Insight Focus

Growing malting barley is challenging and highly unpredictable. Collaboration between farmers, traders and maltsters is key to managing supply, quality and profitability. Premiums fluctuate with supply, demand, logistics and strict quality standards.

The art of growing malting barley is not for the faint-hearted. Many factors, both within and beyond the grower’s control, can impact financial returns.

Prices and premiums may fluctuate significantly from the time the crop is planted to the final day of delivery. As previously mentioned, malting barley can be the most frustrating—yet the most rewarding—crop on the farm!

The Rise and Fall of Premiums

Each year is different for barley grains as varieties evolve and new ones emerge. Potential profitability and weather conditions must be considered before the drill even enters the fields to plant. Maltsters need to encourage plantings, as the more barley available post-harvest, the easier their task of malting becomes.

Pre-Planting Challenges

Farmers, traders, and maltsters all share a mutual interest in focusing on the profitability of the crop about to be planted. This shared focus can sometimes be misconstrued as competition: farmers seek high premiums; traders aim for large volumes; and maltsters strive to secure supply while keeping prices and premiums under control.

Good communication and a clear understanding of each party’s needs are essential to achieving the right balance.

Maltsters can consider supply contracts with traders and farmers to help manage their supply chain by:

  • Encouraging the volume of barley required
  • Focusing on their preferred variety or varieties
  • Contractually specifying the quality terms necessary to meet their malt customers’ requirements
  • Planning volumes for each future delivery period

Supply contracts established before planting can be valuable for maltsters in sourcing locally grown barley of the desired quality and in adequate volume. Traders view these supply agreements with local and regional maltings as a means of securing both volume and margin for the year ahead.

Equally, traders may enter into early contracts with farmers with their export markets in mind. Once again, variety, volume, movement periods and quality will be defined and agreed upon.

Growing Pains

As discussed previously, a plethora of challenges remains for farmers growing quality malting barley. Nonetheless, focusing on what will be deemed usable by the buyer can help guide the timings and agronomic inputs.

As weather aids or disrupts the maturing plants in the field, premiums may fluctuate, reflecting shifting expectations around volume and quality based on the latest meteorological forecasts.

Post Harvest

As soon as the combines begin to roll, samples will be tested, providing a clear picture of both quality and quantity for traders and maltsters to work with. Discussions will then begin around how the market views the local, regional and wider picture—focusing on the challenges ahead regarding volume, quality and logistics.

Logistics and Premiums

Harvest is often seen as a time of pressure. As a result, premiums will regularly see some easing as logistic needs override final price.

Farmers with excess barley will require movement. Traders and maltsters will be filling commercial stores.

In a wet season, local storage facilities may be strained as they work to dry, condition and move barley quickly—before quality deteriorates and, consequently, premiums fall. The longer the storage period, the greater the challenge for the farmer.

In a year of limited quality, greater premiums are likely to be demanded by any sellers further forward. In contrast, a year of abundant quality will inevitably see a falling of premiums as unsold barley looks for a home.

The All-Important Drivers of Barley Premium

Malting barley premiums rise and fall as supply vs demand ebb and flow. Quality is essential, although contractual fallbacks may be agreed upon. These may depend upon blending for export or long-term storage. Blending can work for variable nitrogen levels but is less viable when germination is inconsistent.

Premiums will vary based on:

  • Variety and quality of the barley
  • Distance to delivery—whether to a local maltster or for export
  • Time of year and logistical pressures of movement
  • Underlying base prices and the seller’s willingness to accept delivery risk, including potential price deductions for quality issues versus opting for a base feed price without associated financial risks

While supply and demand are the primary drivers of price and premium, malting barley remains a highly particular crop—affected by its varied varieties, localised destinations and vulnerability to quality deductions or rejections at time of delivery.

Malting barley and its premium fluctuations are a constant challenge for farmers, traders, maltsters, brewers and distillers!