Livestock producers have struggled more than most in recent months as a result of the huge increase in feed and fodder prices, while arable farmers and particularly those producing malting barley appear to be on the crest of a wave, with improved prices which look set to continue – albeit at a slightly reduced rate.

That was the welcoming news from Julian Bell, senior rural business at SRUC, who pointed out that that all cereals had enjoyed increased premiums on the year, with wheat, feed barley and malting barley, rising £30, £40 and £50, respectively.

Speaking at jointly organised agronomy event in Perth he highlighted the fact that 10 new distilleries will be opened in Scotland this year with a further 30 expected to be up and running by 2021, which coupled with Bairds Malt increasing it's malting capacity at its two sites at Inverness and Arbroath, would help to fuel demand for Scottish malting barley further.

Add to that whisky and indeed all spirits being tariff free should Great Britain have to leave the EU without a deal and Mr Bell believes demand for Scottish malt looks set to soar.

"We have seen strong demand for Scottish malt in previous years, but we've not been able to capitalise on it because of limited capacity to produce it in Scotland. By 2020, we could need an extra 100,000tonnes of Scottish malt to meet demand if we are to reduce the amount of imported malt coming in."

He added that demand and prices for Scottish malting barley had increased since 2015 when 775,000tonnes were purchased which then provided a premium over feed barley of £14 per tonne, compared to 2018 when an estimated 810,000tonnes were bought at £47 per tonne ahead of feed barley values.

This year demand is set to rise further to 840,000 tonnes with prices estimated at being around £40 per tonne more than feed, with an extra 70,000tonnes required by 2022 at a total of 910,000tonnes.

However, he conceded that while Scottish malting barley would always attract a premium over English malt – which over the past year has been £30 per tonne – premiums for all cereals, to include malting and brewing barley are expected to fall £10-£30 per tonne this year, on the back of an increased global supply.

In saying that Mr Bell warned that Brexit could still have huge repercussions with a potential no deal, may add a further £20 per tonne or more to the value of grain, while a no Brexit or soft Brexit, could take away £20 per tonne, as a result of exchange rates.

Commenting on the wheat market he said that having been a net importer in 2018, the UK could swing back to having increased supplies and potentially a net wheat surplus to export.

"UK wheat plantings are up 4% on the year or 74,000ha, with the area sown in Scotland up 16%, which means we could potentially have around 2m tonnes of wheat to export and reduced prices."

However, he highlighted that good soft distilling wheat varieties, such as Viscount and Elation, which have shown to produce gross margins of £1548 and £1618 per ha, respectively, would be more likely to find a market.

And, while there is steady growth in the demand for oats, with strong premiums available for those in producer groups of £25 per tonne over wheat futures, Mr Bell warned that such values are often on a limited tonnage.

"Oats are a useful break crop and a crop which is steadily growing in demand but it remains a relatively small market and one that is easily oversupplied. Don't grow it without a contract," he said.

Scottish grain prices – up 20-35% in 2018 – harvest 2019 values £10-£30/t lower but up on 2017

Crop (ex-farm) Last year This year Next year

Dec-17 Dec-18 Change Nov-19

(£/t) (£/t) (£/t) (%) (£/t)

Wheat 143 171 +28 +20 160

Feed barley 131 165 +34 +26 140

Distilling barley (Oct) 161 217 +56 +35 185

Brewing barley 168 203 +35 +21 175

OSR (delivered) 302 317 +15 +5 319