and transport.

Brewers realize that refusals could lead to delivery stops and - in the worst case - to the breakdown of their suppliers. Following the Russian embargo on gas deliveries to Poland and Bulgaria, further embargoes are considered possible, in the worst case forcing a stop of gas deliveries to some or all of the EU malting and brewing industries.

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