UK: High barley stocks make outlook for the market bearish
With high UK barley stocks, the outlook for the market is bearish, FG Insight reported on October 17.
Speaking at the AHDB Grain Market Outlook Conference, head of market specialists (arable) David Eudall said the sheer volume of barley produced globally was having a dampening effect on prices. “Stocks have risen by four million tonnes year on year. While there has been an 11 mln tonne increase in consumption, 16 mln tonnes more barley has been produced globally.”
Traditionally, UK barley has traded at a discount to wheat, however, as the increase in exportable surplus has increased, prices are having to become more aligned with the global market to compete. This year’s UK barley crop is forecast at 8.2 mln tonnes, higher than some in the industry were expecting, says Millie Askew, senior analyst, AHDB balance sheet team. “This is the largest estimate since 1998.”
In terms of use, there has been an increase in use of barley for distilling due to the volume available and relative price, she says. “Demand for barley for animal feed is also likely to increase because of the price and volume. While usage is expected to increase, this will not be enough to outweigh availability and there will be a substantial amount for export or free stock. We will need to shift quite a bit of barley to prevent carryover.”
The recent rush to the ports to export barley has slowed as the October 31 Brexit deadline approaches.
While under a no deal scenario there would be the opportunity to export up to 300,000 tonnes of barley to the EU by the end of the year under a €16 tariff rate quota (TRQ), logistical constraints mean it is unlikely this would all be used by the end of this calendar year having a limited effect on stocks, says Mr Eudall.
Recent delays in cereal drilling due to wet conditions could also mean more farmers switching to spring crops – most likely spring barley, which could exacerbate the high barley stock levels going into the new crop year, he added.
“We could have the continuation of a large surplus of barley for 12-18 months. We need to stay competitive into third country markets which means prices staying at or falling from where they are now.”
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