Grain Market Daily

Peter Collier

 

Peter Collier, Analyst, AHDB Market Intelligence
Peter.Collier@ahdb.org.uk, 02476 478851

 

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UK barley basis

Having recently discussed the basis of feed wheat (the ex-farm value in relation to the futures market) (read more here), this week we turn our attention to feed barley, and explore the merit in taking a similar approach.

Without a barley futures market, wheat and maize futures offer the main means of longer term price discovery. As such, an understanding of where local barley prices sit in relation to the UK wheat futures can help interpret how movement in the UK futures market may impact the ex-farm price in your region.

So far in 2017/18, the barley basis has reverted back to the trends seen in 2014/15 and 2015/16, with a strengthening basis following harvest. However, this season the rate of strengthening is faster i.e. feed barley prices are rising quicker relative to UK futures than in 2014/15 and 2015/16 – particularly in the North of England.  In contrast, in 2016/17 witnessed a weakening in basis throughout the crop year across all regions.

The barley basis reflects regional differences in barley supply and demand, as well as differences between wheat and barley supply and demand.

One reason behind the strengthening of the barley basis this season is strong demand for animal feed. In compound animal feed production, barley usage was up 29% year on year in July - December (read more here). Additionally, the availability of forage in the North of England is reportedly in short supply. Along with continuing exports, stronger demand for barley as animal feed has seen feed barley prices rising faster than feed wheat.

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Continued rise in in ex-farm feed barley price

In the latest AHDB Corn Returns (W/E 15 February) the UK average spot price for feed barley broke above the £130/t mark. This is £1.80/t higher than the previous week’s average and is the highest weekly spot UK ex-farm value for feed barley in nearly four years.

Breaking this down, the highest regional average price was in Scotland at £133.10/t, followed by the North East at £133.00/t. However, the elevated barley price is not isolated to these locations; £131.20/t was reported as the average for the South West.  Meanwhile, the spot price in Eastern England was also up £1.90/t week on week.

While past performance is not a guide to the future, there has been a strong upward movement throughout the 2017/18 year. The UK average ex-farm price having risen £14.50/t since early July. With some of the factors driving the upward trend of barely price mentioned above, the new AHDB cereal usage statistics set for release on 1 March, should provide some additional clarity as to UK market trends.

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