Distiller Diageo is to repeat for another two years a pioneering malting barley contract for farmers.

The deal, which industry rejoiced at its introduction last year, aims to secure malting barley supplies for the drinks giant, which operates 28 malt and two grain distilleries in Scotland.

Diageo said the extension of its ground-breaking deal was in response to ongoing farmer pleas to bring longer-term stability to malting barley contracts and give them the confidence to continue growing a crop that is the key ingredient in the production of whisky and other spirits, such as vodka and gin.

The contract allows those farmers signed up to it to lock in 70% of the malting barley they supply at a set premium – thought to be about £20 a tonne – on November wheat futures. The remaining 30% can then be traded at open market prices. That proved particularly lucrative for growers this year after rates rocketed to in excess of £150 a tonne.

Diageo cereals procurement manager Alan Williamson said: “The pilot we ran last year in response to the concerns of growers and merchants and our needs as a business, has been a great success and we’re delighted to be able to extend it further.

“Diageo values very highly indeed the job that farmers, growers and merchants in Scotland do. Our ambition is to create as stable and sustainable a way of procuring grain that we need in order to assure long-term supply security. So this deal is good for growers in Scotland and good for Diageo.”

Diageo malt distilling director Brian Higgs said quality was vital for the business – Scotland’s largest distilling company and owner of several of the leading whisky brands, including Johnnie Walker, J&B and Bell’s and a single malt portfolio that takes in Glenkinchie, Dalwhinnie, Cragganmore, Lagavulin, Oban and Talisker.

Mr Higgs added: “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.”

The extension of the contract was welcomed by Ian Keith, a grain trader with Frontier at Newmachar and chairman of the Agricultural Industries Confederation grain committee in Scotland.

Mr Keith said the deal had proved very popular with growers as it gave them the ability to lock their malting production into known rates. Fixing now at a November wheat future of £143 a tonne would give growers £163, he added. “We are finding a very favourable response to the increased allocation of these contracts.”

NFU Scotland vice-president Allan Bowie said the contract was an example of what could be achieved when all those in supply chains worked together.

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.”