Even before the Russia-Ukraine War, global barley markets were already on edge – supplies were tight and trade routes disrupted.

The war adds another major disruption to the market, Rabobank’s senior commodities analyst, Cheryl Kalisch Gordon said, because Russia and Ukraine are among the largest producers and exporters of barley.

“With the majority of both countries’ barley exports going to feed grain markets, it’s not surprising that global feed barley prices have responded with more dramatic increases than malting barley prices,” Dr Kalisch Gordon said.

“However, with this resulting in a closing of the malt-feed barley price spread – which usually provides a premium for malt barely – alongside competition from other highly-priced crops, the factors are in place for a global malting barley shortage.”

Dr Kalisch Gordon said as 2022 opened, the global barley market was still getting comfortable with new supply routes following China’s introduction of prohibitive tariffs on Australian barley. “And the market was already highly sensitive to supply and demand shocks. Global barley production for 2021/22 is estimated to be 147.6 million tonnes, down seven per cent year-on-year, putting world stocks on track to be just 17 million tonnes by the end of 2021/22 and the lowest in almost 40 years,” she said.

“Now with Ukraine old-crop barley supply at least temporarily hindered and question marks over new-crop volumes from Ukraine and Russia in 2022, and even more uncertainty regarding the accessibility of exports, the war adds more disruption to an already-disrupted barley market and questions over where barley will be sourced.

“China had increased its reliance on Canadian, French, Argentine and Ukrainian barley after putting prohibitive tariffs on Australian barley in May 2020. With Canadian supply severely reduced by drought last year – and Ukrainian and Russian barley now at least partially sidelined – the market’s focus is on European, Argentinian and Australian barley supplies.”

According to Dr Kalisch Gordon, feed barley prices have increased across all origins, but especially Argentina and Europe.

“In Europe, feed barley prices have increased by about 30 per cent since the start of the war, while malting barley prices have increased by less than 10 per cent. In France, the malting-feed spread has closed. In Australia we’ve seen the malting-feed spread narrow, except in New South Wales, and fall below $10 per tonne in South Australia and Victoria.

“If strong demand for feed barley from the Middle East and China continues to limit the spread between malting and feed barley prices in key origins, it will make sense to buy malting barley for feed and feed purchasing will eat into malting barley supplies, she said.

Along with immediate concerns for shrinking supplies of malting barley is a longer-term barley supply concern for late 2022 and into 2023.

Dr Kalisch Gordon said the spring barley crop in the northern hemisphere (EU, North America) – which represents around 30 per cent of global barley production – will be planted shortly, with no major changes expected.

“However, planting intentions for the remaining 70 per cent of global barley production –  southern hemisphere barley and winter crop in the northern hemisphere – are still open to change.

“With current premiums for malting barley low to nil – and favourable pricing across the broadacre cropping options – getting malting barley varieties into the mix will be a challenge which, if not met, could lead to a shortage of malting barley availability. And we would then expect to see malting barley premiums bolstered,” she said.

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