Drought and soaring grain prices, an industry perspective

Australia is no stranger to drought, but that doesn’t change the fact that it’s a debilitating reality for many growers and producers of grains.

While it shouldn’t be a surprise that global warming coupled with an already dry country is a recipe for drought, growers and producers are still feeling the pinch.

Bintani’s Dale Meddings said that due to the current drought, grain prices will undoubtedly increase but that it’s difficult to predict by how much.

“European barley prices are rising after a tough season and with less-than-spectacular predictions for the Australian crop, I would say the only way is up,” Meddings explained.

“Rising ingredient costs are always a worry for producers as they don’t always have much choice but to wear them, but it’s not always so easy for producers to pass the increases on to consumers either.”

“This is where strong brands with high consumer loyalty have an advantage and where budget brands that are more price sensitive are likely to feel the pinch most.”

Peter McMeekin, consultant with Grain Brokers Australia told Queensland Country Life on Tuesday that the scariest part of the domestic barley story is that it is still in winter and many parts of the east coast are “already a write-off”.

“This scenario is one that will not be lost on the Australian maltsters and brewers, particularly on the east coast,” McMeekin said.

“We are already seeing a steady stream of coastal feed barley shipments from WA to Brisbane and Newcastle, no doubt a large proportion of the Queensland and NSW malting barley requirements will be forced to make the same journey.”

Meddings said that on the whole, larger maltsters are better placed to cope with a difficult season.

“Cargill have maltings in five states and have more ability to move barley and malt around the country to where it is needed,” Meddings explained.

“What we hope is that there is enough understanding of price pressures in the industry that all maltsters, big and small, can make it through the tough seasons to continue providing world-class Aussie malt well into the future,” he said.

Stuart Whytcross of Voyager Craft Malt said that with his business, he operates within a very closed system.

“We contract and pay our growers very attractive prices to grow older varieties,” Whytcross explained.

“Being as small as we are and having growers on irrigated land, gives us a level of security that even in current conditions – where most of our non-irrigated growers are looking like experiencing 100 per cent losses – we will still likely be able to obtain the grain required for 2019 malting from our irrigated growers.”

“So, our clients shouldn’t expect to see any significant price increases from us in the future.”

“But with my growers hat on now, it’s looking very likely that our family farm will have 100 per cent losses on this year’s crop due to the drought.”

Whytcross admitted that over the past 18 months, “there has been a significant rise in commodity barley prices, which have more than doubled in this time”.

“I’d anticipate the widespread drought to have further impact on this price as it competes on the domestic stockfeed market.”

“I can only assume that it would be inevitable that this increase in barley prices would be passed on to brewers and distillers through higher malt prices by the larger maltsters… but you’d have to ask them.”

Meddings said that Bintani is keeping a “close eye” on all Australian barley regions.

“We have a pretty good idea of where the best barley is growing. This is what will be used for the 2019 Signature Malt but I’m hesitant to reveal too much at this stage,” Meddings said.

“There will be great malting-grade barley to be found, it will just require more determined searching.”

“This is where the national reach and capabilities of Cargill are a huge benefit.”

There are some who feel that Australian consumers might look to international markets for supply, but Meddings says no.

“Australia is a large barley grower and should not need to import barley to keep the maltings ticking over and mash tuns around the country full.”

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