EU malting barley prices started to recover slightly in mid-May following the easing of lockdown measures in most countries. For instance, the French malting barley (Sebastian) price, rose 3% m-o-m in the month ending 10th June 2020, to a total of €176/MT.
The coronavirus pandemic led to reduced demand for malting barley. In the UK, according to the AHDB, barley usage for the brewing, malting and distilling sector was 114.7kt in April – the lowest in over a decade (-28%). This significant decline in usage was seen across the EU, driven by low demand from the foodservice sector, as pubs, bars and restaurants were closed and sporting events and festivals like Germany's Oktoberfest were cancelled due to the lockdown. As a result, beer consumption was affected, thus impacting the demand for malting barley used to make beer and whisky, leading to an oversupply in the market. Some maltsters tried to supply the excess barley to livestock producers, resulting in a narrowing of the malting barley premium over the feed barley. As of 10th June, French malt barley was trading at a €25/MT premium than other barley grades, compared to €42/MT in March.
According to the USDA, EU barley production is expected at almost 63 million tonnes (+13% y-o-y) in 2019/20, 6% over the five-year average. Additionally, demand is expected to remain very tepid with some countries such as the UK having its pubs and restaurants reopening in July. This is when the harvesting of the new 2020/21 marketing season is due to commence, thus weighing further on prices. As a result, the ending stocks for the 2020/21 barley season is forecast 16% higher than the previous year at 5.9 million tonnes and 14% above the five-year average.
Even though some companies in the beverage sector have started to increase their capacity and prices have recovered slightly, demand for malting barley is expected to remain sluggish, given the oversupply, hence bearish outlook.