Hamburg, Sept 8 - A better than expected European Union malting barley harvest this summer means brewers will benefit from falling prices for a key ingredient in beer production, analysts and industry observers said on Tuesday.
Good malting barley crops are shaping up in France, Germany, Scandinavia and Britain.
"Malting barley prices are falling just about everywhere in Europe as it is becoming clear that the crop is larger than expected," one German trader said. "It is probably too early to say if beer prices will fall but lower barley prices will certainly be good for brewers' earnings."
Initial indications are that favourable summer weather helped boost yields and crop quality.
France, the EU's largest malting barley producer, should gather a total barley crop this year of 12.6 million tonnes, up 3 percent from a previous record in 2008, France's farm ministry estimates.
Analyst Strategie Grains expects 71 percent of the country's spring barley crop to be malt quality.
The large crop has sent French malting barley falling to around 100 euros a tonne, the same level as animal feed barley.
Malting barley is usually 30 to 40 euros a tonne more expensive than feed barley.
"We're seeing the malting and feed barley markets merge into one," said Remi Chevalier, a French broker specialised in malting barley.
Good weather meant Germany's malting barley harvest was considerably better than expected.
The barley crop reaching malt quality could total 1.5 to 1.6 million tonnes from 1.3 million tonnes last year, said Michael Lerch, chief executive of the German malt industry association.
"We believe Germany has achieved a good harvest which will provide satisfactory quality and prices are falling," he said.
German malting barley prices are around 100 to 115 euros a tonne for prompt delivery, down from 130 a tonne before the harvest in July. About 18 months ago German prices reached a peak of 300 euros a tonne after poor harvests.
Britain has an abundance of malting barley this year after a sharp rise in sowings of spring varieties triggered by difficult planting conditions for other grains in autumn 2008.
"We've had quite a big increase in plantings of spring barley in the UK because of the bad weather we had in the autumn which diverted a lot of land towards spring cropping," said Jack Watts, senior analyst with Britain's Home-Grown Cereals Authority.
An HGCA survey estimated spring barley plantings in Britain rose 22.1 percent this year to 727,500 hectares while winter barley area edged up 1.4 percent to 416,800 hectares.
Winter barley is sometimes used for malting by brewers while spring barley is used by both beer and whisky industries.
"The (spring barley) crop looks to have come off in pretty good condition in England. The Scottish harvest is still going on at the moment," Watts said.
A report by British crop consultants ADAS said spring barley yields were expected to be above average at around 5.4 tonnes per hectare with quality generally good.
HGCA analyst Watts said the abundance of malting barley had wiped out the price premium over feed supplies.
"The malting premium has virtually disappeared. Maltsters have bought what they need for the season," Watts said.