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Brewing accounts for about one-third of barley usage, World Commodity Profiles Via Thomson Dialog News Edge stated December 12.
Special varieties have been bred for malting, with a further distinction between types suitable for low-alcohol and high-alcohol beers. In some countries, farmers have contracts with maltsters to grow particular varieties. Whether or not malting barley is fit for the intended purpose depends much on the weather: high protein content seriously impairs malting quality. Grain that fails to meet malting standards is sold for feed, as are the by-products of the brewing industry. While the brewing industry is still chiefly based in industrialised countries, it is growing fast in East Asia notably China and in Latin America. Barley remains a staple food in some rural areas in East Asia and North Africa and there is a niche health food market in North America and Europe. Ethanol production represents a new use for barley, so far limited to the EU.
Regional consumption trends
World usage of barley was declining until the late 1990s, when growing feed demand, especially in the Commonwealth of Independent States (CIS), brought a limited recovery. Consumption now averages about 145m tonnes/year (t/y). Some 100m tonnes are used for animal feed, representing about 13% of global feed use of grains. About 25m tonnes are used for malting, 8m tonnes for human food and 5m tonnes for various industrial purposes. Regionally, Europe accounts for 40% of world barley use, the CIS 20%, the Middle East 15% and North America 10%.
Barley is a popular stockfeed in Spain
In the EU, feed use of barley varies at around 35m-40m t/y, representing about 28% of total grain feeds. Wheat has a higher feed value, and is liable to replace barley in feeds when it is abundant and relatively cheap, as has been the case in recent years. However, transport costs and traditional preferences among livestock producers ensure the survival of substantial markets for barley in some parts of the EU. For instance, in Spain more barley is fed than either wheat or maize. For similar reasons, barley tends to be used on-farm rather than sold for compound feed production. Over 60% of barley feed use in the EU is on-farm, compared with less than 40% for wheat or maize. In years of tight feedgrain supplies, such as 2006/07, barley feeding may increase, especially if the European Commission agrees to release supplies from its intervention stocks.
The EU is the biggest exporter of barley malt
Malting barley requirements in the EU total around 8m tonnes including exports as malt. The EU is by far the biggest exporter of barley malt, selling around 2m t/y, but the global market is shrinking as more countries establish their own malting facilities. Overcapacity led to closures of malting plants in several EU countries, including the UK. Some barley is used to make ethanol in Spain, but other member states find oilseeds better suited to this purpose.
Russia uses 12m tonnes of barley a year in feed
Poultry production in Russia is increasing rapidly as consumer confidence in poultry meat recovers from the bird flu scare. Heavy investments in the industry have improved meat quality and prices are more competitive with imports. Pig numbers are variable, as demand is sensitive to price changes, while beef cattle are in decline. Russia’s feed requirements are met almost entirely from domestic sources, including on average 12m tonnes of barley. As barley production is variable, in some years supplies to the feed industry may become short. Recently, good-quality barley has been exported, further tightening domestic supplies. Beer consumption is growing rapidly in Russia and with the opening of new malting facilities over 1.5m tonnes of barley are needed for processing. In Ukraine, the poultry industry is unable to meet local demand, partly because, in most years, feedgrain supply runs short of needs. The situation has recently been exacerbated by large barley exports, and domestic use has dipped below 5m tonnes. New malting facilities are increasing the demand for malting barley.
Food usage of barley has been growing in North America
In the US, barley is grown mainly in regions remote from the main centres of the feed industry. Feed use totals less than 2m tonnes, representing only 0.8% of the total amount of grain fed in the US. Food and industrial uses (mainly malting) are stable at around 3m t/y. In Canada, prairie-grown barley used chiefly to be an export crop, but the establishment of modern feedlots, growing exports of meat to the US and rising grain transport costs mean that feed barley production is now mostly oriented to the domestic market. Feed use, which averages over 9m t/y, is growing, but varies from year to year with availability of low-quality wheat. Malting barley requirements are rising, and health concerns have boosted food use of barley, which is high in soluble fibre.
Saudi Arabia’s import market
With no barley production of its own, all Saudi Arabia’s needs have to be imported. Production of alfalfa, the chief locally produced alternative feed, is restricted because of its heavy use of the country’s scarce water resources. Most of the average 6.5m tonnes of barley used in Saudi Arabia are provided to nomadic tribesmen as supplementary feed for their sheep and goats. These requirements vary from year to year according to pasture quality. Barley is also fed to imported sheep and goats kept in the country for a few months for fattening; these are particularly numerous in years of pilgrimage. Some barley is also incorporated in feed concentrates for dairy cattle. For political and welfare reasons, the government supports livestock farmers by heavily subsidising to around US$300m a year the costs of importing barley. Use does not, therefore, respond directly to changes in international market prices. Elsewhere in the Middle East, and also in North Africa, barley feeding is declining as maize-fed poultry replaces sheep and goat meat.
Brewing is a major end-use in China
China, which is not an important barley producer, normally uses very little for animal feed: the estimate is about 1m tonnes. Brewing, however, is an important source of barley demand. Malting requirements total 4m tonnes and are rising along with disposable incomes and beer consumption. In Japan, feed barley use now totals less than 1m tonnes. Some 85% is used in feed mixes for beef cattle, giving the meat a marbled quality especially preferred by consumers. Under World Trade Organisation (WTO) pressures, Japan is opening its market to meat imports, and domestic beef production is in decline. Other uses of barley are limited and falling. Beer consumers are shifting to lower-alcohol types, which use maize rather than barley.
Latin Americas malting needs are imported
Little barley is grown in Latin America, and there is no tradition of use in animal feed. About 2m tonnes is used for malting. Beer consumption is rising in some countries with strong economies (particularly Brazil and Mexico), but in Argentina and Uruguay it has now levelled off. Few countries in Latin America have a large malting industry, and their needs are therefore mostly met by imports of malt.
The EU, with crops of around 55m-65m tonnes, accounts for over 40% of world barley output. Germany, France, Spain, the UK, Denmark and Poland are the main producing countries. Planted areas are slowly declining because of over-production and the greater market value of wheat and other crops. However, when winter wheat plantings are reduced by bad weather, or killed by frost, farmers may replant with spring barley, which matures more rapidly than spring wheat. This happened in several member states in 2006. The withdrawal of EU intervention support for rye after stocks became excessive in the mid-2000s may boost barley production in central and eastern Europe on soils where wheat cannot reliably be produced.
Russian production varies widely
Barley has always been an important crop in Russia but as it is grown on relatively marginal land (the better land is reserved for wheat), with limited applications of fertiliser, yields are very variable. Over the past ten years, production has ranged from over 20m tonnes to less than 10m tonnes. Most is for feed but efforts are being made to produce malting barley of a high enough standard to replace imports of malting barley and malt. In Ukraine, better returns as a result of successful export marketing are encouraging farmers to use more fertiliser, enhancing both yields and quality. Except after severe winters such as in 2003 and 2005, production now normally exceeds 10m tonnes.
In Turkey, wheat and barley are the main means of livelihood for farmers in the central plains. Barley, once locally a staple food continues to be grown on the high plateaux where the long winters and late springs do not favour wheat. The crop, which normally amounts to around 7m tonnes, is susceptible to drought and pests. Turkey is unusual in that a number of distinct barley types are recognised. Production in Iran is declining as farmers switch to higher-value crops and the government reserves scarce water supplies to meet the strategic objective of foodgrain self-sufficiency. Nearly all Syria’s barley is also grown under rain-fed conditions and production is variable.
Canada is a major barley producer
In Canada, most barley is grown in the prairie provinces, especially on the northern fringes of cultivation, where its short growing season and hardiness give it advantage over other grains. Production of feed barley in western Canada was boosted by the development of intensive livestock production units, while good export prospects provide a ready market for high-quality malting barley. Plantings vary according to expected prices relative to wheat and canola (rapeseed), and drought can severely affect yields. In the US, barley production is in long-term decline. Other crops offer better returns, and many barley acres were taken out of production under the Conservation Reserve Programme. Plantings in recent seasons have been the lowest in over a century. Most barley is grown in central northern states where the climate is cool and dry and the growing season short. Despite rising yields, in 2002 production fell below 5m tonnes for the first time in 50 years, and was even smaller in 2005.
Production varies widely in Australia
Barley production in Australia competes with oilseeds, wheat and sheep. The climate favours malting barley, which usually comprises half the crop. Output is rising in response to firm domestic and export markets, but the timing and amount of rainfall is crucial, and output varies. The 2005 crop (harvested at the end of that year and marketed in 2006) was a near-record 9.9m tonnes, but output slumped to only 3m tonnes in the following year because of drought.
Trade in feed barley averages about 13m tonnes but is variable. Malting barley trade, averaging about 4m tonnes, is more stable. Exports of malt as such, which are not included in barley trade statistics, total about 6m tonnes, having increased by 50% since the mid-1990s. In recent years, growth in the trade has levelled off.
Saudi Arabia dominates barley imports
Saudi Arabia is by far the largest market for feed barley, usually accounting for half of all trade. Purchases average over 6m tonnes but vary from season to season because barley is stockpiled when prices are low, and imports deferred, as far as possible, when it is expensive. The EU used to be the main supplier, but in recent years the market has become very competitive, with Australia and Ukraine making the biggest shipments. Iran and Syria usually import some feed barley, in amounts varying with domestic production. Jordan and Israel are feed-deficit countries and each regularly buys 500,000 tonnes of barley a year. Because of freight advantages, these markets are now usually supplied from Black Sea origins. North Africa’s purchases of feed barley can be large in drought years, for example in 2001/02 when imports exceeded 2m tonnes, but the trend is downwards as maize and other feeds are more widely used. The EU, which has freight advantages, retains part of the North African market, but Ukraine is a major competitor.
Barley is a strategic commodity in Japan
In Japan, barley production is small in relation to demand and there is a fairly stable import requirement averaging 1.4m tonnes. The government regards barley as a strategic commodity and controls imports, buying most of the requirements duty-free on behalf of licensed processors, who tender directly under a simultaneous buy-and-sell system. Australia and Canada are usually the main suppliers. Brewers’ needs are mostly met by imports of malt, but some malting barley is bought for food use. China is now the world’s largest importer of malting barley, usually buying over 2m tonnes. Beer production is growing very quickly by 14% in 2004and although barley does not qualify for government production assistance; rising processors demand has stimulated improvements in the malting quality of the local crop. This is slowing the upward trend in imports. Australia is the leading supplier, and Canada and the EU (France) usually provide the rest.
Competition has reduced EU barley exports
The shares of different exporters in world barley trade vary hugely from year to year much more so than with other grains. This reflects the swings in domestic production and also the priority accorded to domestic feed needs over exports. EU sales often reached 7m t/y in the 1990s but have recently averaged about 3m tonnes because of reduced production, lower importers requirements and strong competition from low-cost producers like Russia and Ukraine. Lower intervention prices under the common agricultural policy (CAP) reforms mean that the European Commission does not now usually have to grant large subsidies for EU barley to compete on world markets. Trade is, however, still partly controlled through the issue of export licences and the disposal of intervention stocks at export tenders. Most EU exports are of feed barley, but malting barley sales usually total at least 1m tonnes. It also ships over 3m tonnes of malt annually.
Ukraine has become a major barley exporter
Russia became a large-scale barley exporter in 2000 when falling meat production left a big surplus. It shipped over 3m tonnes in 2002/03 and again in 2003/04, competing especially strongly in traditional EU markets such as Saudi Arabia. Shortages and rising domestic prices have since reduced exports to around 1m tonnes. Transport congestion and expense constrain Russia’s grain exports, and wheat tends to take priority over barley. Ukraine has recently risen to prominence as a major exporter, with sales of 4.3m tonnes in 2004/05 when it overtook the EU to become the second-largest exporter. With shorter distances to travel, and better-equipped Black Sea ports than Russia’s, Ukrainian barley has been sold profitably at very competitive prices and found ready markets in the Middle East and North Africa. However, as in Russia, the government is prepared to limit barley exports in order to safeguard supplies and stabilise prices for the growing livestock farming sector. Kazakhstan, Turkey and Syria are occasional exporters of feed barley.
Higher port charges have reduced Canada’s barley exports
Canada’s share of world barley markets has fallen since transport costs from the prairies to the ports increased in the 1990s. Exports now average 900,000 tonnes of malting barley and 700,000 tonnes of feed barley a year. Some prairie producers feel that they would do better if the Canadian Wheat Board (CWB) no longer controlled the marketing of their barley, but there is also concern that US trading companies would then take control. The CWB single-desk export system is under threat from the agricultural trade negotiations in the WTO, where major players especially the US seek to break up state trading monopolies. Although the US is only a small barley producer, local surpluses close to its Pacific ports allow it to sell about 400,000 tonnes of feed barley and 100,000 tonnes of malting barley annually. Relaxation of trade barriers under the North American Free Trade Agreement (NAFTA) has facilitated malting barley imports into the US from Canada (and also US exports to Mexico).
Except in drought years, Australia is the largest exporter of malting barley with average sales of 1.6m tonnes, and it competes strongly in feed barley markets with up to 4m t/y. Rising domestic demand has not so far reduced export availability because of the growth in production. Export marketing arrangements, which were once rigorously controlled at state level, are now almost entirely deregulated.
Stocks
World barley stocks average 25m tonnes, about one-half of which is located in main exporting countries. The EU is the only producer normally to carry surplus stocks. In 2002 stocks totalled nearly 10m tonnes but in 2004, after the CAP reforms, they fell to only 4m tonnes and intervention stocks were almost eliminated for the first time in many years. Bigger harvests led to the accumulation of over 2m tonnes of intervention stocks by the end of 2005/06, the largest holdings being in Germany France and Finland. Carryover stocks in Canada and the US each average 2m tonnes, and Australia’s are normally less than this level.
Price issues
Feed barley prices tend to be more volatile than those of maize because of the much narrower import demand base, widely varying crops in importing countries, and limited substitutability with other feeds. Producers particularly in Australia and Canada are quick to respond to changed market prospects, and periods of high barley prices seldom last long. Since 1998 export prices (fob French ports) have ranged between less than US$60/tonne and over US$190/tonne. In 2003/04, when feed was in particularly short supply in the EU, export quotations were sometimes US$60/tonne higher than US maize. Ukrainian and Russian feed barley is usually available on an fob basis more cheaply than French. The discount varies, but has been around US$10/tonne.
With firm demand from the brewing industries in many countries, but variable supplies, malting barley export prices usually command a premium over feed grades. This reached an exceptional US$70/tonne in early 2003, but fell to US$20/tonne as feed supplies in the EU tightened. It rose again to US$60/tonne by late 2006, when malting barley was in particularly short supply.
14 December, 2006
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