USA: Some malting barley growers still waiting for contracts to be released by maltsters

What a difference a year can make in the malting barley market.

Last year at this time, maltsters were making plans for sweeping out the corners of the grain bins as the supply of malting barley appeared to be razor thin. But after an exceptionally good year of production in 2015, the market is awash in malting barley and some maltsters appear to be in no hurry to extend contracts to growers for the 2016 crop, Farm and Ranch Guide reported on February 5.

“The contracts are coming out, slowly but surely. Some have been issued by some companies and some haven’t been issued,” commented Marv Zutz, executive director of the Minnesota Barley Growers Association. “Last year the contracts were issued early and at a strong price due to the shortage of barley. This year, because of the surplus of barley from our above average yields last year and the high acceptance rate, not as much barley is needed for the current production year.”

This year due to the lower competition for barley acres to supply the maltsters’ needs, there will be a reduction in acres contracted and some maltsters are currently in a wait and see attitude as they wait to see what the market is going to do and what they will have to pay for those contracted bushels.

The contracts that have come out are not as high priced as they were last year, Zutz noted. The contracts are coming out in a price range of $4.50 to $4.65. And only a percentage of the acres that a grower had the previous year are being signed up for contracts this year.

How this is going to impact a grower’s crop rotation decision is still not certain.

“Farmers are right now in the planning stage of what they are going to do,” Zutz said. “I attended AgCountry’s marketing session yesterday and most of the farmers in the room understood that very few crops are going to return a profit per acre. So guys are still trying to figure out what they are going to plant. Most of the guys are looking at crops that they won’t lose as much on.”

Zutz expects few growers will plant barley without a contract. And even with a contract, the delayed delivery associated with malting barley is causing some growers to turn away from barley completely and instead having a corn, soybean and wheat rotation, where the grain can be delivered at any time.

And don’t expect help from the feed barley side of the market, according to Zutz.

“All of the grains follow corn. Corn and wheat are probably at the highest levels they have been for a while. The chance of any further price recovery is slim to none,” he said.

The abundance of barley is also reflected in the cash bids on the elevator boards, where bids for both malting and feed barley are identical at around $2.20 a bushel, which is significantly lower than the malting barley cash price quoted a few months ago that was in the $5.00 neighborhood.

10 February, 2016