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China demand props up barley prices, with malting premiums firm on top, 06.02.18

UK farmers are seeing good returns on malting barley, helped by firm premiums on top of a world barley price which has been supported by higher-than-anticipated Chinese demand.

Malting barley premiums and prices have remained very good, leading commentators said.

And feed barley has been “holding its own” in export markets while the UK wheat market has remained under pressure.

But an increased European Union malting barley area forecast for the 2018 crop was expected to lead to large surpluses across the UK, Scandinavia and France.

Tight supply

For feed barley, prices should continue to be supported by the tight supply which seemed to be developing across Europe, said Sam Scott, grain buyer at Cefetra, the UK merchant owned by Germany’s BayWa.

Globally, demand had been expected to be well-balanced, but larger-than-anticipated Chinese demand has driven international prices up and European prices have increased, despite a firmer euro.

Separately, it emerged on Monday that Russian barley prices have overtaken those of wheat – a reflection of strong Chinese buying from the world market, at a time when Russia’s wheat prices are depressed in an effort to shift its huge exportable surplus.

According to Ikar, wheat prices - at $195 a tonne for standard 12.5% protein export grade, on an FOB basis - have fallen behind the $199 a tonne achieved for barley.

Rival analysis group SovEcon put barley prices at $198 a tonne, up $3.50 a tonne week on week.

‘Challenging to find sellers’

At rival UK merchant Gleadell, trading director Jonathan Lane said: “Recent tenders to the Middle East and slowdown in Russian availability appears to have cleared out the markets longs and it has become challenging to find new first-hand sellers at previous levels.”

In the UK, the differential between barley and wheat has narrowed as alternative bio-products, such as wheat feed and mid-proteins, have moved sharply up in price.

“We continue to see good underlying support from the export markets into Ireland and Spain, and while the wheat market remains under pressure, feed barley is holding its own,” Mr Lane said.

‘Supported by premiums’

Mr Scott added: “Wheat in Scotland also remains heavily supported by premiums, with ex-farm prices offering growers good opportunities to sell well above London futures.

“The speculative fund short in agricultural commodities has been well-documented and there will at some point be some covering of position, we have seen a small amount already, although the effect on the UK market may be offset by a strengthening pound.”

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