Beer and the Russia-Ukraine Conflict

Initial Impact on Barley and Malt Supply is Limited

Although the Black Sea Region (BSR) is a major producer of barley, very few maltsters in the rest of the world depend on its crop, as the barley produced and exported from the region is mainly feed barley. Russia produces around 13% of global barley and Ukraine 5% (2020/21 crop). Together, these countries account for 30% of global barley exports, a significant amount.

Most BSR barley flows find their way to countries without a strong beer culture. In 2019/20, 64% of Russian barley was exported to the Middle East and 9% to North Africa. In the past crop season, Ukraine benefitted from the trade war between Australia and China, sending almost a million metric tons of barley (18% of its exports) to China. Another 54% of its barley exports go to the Middle East, 17% to North Africa and 10% to the EU. Although some maltsters in China might use Ukrainian barley, malt plants in the rest of the world are mostly sourcing from other regions.

As a result of these developments, there is still uncertainty about what farmers outside the BRS will be growing this spring. The spread between malting barley and feed barley has turned negative (in France) and the price of wheat has skyrocketed. As sowing of spring barley in the northern hemisphere occurs between March and April, the recent price movements have probably come too late for farmers to change their seedings, but a battle for acres could erupt later in the year when winter grains are planted.

Malting barley prices in western Europe are currently 50% above levels seen a year ago. This will have a major impact on maltsters, for whom barley inputs make up 65% of costs. For brewers, the impact is less severe as barley accounts for only 5% of costs. But there is a risk that protectionism could derail the entire value chain (e.g. if western Europe were to stop exporting malting barley/grains to countries outside the EU) and brewers might not get the right quantity or quality of malt. The development of alternative origins (possibly using new barley varieties), the strengthening of supplier relationships and a clear ingredient strategy per brand will be beneficial in the long run.