Barley growers toast Diageo deal aimed at stabilising prices

One of the recurring areas of disagreement between grain growers and buyers has been the price offered for malting barley. Many of the disputes have focused on a lack of any worthwhile forward contract.

Diageo, the biggest buyer of grain in the drinks business, came out yesterday with a promise of a contract that the company claims will provide longer-term stability to the malting barley sector.

The move follows a pilot scheme last year in which a portion of the company's malting barley requirement was acquired under a special deal. Diageo paid producers an agreed premium over the November futures price for 70 per cent of the contract, with the balance being paid on open market price.

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This formula proved successful and now it is being extended for a further two years. The company says this format of contract is a first for the whisky industry, and recognises the important commitment Scottish growers make to the security of malting barley supplies for Diageo's whisky requirements.

Allan Bowie, vice-president of NFUS, described the contract as "a great example of what can be achieved when relationships within the supply chain are strong".

He added: "Diageo are making great efforts to bring long-term stability to grain price structures by recognising the volatility in the global cereal market and acting now to secure barley which gives a fair return to both grower and end user. Scottish growers consistently produce a quality barley and that is certainly reflected in Diageo's product. These partnerships can only bode well for the future of barley growing in Scotland."

Alan Williamson, Diageo's cereals procurement manager, who was involved in the development of the contract, said Diageo was keen to ensure a long-term supply of grain. "So this deal is good for growers in Scotland and good for Diageo."

Brian Higgs, Diageo's malt distilling director, added: "Quality is vital for Diageo. In order to produce the high quality spirit for our world-leading whisky brands, we need a sustainable source of high quality malting barley.

"Scottish growers are therefore at the heart of what we do and I'm delighted that we are working closely with them to ensure we get the quality malting barley we need."