Malting Barley Market Outlook

Jack WattsLead Analyst - Cereals & OilseedsAHDB Market Intelligence

Global Grains Production - predicted to break records this year

1,500

1,700

1,900

2,100

2,300

2,500

2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14Jan. f'cast

Pro

du

ctio

n &

Co

nsu

mp

tio

n (

Mt)

Source: USDA

As a result, prices move lower – particularlyfor maize

100

120

140

160

180

200

220

£ p

er t

on

ne

UK feed wheat Paris m. wheat Chicago m. wheat Chicago maize

Source: AHDB/HGCA

Global Maize S&D - a much needed surplus,but not out of the woods

0%

5%

10%

15%

20%

600

650

700

750

800

850

900

950

1000

2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 Janf'cast

ST

U (

%)

Pro

du

ctio

n &

Co

nsu

mp

tio

n (

Mt)

Production Consumption STU

Source: USDA

Global Wheat S&D - persistent premiums to maize could undermine feed demand

10

15

20

25

30

35

550

570

590

610

630

650

670

690

710

2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 Janf'cast

ST

U (

%)

Pro

du

ctio

n &

Co

nsu

mp

tio

n (

Mt)

Production Consumption STU

Source: USDA

Global Barley S&D - uplift in production, butno major stock rebuild

0

5

10

15

20

25

30

100

110

120

130

140

150

160

2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 Janf'cast

Sto

cks-

to-u

se (

ST

U)

rati

o (

%)

Pro

du

ctio

n &

Co

nsu

mp

tio

n (

Mt)

Production Consumption STU

Source: USDA

Year-on-year change in global barley availability from main suppliers

EU-28P: +4.8MtE: -0.3Mt

RussiaP: +2.6MtE: +0.3Mt

UkraineP: +0.5Mt

E: 0Mt

CanadaP: +1.4MtE: +0.2Mt

ArgentinaP: -0.7MtE: +0.7Mt Australia

P: +0.7MtE: -0.4Mt

P = ProductionE = Exports

Source: IGC

Global production 2012/13: 129.5Mt; 2013/14 forecast: 142.8MtTotal exports 2012/13: 19.5Mt; 2013/14 forecast: 19.1Mt

EU Barley S&D – good export pace so far, but likely to slow down

7.8 7.0

0%

5%

10%

15%

20%

25%

30%

35%

0

10

20

30

40

50

60

70

80

2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14Dec f'cast

Sto

cks-

to-u

se

M t

on

nes

Dom. Demand (LH axis) Exports (LH axis)

Total supply (LH axis) Stocks-to-use (RH axis)

Source: EU Commission

EU Malting Barley prices

150

180

210

240

270

Eu

ros

per

to

nn

e

UK malting barley, S.Coast French, feed barley French, malting barley

Source: RM International

UK Situation

UK wheat production and demand - stocks, imports and alternative feed grains important

10

11

12

13

14

15

16

17

18

M t

on

nes

Harvest year

Domestic demand Production

Source: AHDB/HGCA, Defra

UK barley production and demand - largest crop in 15 yrs = more feed demand / exports

0

1

2

3

4

5

6

7

8

M t

on

nes

Harvest year

BMD* demand Feed demand Production

Source: AHDB/HGCA, Defra

How are we dealing with the biggest barley crop in 15 years?

767 690 723 634 673 720 735 776

436333 333

341 391 320 385 424

202245

390404

398 386 280

636

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

K t

on

nes

Barley usage (Jul-Nov)

Brewing, distilling & malting GB feed compounders and IPU*

Exports

Other key areas

On farm feeding

End season stocks

Intervention

*Integrated Poultry Units Source: Defra, HMR&C

The geography of UK malting barley–strong distilling demand using more English barley

Source: AHDB/HGCA

Strong distilling demand

Northern England movingtoward spring distilling

varieties

E. Anglia typically in deficit, but looking at distilling

demand

South of England remains key for exports and regional ‘buffering’

Outlook

Five-year global outlook for barley - 1.8% average increase in production

115

120

125

130

135

140

145

150

155

12/13 13/14 14/15 15/16 16/17 17/18 18/19

Ton

nes

Production Demand

Source: IGC

EU barley prospects for 2014 - forecast 8%drop in spring area could be useful

Source: Strategie Grains

4.52 4.8 4.84

7.93 7.51 6.94

0

2

4

6

8

10

12

14

2012 2013 2014 f'cast

M H

a

EU-28 total barley area

Winter Spring

0

0.2

0.4

0.6

0.8

1

1.2

M H

a

Key northern EU spring barley producers

2012 2013 2014 f'cast

Summary

• Grain prices are lower due to record global production this year

• However, recovery in global grain demand and strong EU exports have helped provide some support

• UK barley exports to non-EU countries are important to dealwith the largest crop in 15 years - but face competition due to higher global production

• 2014 may provide better opportunities with lower EU/UKspring barley areas expected

Thank you

Jack.watts@ahdb.org.uk

Grain skinning: What can growers do to help hit malting specification?

Maree Brennan and Steve Hoad – SRUC Crop Science Team

21

Detachment of the barley husk (skinning) reduces malting efficiency

- wasted time coping with variability

- over-modification, loss of sugar to plant

The whole supply chain is affected:

Breeders Growers Maltsters Brewers & Distillers

Barley Steeping Germination KilningMalting:

Conversion of starch to sugars

Germination halted

Water uptake for germination

“Despair”

“Extra work”

“Hassle”“Unbelievable”

Grain skinning & UK malting

What are we doing?

Variety Improvement – funded by BBSRC’s Crop Improvement Research Club

• Characterise varieties• Grain structure and genetics • Grain assessment and variety screening

Industry intelligence – funded by HGCA

• Industry samples and data• Field screening tests• Industry protocols• Identify risk factors

from: Maree Brennan & Steve Hoad (SRUC)

Helping industry to grow varieties with no physical defects

23

Outputs so far…

• Development of variety screens for breeders

• Developing a new scoring protocol for industry

• Identifying risk factors to inform growers

from: Maree Brennan, Steve Hoad, Linda McCloskey and Kairsty Topp (SRUC)

24

Skinning weakness was evident in 2012

• Wide range of skinning (4% to 67%) recorded in field trial• Many Recommended List varieties ( ) performed poorly• Dispelling industry myth that brewing varieties ( ) are resistant

*

from: Maree Brennan & Steve Hoad (SRUC) and Bill Thomas (JHI)

25

Controlled environment screens are being compared to help the industry identify resistant and susceptible varieties

- misting post-anthesis simulated a summer with wet and dry spells

- shading post-anthesis simulated low light and poor grain-filling (2012)

Misting Shading

Screening for grain skinning

26

Grains must be subjected to mechanical force to distinguish varietal susceptibility to skinning (coded A to F)

In this test, hand-harvested ears were mechanically threshed for 5 or 20 seconds

0

2

4

6

8

10

12

14

16

18

A B C D E F

% S

kin

ned

gra

ins

Hand

5 s

20 s

Tests for grain skinning

27

Grain #

Floret #Ear length

Grain wt

% Skinning

Wt loss

Varieties with larger grains are not more susceptible to skinning

Varietal differences must be caused by other factors

Results from the misting screen

28

Phenotypic expression among contrasting environments

- 2012 field trial at JHI, Dundee (poor grain filling)

- 2013 field trial at SRUC, Edinburgh (more typical season)

- Glasshouse post-anthesis misting screen (wetting and drying effect)

Test for significance of rank order among environments

- Kendall’s coefficient of concordance, W

Identifying high- and low-risk varieties

29

0

0.5

1

1.5

2

2.5

3

3.5

4

Ski

nnin

g (r

elat

ive

to m

ean)

20122013Misting

Skinning expressed relative to the population mean

The final order is based on the average rank across environments

W = 0.525, P = 0.011

High- and low-risk varieties

30

Husk

Cementing layer

Pericarp

Testa

Aleurone

Endosperm

A lipid cementing layer is required for husk adhesion

The structure of this layer gives insight into varietal differences in husk-caryopsis adhesion

Cuticle proper

Cuticular layer

Cell wall

Cut

icle

Understanding the husk adhesion process

31

Le

Pe

Have we found the glue?

32

Summary of findings so far …

• Most current varieties had some weakness in 2012, a year of poor grain filling and a prolonged harvesting period

• Crops were much less susceptible in 2013, though weaker varieties skinned under SRUC under lab tests

• Skinning can be induced by repeated (prolonged) wet-dry spells

• Dispelled the myth that brewing varieties were less susceptible to skinning

• Variety and environmental influences on a glue-like material are being investigated

from: Maree Brennan & Steve Hoad (SRUC)

33

• Industry requests to address grain skinning in malting barley

• HGCA-funded project ‘Supporting UK malting barley with improved market intelligence on grain skinning’, started October 2013

• Identify varietal, regional, climatic and agronomic factors influences grain skinning

• Liaison with Scottish and English Micro-Malting Groups

• HGCA SRUC Agronomy Workshops 2014

• Field events e.g. Cereals in Practice

• SWRI activities e.g. Raw Materials KT Seminar, October 2013

• Ongoing discussions with BBSRC Crop Club barley breeders

• Engagement with AIC

Industry engagement

34

• It is too early to recommend a low risk variety, but some variety differentiation is emerging

• Follow the HGCA Project on ‘Supporting UK malting barley with improved market intelligence on grain skinning’

• A variety guide to skinning will be an output from this project

• Ideally, grow more than one variety to reduce risk in a bad year

• Liaise with maltsters on revised thresholds in a difficult season

• Consider changes to combine settings to reduce abrasive/handling effects on weaker varieties

• Attention to plant health: Although too soon to confirm, avoidance of plant stress before flowering and during grain filling should help to offset any mismatch between husk and grain development

What can growers do?

Project Team

Thank you, Any Questions?

Maree Brennan

Christine Hackett

Pete Hedley

Steve Hoad

Monika Lenty

Linda McCloskey

Brian Pool

Tom Shepherd

Bill Thomas

Kairsty Topp

SRUC, Post-Doctoral Research Assistant

JHI, Data Management

JHI, Genome Facility

SRUC, Principal Investigator

SRUC, PhD Student

SRUC, Technical Support

SRUC, Glasshouse

JHI, Lipid Analysis

JHI, Principal Investigator

SRUC, Data Management

Market requirements from a maltster’sperspectiveEddie Douglas - Commercial DirectorBairds Malt Ltd

Malting Barley Production and Purchases

Scottish Cereal Production

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Pro

du

ctio

n (

ton

nes

)

Year

TOTALCEREALS(1)

SPRING BARLEY

WHEAT

WINTER BARLEY

OATS

(1) Includes triticale

Scottish Spring Barley (area/yield)

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

-

500

1,000

1,500

2,000

2,500

3,000

3,500

Yield

(ton

nes p

er hectare)

Are

a ('

00 h

ecta

res)

Pro

du

ctio

n (

'000

to

nn

es)

Area ('00 Hectares) Production ('000 Tonnes) Yield (t/ha)

MAGB Scottish Malting Barley Purchases

0

100000

200000

300000

400000

500000

600000

700000

800000

900000

1000000

Tonnes

Winter Spring Total

Malt Market

UK malt supply by sector – Free market

Source: MAGB Industry data

Tho

usan

d to

nnes

0

100

200

300

400

500

600

700

2006 2007 2008 2009 2010 2011 2012 2013E

Brewing Distilling Food Export

UK Beer sales (,000hl)

31064 30262 29533 28869 28293 27164 26037 2435722092 21004 19422 18752 18284 17827 17381

13503 14470 15533 16702 1738817448 17893

1784817813

1729217396 16764 16344 15936 15537

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012F 2013F 2014F

Off trade sales On trade sales

• Forecast volumes declining by 2.5% per annum Source: Plato logic

22% decrease from 2004 to 2011

Scotch Whisky sales(million litres of pure alcohol)

Source: Sutherlands

Sutherlands forecast of ~5% growth pa 2013 to 2016

0.0

50.0

100.0

150.0

200.0

250.0

300.0

350.0

400.0

450.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013F 2014F 2015F 2016F

Grain Bulk malt Bottled blend malt Bottled malt Bulk blend Bottled blend

Usage of UK Produced Malt(2013 Est.)

53%

32%

13%

2%

Distilling

Brewing

Export

Food

Usage of Scottish Produced Malt(2013 Est.)

94%

3% 3%

Distilling

Brewing

Export

Food

Malting Barley Specifications

Importance of Barley Specification

• High quality malt requires high quality malting barley

• Malting barley specification ensures that customer malt specification requirements can be achieved

• Ensuring that the malting barley delivered meets specification is key control activity

Quality Requirements

• Germination - 98% min

• Grain size - <10% thru 2.50mm

• Grain nitrogen – Wish list

• Admixture

• Food Safety

Importance of Germinative Capacity

• Germinative capacity measures the viability of the barley

• The changes that convert barley to malt wholly dependent on the grains ability to germinate

• Non-viable grains do not germinate and pass through the malting process unchanged

• These non-germinated grains will have a significant detrimental effect on malt quality

Importance of Moisture Content

• Risk that high moisture barley may have damaged germinativecapacity

• Storage of high moisture barley for even short time period can result in fungal growth and possible mycotoxin formation – see HGCA Grain Storage Guide and Safe Storage Matrix

• Legal limits in place for ochratoxin A (OTA) which may be result from fungal growth

Importance of Grain Size

• Small grains will be lost during pre processing grading of the malting barley

• Small grains higher in nitrogen, low in extract

• Small grains hydrate rapidly so would give uneven moisture levels if steeped along with std malting barley grains

• Uneven steeped moisture levels would result in uneven modification levels in the germinated malt

Importance of Nitrogen Content

• Correct nitrogen content of resultant malt important for distilling/brewing performance

• Customer sets acceptable malt nitrogen range based on their product type and process

‘Wish List’ 2014 Scotland

SPRING Under 1.55%36%

SPRING 1.56% to 1.65%48%

SPRING 1.66% to 1.85%0%

SPRING Above 1.85%9%

WINTER Above 1.85% 3%,

WINTER 1.66% to 1.85%4%

Importance of Other SpecificationItems

• Admixture• Important to keep foreign material out of the malting and brewing process

• Varietal purity• Individual varieties will require specific processing conditions to optimise

malt quality

• Pregerminated/split/skinned grains• Damage of this nature renders the grain problematic to handle and malt

leading to poorer malt quality

Field mycotoxins

• Legal maximum levels apply to DON and ZEA when cereals are offered to the market – due diligence analysis programmes are run by malting companies

• Maltsters are also participating in UK data collection of levels of T-2 and HT-2 mycotoxins

Varieties

IBD Approved List Harvest 2014

WINTER VARIETIES

FOR BREWING USE

SPRING VARIETIES

FOR BREWING USE

SPRING VARIETIES FOR

MALT DISTILLING USE

SPRING VARIETIES FOR

GRAIN DISTILLING USE

Full ApprovalPearl Flagon Cassata Venture

NFC Tipple Concerto Propino

Optic Belgravia Concerto

Moonshine Odyssey

Belgravia

Provisional Approval 2

ArcherOdyssey Overture

Overture

Provisional Approval 1

Talisman Sanette Glassel

HGCA Recommended List 2014Spring malting varieties

Variety Breeder ParentageHGCA

Recommendation

IBD

Approval

Sanette Syngenta Summit x Yard Full UK Prov 1 brewing

KWS Aurelia KWS UK (Conchita x Quench) xQuench Full UK Under evaluation

Odyssey Limagrain Concerto x Quench Full UK Full brewing & Prov 1 malt distilling

Propino Syngenta Quench x NFC Tipple Full UK Full Brewing

Hacker Secobra Quench x Belgravia Full UK Under evaluation

Overture Limagrain Concerto x Quench Full UK Prov 1 brewing & malt distilling

Glassel Syngenta Summit x Belgravia Full UK Prov 1 malt distilling

Quench Syngenta Sebastian x Drum Full UK No longer approved

KWS Irina KWS UK Conchita x Quench Full UK Under evaluation

Concerto Limagrain Minstrel x Westminster Full UK Full brewing & malt distilling

Shaloo Syngenta SY Taberna x Marionette Full UK Under evaluation

Moonshine RAGT Toucan x Class Full N East Full malt distilling

NFC Tipple Syngenta (NFC 497 x Cork) x Vortex Full UK Full brewing

Belgravia Limagrain Minstrel x Westminster Full N East Full malt & grain distilling use

Optic Syngenta Chad x (Corniche x Force) Full UKFull malt distilling / No longer approved for brewing

New

New

New

HGCA Recommended List 2014/15Winter malting varieties

Variety Breeder ParentageHGCA

RecommendationIBD

Approval

Talisman Senova Flagon x Retriever Full UK Prov 1 Brewing

SY Venture Syngenta DH9525 x Retriever Full UK Full Brewing

Archer Limagrain NSL01- 8026 x Jonathan Full UK Prov 2 Brewing

Winsome Syngenta Flagon x NFC 7169-01 Full UK No longer approved

Cassata Limagrain Opal x NSL 96/7517 Specific (BaYMV) Full brewing

Flagon Syngenta (NFC296-7 x Rifle) x Pearl Full UK Full brewing

Pearl Limagrain Puffin x Angora Full UK Full brewing

Malting variety purchases

29.8%

46.9%

3.0%

16.6%

9.6%

20.2%

35.3%

4.4%7.2%

40.9%

12.1%

18.5%

6.4%

16.1%

10.4%

56.0%

9.2%8.3%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

Optic Decanter Oxbridge Belgravia Concerto Propino Others

% O

f To

nn

age

Pu

rch

ased

MAIN VARIETIES PURCHASED

Scottish Spring Barley Purchased - 2009 to 2013 Crop(Data Source:- MAGB Malting Barley Purchasing Return)

2009 crop 2010 crop

2011 crop 2012 crop

2013 crop (Int)

Malting Barley Prospects 2014

Scottish Malting Barley Prospects2014 crop

• Increased Spring barley demand due to distilling expansion.

• Variety and nitrogen will depend on target market• Distilling

• Pot still malt - Spring barley, low nitrogen - below 1.65N2

• Grain malt – Spring barley, high nitrogen - above 1.85N2

• Brewing• Brewing can use both Winter & Spring with a range of nitrogen up to

1.85N2

• Distillers prefer zero GN varieties• – Concerto, Belgravia, Odyssey etc.

• Each maltings/intake point will have their own specific variety requirements – please check with your merchant

Thank you