RMI Analytics Crop Tour – 2017 United Kingdom
On August 1st and 2nd RMI Analytics conducted a crop tour of malthouses, trial and commercial barley fields, breweries and distilleries in the United Kingdom in East Anglia.
In the UK a dry start to the season has now given way to continued daily rainfall across major malting barley production areas in England, which is delaying harvesting activity and is causing concern about barley quality. This early drought stress has caused some loss in quality and yield on mainly lighter land with heavier land faring better. Broadly speaking, the dryness is only expected to result in a slightly below average crop in 2017. As of the time of the tour participants heard the spring barley crop was only about 5% harvested in the visited region with heavy rain interrupting progress almost every evening. Farmers were said to be focusing on harvesting their wheat crop when the rain abated and would get into harvesting spring barley in about 10 days.
Starting the tour at Throws Farm in Dunmow tour participants heard about how the agronomy services provider Agrii has teamed up with Glencore to offer farmers assistance in growing, contracting and marketing their grain. As part of Agrii and Glencore’s efforts they have worked to build the number of farmers growing spring malting barley in non-traditional barley areas in an effort to increase the local malting barley supply and combat blackgrass infestation. Participants heard from Richard Lawrence, of Agrii, and Nick Oakhill, of Glencore, that in 2016 there were 90 spring malting barley growers growing the Explorer variety for Budweiser UK but in 2017 this figure had risen to 140 farmers.
Following this presentation, Jack Watts, from the UK Agriculture and Horticulture Development Board (AHDB), discussed ‘Brexit’ and what it means for barley farming and agriculture in general. In a wide ranging presentation Mr Watts said he thought it would take at least 10 years for the UK to adapt all EU laws into the UK legal framework with the economy needing about 20 years to rebalance. For farming the biggest risks were seen to be from low market prices, a lack of competitiveness for UK grain, tariffs on selling into the EU, a reduction in government support for farmers and a lack of sufficient export infrastructure. In recent years the group was told agricultural income was much too low to maintain farm operations with the majority of income for many farms coming from government assistance. Mr Watts said he expects post-Brexit there to be significant consolidation in the agriculture sector with many farmers confident they can be successful outside the EU.
The implications for spring barley, and the possibility it would face a large tariff to be traded into the EU, were expected to be a reduction in acreage from the current levels, possibly starting from the 2018 crop, part of which will be marketed after the March 2019 Brexit deadline.
During a Q&A session after the presentation participants expressed the belief that there won’t be 18 months to work out and implement a new system and that perhaps there are only 6 months left to plan for how farmers will cope on leaving the EU and implement any measures. Discussions between participants expressed the view that farming is inherently a business full of uncertainty and continued uncertainty has now become the norm with ‘what was considered to be eternal (access to the single market) now going to change’. Farmers at the meeting also expressed the view agriculture was of a low priority in discussions on leaving the EU and the farming sector needed to unite and push for a higher place on the list of priorities during negotiations in Brussels. On a brighter note, participants did hear that UK food manufacturers are working hard to source more of the specialty foods from within the UK, which could stimulate UK farming in the coming 18-months.
During a visit to fields in Essex, farmers said they expected spring malting barley to return up to 11.8% protein and 7-7.5MT/Ha on their heavier land while on lighter land yields could be down to 4MT/Ha due to the early dryness. With discussion on Brexit continuing in the fields one trader expressed the view that the UK needed to seriously invest in port infrastructure if it wanted to be a grain exporting nation. Currently spring barley from Scandinavia or Continental Europe ships past the UK and into international export destination (e.g. Saudi Arabia) because the UK lacks the infrastructure to load large bulk carriers. A farmer on the tour said if there was no deal with the EU by March 2019, and spring malting barley faced tariffs into Europe, he would simply stop growing it and a switch into spring wheat.
In a presentation by farmer cooperative Camgrain participants heard the 35-year-old stores over 500,000MT of grain and, in partnership with Frontier, markets grain for farmers. Camgrain said it was their priority to get the best prices for farmers when selling their grain and they are well placed to deliver this as they have a detail traceability program and the ability to segment grain into many different types of differing price potential.
On the second day of the RMI Analytics UK Crop Tour the group visited Boortmalt’s 210,000MT capacity malthouse in Bury St Edmunds, the largest single site malting plant in the UK. During a presentation at the site the group heard how Boortmalt can produce five distinct categories of malt, divided by the nitrogen levels, which all supply different specifications of their customers such as lager and ale malts, exports specifications, or Nullox, high FAN and distilling types. At the site Boortmalt has storage for 5000MT of barley storage and space for 20,000MT of finished malt, which allows them to blend malt to the specific requirements of their customers.
From here the tour visited the St. Peter’s Brewery in Bungay where tour participants learnt about the production of traditional British ales and tasted a variety of locally produced beer from their range of over 20 styles.
Following this there were a series of presentations on UK and global malting barley S&D by Robert Streatfeild (Commodity Solutions), Matthias Wree (Evergrain) and Dr Christian Temme (RMI Analytics). Dr Temme started off by explaining how by investigating sold seed figures the variety split in terms of total harvested grain can be extrapolated. In his presentation Mr Streatfeild said he expected 725,000Ha of spring barley and 428,000Ha of winter barley would be harvested in the UK in 2017 for a total combined malting barley supply of 2.625m MT (excluding farm saved seed). In total Mr Streatfeild put UK domestic malting barley usage at 1.9m MT and the exportable surplus of 724,940 MT, one of the largest surpluses in recent times almost equality the largest surplus in 2015-2016 of 807,293MT. Finally Mr Wree discussed the global S&D with his expectation the global malting barley supply would be very tight in the next 12 months owning to poor crops in major global production regions. Mr Wree singled out the slow harvest in Germany and quickly eroding quality situation as rain continues to interrupt harvesting. He told participants his firm Evergrain had informed grain collectors in Southern Germany to keep all malting barley up to 13% protein, due to the expectation all grain will be required and only in dire cases should grain be sent to the feed channels. Mr Wree said poor conditions in Australia, Canada and the USA (dryness) and a mix of poor conditions in Argentina (excess rainfall) and a decline in acreage meant global exporters wouldn’t contribute as much to global trade as they had in 2016-2017. Out of Europe Mr Wree said the EU would have about 358,000MT of exportable surplus while globally supply and demand is virtually balanced meaning any unexpected crop problems could have a sizeable impact on prices.
Finally, the group visited The English Whiskey Company at the St George’s Distillery in Norfolk. The distillery was England’s first whiskey distillery to open in 120 years when it came into production in 2006. The distillery has about 3000 casks of whisky currently maturing and wide range of styles of locally produced English whiskey, some of which the tour group was able to sample.
This is the third RMI Analytics crop tour of 2017 and we would like to offer our sincere thanks to platinum sponsor Boortmalt, silver sponsor Evergrain and bronze sponsors Agrii and Commodity Solutions.
Thanks as well go to local farmers and cooperatives who opened their doors to the tour group and shared their passion for the malting barley.
Finally, it’s important to thank the participants, who make this unique malting barley industry networking opportunity such a success.
Manager of Market Insights and Reporting
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