Malting barley buyers, who are scrambling to convince farmers to keep growing the crop, will soon replace the unreliable bulk system with direct contracting, says the head of BARI-Canada.
Farmers will probably grow either strictly feed barley varieties or malting types under contracts with malt-sters that have a high likelihood of being respected, Pat Rowan said during a panel discussion at the recent Grainworld conference.
“Direct contact with the farmer is a good option for us,” he said in a later interview. “We have a plan. We’re not going to reveal it today, but it has to do with money and it’s going to have to do with money and long term contracts.”
BARI-Canada is the Canadian wing of major brewer Busch Agricultural Resources.
Rowan acknowledged that malting barley buyers have often rejected barley in ways that have upset growers. He also agreed that farmer anger is reasonable.
“I think the malt industry has a black eye and deserves it.”
Some analysts believe barley acres will rise slightly this spring because of the recent slump in wheat prices, which is good news for maltsters.
FarmLink Marketing Solutions’ 2013 seeding projections see barley acres rising 1.3 percent.
However, Rowan said maltsters are worried by the trend of farmers switching from malting barley varieties to feed varieties.
He said feed varieties make up 50 percent of barley acres in Alberta and 40 percent in Saskatchewan, while malting barley acres are quickly disappearing in Manitoba’s Red River Valley. Rowan expects to see malting barley be “eradicated … completely” from the valley as highly productive crops such as canola, corn and soybeans expand.
Barley will be driven from many areas when genetically modified wheat is introduced, he added.
Rowan said farmers will likely move away from the old industry paradigm of growing barley that would likely end up as feed but had a small chance of becoming malt.
“It was like winning the lottery.”
Prairie farmers might soon be in a similar situation to what exists in the United States, where malting barley is grown exclusively under contract, often on irrigated land.
Rowan said malting barley on irrigated U.S. land has a 95 percent selection rate.
New crop malting barley prices have been scarce this winter, which Rowan said reveals part of the problem for the malting industry: grain companies don’t like the stuff.
“Most (maltsters) have had difficulty working with the commercials,” said Rowan.
“Commercials really don’t want to ship malt barley. They want to ship to the port. They want to ship anywhere they can ship 100-car trains.”
Rowan said most malt plants can handle a maximum of 25 rail cars, so they are not a favoured customer of the railways or grain companies. A trend toward incentives for 100 to 112 car trains means the malt industry is out of tempo with the high-velocity grain handling business.
Rowan’s company trucks malting barley from southern Alberta to Conrad, Montana, while Saskatchewan farmers load producer rail cars and Red River Valley barley is trucked to Fargo, North Dakota.
He said barley’s shift from a bulk commodity crop to a contracted “special crop” won’t be easy for BARI but won’t necessarily be bad either.
“We just have to micromanage it a little bit more,” said Rowan.
“The direct manner is better.”
He said close relationships with farmers, long contracts and act-of-God clauses should ensure that dedicated growers will still produce malting barley.