UK sees lowest barley acreage in 16 years

As weaker demand prompts brewers and distillers into buying less barley for malting, farmers are planting less of the grain in favour of higher-yielding crops like oilseed.

Lower levels of alcohol consumption in Britain are impacting forward planning in the beverage alcohol industry.

Consumers have been cutting back on spending in some categories, while health concerns, moderation trends and tighter household budgets have weighed on volumes. In turn, brewers and distillers have adjusted inventories and purchasing needs, which has further reduced demand for barley.

For instance, Diageo has halted malting at its giant RoseIsle distillery for part of this year, although distilling there continues.

Reduced barley acreage

Lower demand for beer and spirits has fed back into farm decisions for the current planting cycle. That has left barley acreage at its lowest level since around 2010.

In turn, that reduces the available supply of high-quality malting barley, meaning that malt buyers could face higher input costs or more competition for available grain, depending on harvest quality and final yields.

The effect is not certain, but the reduction in planting raises the risk of pressure on prices and availability as and when demand returns to a longer-term trend.

With prices at what many farmers calculate mean they cannot make a profit on a barley crop in present conditions, continuity of future supply is not guaranteed especially as not all harvested grain meets the high malting standards.

Balancing act

The British barley sector is also tied to export flows and domestic feed demand, so farmers are balancing several market signals at once. However, demand from brewers and distillers remains one of the prime drivers for premium barley values.

When that signal weakens, acreage tends to respond quickly.

For breweries, especially smaller operators with less clout in the market, any sustained increase in malt costs could add to existing pressure from soaring energy, packaging and labour expenses as well as taxation levels.

Distillers tend to hold longer-term grain contracts, but they are still exposed to shifts in raw material markets over time.

The reduction in planting does not mean an immediate shortage is certain but the 16-year low in acreage signals that weaker drinking demand is now influencing decisions at the start of the supply chain, which may have longer-term consequences on pricing.

 

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