Prepare for roller-coaster prices, volatility: malt buyer

New pricing era | Under the CWB export monopoly, prices were stable but in an open market prices will be demand driven

EDMONTON — Alberta’s malting barley producers will see higher prices but more volatility in Canada’s new open market, says a malting barley buyer.

“The market will go up and down as end users try to secure the quantities they need,” said Derek Prell, director of procurement for Malteurop North America.

“It is going to be demand driven. We as industry only need so much barley in a year.”

Unlike the more even prices seen during the CWB era, maltsters will now use higher prices to signal demand for malting barley directly to farmers.

“If we need barley, we’ll see prices go up,” he told farmers at FarmTech 2013.

The North American malting industry will provide stable but limited demand and premiums to growers. It will likely mirror U.S. style markets with more grower contracts to ensure industry supply.

The highest prices will continue to be offered by North American malt-sters looking to fill local demand, while the rest of the malting barley crop will be sold into lower-priced export markets.

“Globally, North America has some of the highest priced malting barley in the world.”

Alberta prices are $30 to $35 per tonne higher than what Australia sells its malt barley for, he said.

Prell doesn’t expect the North American malting barley market to grow beyond existing capacity. It is sized for the amount of beer produced.

Alberta barley producers are better positioned to take advantage of the new malting barley era than farmers in Saskatchewan and Manitoba.

The province’s proximity to West Coast ports, its two malting plants and the southern Alberta cattle feeding industry, all work to prop up malting barley prices and bring premiums to producers.

In Manitoba, malting barley has become a niche crop next to corn and soybeans.

Prell said farmers who expect to capture premium malting prices need to begin with seeding malting varieties.

Long gone are the days of growing a feed barley for the yield and capturing a malting premium by chance, he added.

“A malting barley is a very unique crop and it needs to be treated as such.”

Prell said producers must have continual contact with maltsters and grain buyers as they look for the best premium for their malting barley. The best premiums will likely come from contracting the crop in advance, he added.

“It is the best opportunity to gain a portion of the premium out there.”

Prell said maltsters and brewers will continue to buy mostly Metcalfe and Copeland varieties of malting barley, which Canadians grow.

“People are forced to come to the Canadian market and buy what they need.”

Prell said North America will continue to be a limited player in the world barley market trade. The European Union, Australia and Argentina are the primary suppliers of export malting barley.

Argentina, which is traditionally a soybean growing area, is the new player in the industry. Prell said producers found that barley works well in their two crop rotation, and production has increased tremendously over the past 10 years.

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