One of Canada’s largest malt companies is downsizing in a big way and will be buying less malting barley as a result.
Prairie Malt Ltd. in Biggar, Sask., has issued layoff notices to 35 of its 75 employees. In a news release, the company said the end of a supply agreement with a major customer prompted the move.
“Unfortunately, this circumstance has necessitated a very difficult business decision for us right now,” said company president Doug Eden.
“To ensure the competitiveness of Prairie Malt Limited, we are aligning production at the plant with current demand. We are very sorry to lay off employees and are grateful for the high quality work they have performed at the facility.”
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Brian Otto, president of the Western Barley Growers Association, said any downsizing of that magnitude at one of the handful of large malting plants operating in Western Canada means less domestic demand for malting barley.
“It will be a serious blow,” he said.
The 2010-11 crop year was a tough one for the malt industry. Companies have been struggling with a lack of supply of suitable raw material to operate their plants.
Growers seeded 6.9 million acres of barley and harvested 5.9 million in 2009-10. Both of those numbers are well below the long-term averages. Poor harvest conditions further contributed to last year’s malting barley shortage.
“That has probably created some serious stress for the industry and especially for malt plants,” said Otto.
To make matters worse, malt companies had a tough time competing for supply in an environment of attractive feed barley prices.
“Producers could deliver into the feed industry, get their money right now, and be very close to what the malt price was,” said Otto.
Malt companies were running on empty by the time this year’s harvest began.
Otto barely got his crop off the field on Aug. 15 before it was out the door and at the local plant for processing. He wonders if companies are also suffering from the slowdown in global beer consumption.
Brigitte Bourgoine, spokesperson for Cargill Limited, the company that jointly owns Prairie Malt with Viterra, said the layoffs at the plant had nothing to do with supply issues or faltering demand. It was all about the loss of one crucial client.
“That customer was quite significant. We produced at least 50 percent of our capacity for their product,” she said.
The customer is shifting its business to another Canadian supplier of malt once the current supply agreement with Prairie Malt expires on Dec. 31.
“They just found a more local business to work with,” said Bourgoine.
The upshot is that the plant will be operating at about half of its 220,000 tonne per year capacity.
“We are continuing to look for other opportunities to bring that production back up,” said Bourgoine.
Canadian Wheat Board president Ian White isn’t concerned about problems at Prairie Malt affecting pool accounts.
“I don’t see (it) really affecting overall malting barley demand that much at all. We have a lot of outlets for malting barley, including export markets,” he said.
White is also optimistic that this year’s crop will produce a better quality malting barley than last year.
