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 because Russia and Ukraine are among the biggest producers and exporters of barley.

With the majority of barley exports from both countries going to feed grain markets, it is not surprising that global feed barley prices have responded with more dramatic increases than malting barley prices.

But, 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.

As 2022 opened, the global barley market was still getting comfortable with new supply routes after 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, which is down 7 per cent year-on-year.

This is putting world stocks on track to be just 17 million tonnes by the end of 2021-22, and the lowest level in almost 40 years.

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 poses questions about 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.

Feed barley prices have increased across all origins, but especially in Argentina and Europe.

In Europe, feed barley prices have increased by about 30pc since the start of the war, while malting barley prices have increased by less than 10pc.

In France, the malting-feed spread has closed.

In Australia, we have 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.

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

The spring barley crop in the Northern Hemisphere from the European Union and North America – which represents about 30pc of global barley production – will be planted shortly, with no major changes expected.

But planting intentions for the remaining 70pc of global barley production – from 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.

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