UNCERTAINTY and price volatility will be major factors in the 2005 grain trade, according to Josh Dadd, of the Home Grown Cereals Authority, which is conducting an online conference this week with the focus on malting barley.

Last year excellent harvests pushed up global stocks of wheat and maize to around 262 million tonnes. However, Dadd warns this must be seen in perspective.

"Despite this additional 33 million tonnes in store, stocks are still forecast to be the second-lowest since 1983/84, a key factor for the coming season and which suggests that prices will continue to be sensitive to world weather charts."

US maize is effectively the price setter on the international market and cannot be ignored, with most malting barley contracts based on a feed value base plus a premium. The US had a record maize crop last year at 300 million tonnes and stocks in store at 51 million tonnes - the second highest since 1992/93.

However, as Dadd explained, not all of the crop is destined for the feed market.

He said: "The situation could be even worse if it were not for the rapid expansion in the US bioethanol market, which now accounts for 30 million tonnes of US maize each year. There is no doubt that this has benefited the US maize price and thus world grain prices."

Currency moves will be important in the coming months and, on this front, European Union traders will need to pitch exports at a competitive level against the dollar.

Dadd said: "For malting barley prices, do not look at the market in isolation. A close eye needs to be given to all the major grain crops to understand what might happen to the malting barley price. Remember, you can feed malting barley, but you cannot malt feed barley."

The entire structure of the malting industry is changing, according to Andree Defois, of Paris-based Strategie Grains.

She said: "The EU is in a situation of over-capacity. Plants have closed, most notably in the UK and Germany.

"As a total we estimate that in 2004/05 the EU-25 usage of malting barley will reach 11 million tonnes against the 10.9 million tonnes in 2003/04. It will decrease by 150,000 tonnes in the UK and 80,000 tonnes in the Netherlands.

However, it will increase by 20,000 tonnes in Germany, 65,000 tonnes in Belgium, up to 80,000 tonnes in France, 40,000 tonnes in Finland, 90,000 tonnes in Sweden and 45,000 tonnes in Lithuania."

That analysis is not good news for the UK, where production of malting barley in the current year is expected to be around 2.1 million tonnes.

Total demand is anticipated at 1.8 million tonnes, leaving a surplus of almost 300,000 tonnes, which will either have to be exported or directed at the lower feed market.