Hopes of further fall in the price of barley

Brewers were forced to battle sharp rises in the cost of malting barley during 2011 - but things are looking up for this year.

The average price of European malting barley has been falling since 1 February, and has dropped 7% over the past two months to €213 per tonne [Mintec]. UK barley prices have dropped 3% to £189 per tonne over the same period.

Meanwhile, spring malting barley sowings are reported to be progressing at a record pace in Europe’s key production markets. The dry conditions that raised doubts over Europe’s winter grains have allowed malting barley farmers to sow their crop swiftly, raising hopes of strong spring yields and putting the forecast for 2012’s EU barley output at 54 million tonnes - three million tonnes higher than last year.

Despite the positive signs, big beer brewers are not celebrating yet. Heineken warned that higher prices - primarily malted barley - would push up its input costs by about 6%. It would mitigate this through “planned revenue growth initiatives” and efficiency programmes, it said.

While malting barley prices are still high, Heineken’s outlook jars with the falls of the past few months, said Mintec analyst Robert Miles. “That pricing trend has reversed now and we look to be coming out the other side,” he said.

With costs drifting lower and raw materials accounting for between just 3% and 10% of the price of beer, are brewers being cautious or are they preparing for further price hikes before news of an improvement in malting barley supply hits?

It’s too early to say, according to one maltster who supplies barley for a major UK brewer. “The rain we’ve had over the past few weeks has come at the right time and people are optimistic next year’s crop is going to be back to normal, but it’ll be the back end of June before we have better visibility,” he said.