Supply Chain Collaboration Essential for Malt Security and Re-Investment

In his annual statement retiring MAGB (Maltsters Association of Great Britain) Chairman David Wilkes has called on farmers, merchants, maltsters, brewers and distillers to work in a more collaborative and constructive way, in order to ensure security of malt supply and encourage re-investment by UK malting companies. Reviewing the significant changes that have taken place in the industry during the past twelve months, he concludes that buyers of malt have to play a much more active role in the total supply chain.

Starting from the changes which he described in his previous statement, Mr. Wilkes outlined the situation which has seen world beer production rise by 6% during 2006, the equivalent to 500,000 tonnes of malt or the output of five new modern malting plants. He said: “Re-investment on the scale required is not occurring as a result of insufficient margins in our businesses over a number of years. This had to change, and has started to change. Security of supply was under threat. Sustainability of the supply chain demands that every link in the chain has a profitable base to support investment.”

Describing current market conditions he pointed to a number of contributing factors including:

• Harvest difficulties in Eastern Europe, Germany and France for a second year running

• Continuing drought in Australia

• Global cereal stocks at a thirty year low

• Competition for land from biofuels

• 300,000 tonne shortfall of malting barley in the EU and up to one million tonnes globally

• High malting barley prices

• Additional malt demand from scotch whisky distillers

• Reductions in UK exports from 400,000 to 190,000 tonnes due to closures of

UK malting plants in the past three years

Mr. Wilkes went on: “As a result of the changed environment, malt prices and margins have moved to more acceptable levels. If the UK malting industry is to remain viable and competitive then re-investment in malting assets is essential…….There must continue to be efforts made to increase confidence in the medium and long-term sustainability of supply chain relationships, which will encourage further investment by UK malting companies.”