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CASTLE MALTING NEWS in partnership with www.e-malt.com Dutch
05 November, 2022



Malting news World: Analysts expect tight malt supplies, boost to beer consumption by FIFA World Cup in Q4

World’s major brewers released recently their financial performance data for Q3 2022, and the results pointed out to the fact that a continued beer recovery is underway, RMI Analytics reported earlier in November.

With global beer production nearly back to the pre-pandemic 2019 levels, we can continue to put the Covid-19 pandemic behind us, the analysts said. However, there are lingering impacts from the pandemic which are still influencing the brewing and distilling supply chain. In particular, the global malt market is precariously tight, and arguably is tighter than in 2019, before Covid turned things upside down.

During the recent Drinktec event in Munich, there was clearly a presence of unfilled malt demand, which was met by a mostly universal lack of malt supply to fill this demand. This confirmed the fact that current conditions are tighter than in 2019 but it also triggers a simple question: where did the world malt supply go?

There are several factors contributing to this situation, the RMI analysts believe, some are fundamental shifts which will likely continue to impact the supply chain going forward, while others are transitory and eventually soon fade out of the picture. These factors apply to both the supply side (e.g. maltsters) and the demand side (brewers and distillers).

Looking back to the early days of the pandemic, some maltsters took a difficult decision to close production as malt inventories were climbing rapidly as brewers dropped orders. In retrospect, the pandemic’s impact on malt demand was overstated, and these malting closures were unnecessary, in hindsight. More importantly this lost malting capacity is lost forever, and today, the market seems to be feeling the effects of this lost production.

On top of a wide range of Covid-related challenges, maltsters also faced specific challenges in 2021 related to barley quality (e.g. North American drought). In this case, the effective capacity in North America was reduced in late 2021 and throughout 2022. As a transitory impact, the conversion to a normal crop 2022 puts the region back to normal operations and capacity.

In Europe, the energy crisis is a serious risk for maltsters, with a real potential for operational impacts this winter. As a result, commercial maltsters may be slightly conservative in pre-selling 2023 malt volumes with the risk of natural gas interruptions looming. This leaves the malt supply side a bit low on availability, and concerns about the coming 3-4 months.

Now, in turning to brewers and distillers, there are a number of factors contributing to the current tight malt situation, and there are four specific items to consider, RMI Analytics said.

1. Pandemic-related supply chain disruptions made consistent malt deliveries difficult at times. In response, there is a belief that end users have increased malt orders (demand forecasts) as a means to secure supply. Further, beer marketers are famous for ‘over-promising’ while ‘under-delivering’ sales volumes. Together this creates an overstated malt demand picture which will be corrected in the coming months.

2. Brewers and distillers prioritize vertical malting assets from a malt allocation perspective, which placed further strain on commercial maltsters during the pandemic. As a result, some marginal capacity was closed during or shortly after the pandemic. Also, new malting constructions were delayed due to pandemic lockdowns etc.

3. Due to the energy crisis, many European brewers are believed to be filling the beer retail pipeline.

4. Malt utilizations are gradually increasing as craft and all-malt beers gain flavour with consumers, and in a slow, gradual manner this is boosting malt demand.

The FIFA World Cup in Qatar (November, 20 – December, 18) gives beer consumption an unusual boost in Q4, especially in big markets (Germany and Brazil) where football enthusiasts often enjoy the matches with a refreshing beer in hand. Therefore, the tightness in malt supply for all the reasons outlined above should remain through the end of 2022, the RMI analysts said.

It is plausible a “World Cup hangover” occurs in early 2023 as inflated malt demand disappears, a full beer pipeline leads to reduced Q1 brewing, and the energy crisis impact becomes clearer, RMI Analytics conclude.





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