Spring barley for malting could be the big winner for arable farmers this year, due to an upturn in the demand for whisky, last year's reduced crop and swing towards distilling varieties south of the Border.
That was the welcoming news from Julian Bell of SAC Consulting, who told a joint AHDB/SRUC agronomy roadshow in Perth, that the entire Scottish cereal crop in 2016 was down 327,000tonnes on the year, with the spring barley crop showing a massive 225,000tonnes decline.
Add to that the seven to eight year cyclical whisky market, which is due for a turnaround, and he said there is potential for a £40 per tonne premium over feed barley prices in 2017.
"Whisky exports have quietly started to improve, and with last year's small barley crop combined with more barley in England expected to be sown for brewing instead of distilling, forward prices for malting barley are already higher," said Mr Bell.
Such is the potential shortage of malting barley this year, that Mr Bell said that local premiums for malt compared to feed barley could be as much as £40 per tonne, compared to £28 in 2016 and £14 per tonne in 2015.
Furthermore, he added that growing high yielding malting varieties are likely to produce the best margins in 2017. "It's hard to justify growing barley for feed when distilling prices are on the up." (See table)
There is also potential for a big change in spring barley ratings, with the No 1 variety Concerto, coming under increasing pressure from Laureate, which has been awarded provisional approval for malting and brewing by the Institute of Brewing and Distilling.
Higher yielding than Concerto by some 12% and with strong agronomic features to include short straw and low specific weights, AHDB trials have also shown the variety is less susceptible to skinning.
More importantly, it produced higher gross margins and indeed nett profit when compared to sowing Concerto and significantly higher profits to a typical feed barley.
In trials, Laureate produced gross margins of £931 per ha with a nett profit of £219 per ha, before the SFP, due to it's higher yield. This compared to figures for Concerto of £848 per ha, with a nett profit of £137 and feed barley, which although produced the highest yields of the three varieties, with increased costs of production and a £40 lower end price, resulted in gross margins of £696 per ha and a negative end margin of -£15 per ha.
However, while there is a positive outlook for the malting sector in Scotland, Mr Bell was also quick to point out that huge uncertainty surrounds future agricultural commodity prices following the Brexit vote, and the resultant weakening of sterling.
Wheat price rises, he said, have risen £30 per tonne on the year, of which £15-£20/t is as a consequence of the fall in the value of sterling. Nevertheless, he warned that future wheat prices are unlikely to improve much more due to another year of record breaking world harvests.
"After four near-record world harvests, the world grain market is depressed – there is no getting away from that. But, what is positive is that world demand has grown so strongly and the stocks-to-use ratio has stabilised so really we are no worse off than where we were a year ago."
Consequently, he said that farmers should not build too much of a business based on sterling remaining week and that they should instead look to build bridges with local processors in this country.
"UK farmers, suppliers and processors are all in the same boat – they share the same currency and can trade tariff-free and can therefore help each other out."
Those looking further afield he said could in future bring tariffs back into play.
Closer to home, he added there is also potential to look into growing protein crops, which with the import bill for animals feed additives currently standing at £150m per year, could be a winner.
"We're too far north in Scotland to grow soya, but there is a massive protein market that could be tapped in to long-term as new varieties are always being developed," he said.