Surplus causes malt price drop

Australia's surplus of malt barley for the 2011-12 season has resulted in prices trading within a $5 difference to feed barley.

On Monday, malt barley was trading at US$240 a tonne FOB and feed barley at US$235/t FOB.

CBH barley trading manager Trevor Lucas said the drop in price was due to oversupply, with Australia estimated to export a surplus of 2.5 million tonnes of malt barley on top of 3.5 to four million tonnes.

The global barley market, including feed, is 16 to 17 million tonnes.

Mr Lucas said growers in New South Wales, Victoria, South Australia and WA had experienced an exceptional malting barley harvest.

"The average selection rate for malt is around 20 to 30 per cent, but this year we have found in all those states at least 50 per cent has made malt," Mr Lucas said.

"That has tipped the supply side over what global market demand requires."

Mr Lucas said markets including China were sitting tight and waiting for prices to drop in the knowledge that Australia was having a good year.

Malt and feed barley has traded within $10 of each other previously, but historically, Mr Lucas said the difference was $20.

"In the last 10 years, it has been $35 to $40. In the last five years it's been a $50 difference and has been increasing," he said.

"To have it come back this close is a shock to the system for growers.

"As a trader, and marketer, it's a real worry because we know growers struggle to grow it and may consider not putting in malting varieties given this is what happens in a good year."

Mr Lucas said in the feed barley market, there was strong demand for Australian grown grain and it would be another year where ending stocks decreased.

"Big buyers including Japan, Saudi Arabia and China are going to be looking at Australia for origin, because it's the cheapest and quality is reasonable. There is going to be a lot of pressure to export bulk barley."

Kojonup mixed farmer Thys Gorter said he had never seen the price of malt and feed barley trade so close. He said last week there was a $4 difference.

While Mr Gorter forwarded contracted some of his malt barley in July at $340/t, last week he was watching the market closely and considering his marketing options for the remainder.

After grazing his barley crops and canola this year because of the dry start, Mr Gorter said his barley looked like it would yield between three and four tonnes, well above last year's yield.

And while the rain has slowed harvest, Mr Gorter said on the upside, it's been good for his perennials.