Malting barley acres declining | Government changes play havoc with ability to access grain
Making the Canadian Wheat Board voluntary may not be enough to turn around the malting barley industry, says the head of the Malting Industry Association of Canada.
“The removal of the CWB alone will not solve all of the challenges this industry faces moving forward,” Phil de Kemp said at the recent Western Barley Growers Association convention in Calgary.
Canada’s four malting companies buy 1.1 million tonnes of malt barley annually. About half comes from Alberta and two-thirds of all the malt produced is exported to about 20 countries.
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“We have always maintained that malting barley is a specialty crop and we have been concerned for a number of years, as you have, about the significantly declining acres,” he said.
“The removal of the CWB monopoly will at least create the environment to make them reconsider this trend over the next decade, but it is important to understand there are considerable challenges and hurdles ahead that need to be addressed.”
Beer consumption has increased everywhere but North America since the mid 1990s. At the same time, malt companies have not invested in expansions or improvements.
There are many reasons why this happened.
The malting industry wants assurances it can get enough grain to fulfill its customers’ requirements, but previous changes that the federal government made to the wheat board’s operations created problems.
When the Conservative government permitted an open continental market for barley in 1993, the industry scrambled for grain until a court injunction closed the border again.
“In those 41 days, an awful lot of barley went south of the border at a premium to feed and a discount to malting barley,” de Kemp said.
“It ended up in our competitors’ malt plants and in one case we lost a tender on 20,000 tonnes of malt to Japan.”
Later, when the government changed legislation to create a farmer elected board of directors, the new law provided no arbitration mechanism to address commercial concerns. Maltsters had previously been able to meet with board commissioners to make their case when they needed more supply.
De Kemp said the industry appreciated the board’s right to do business, but changing marketing philosophies sometimes left maltsters shorthanded.
“We felt at times it was detrimental to traditional supplier relationships,” he said.
The policies that were used to set initial prices could not send signals to farmers that more malt was needed. As a result, the barley often ended up as feed because the price was better.
The Cash Plus program helped send price signals for growers and maltsters.
De Kemp said maltsters will be able to better compete for farmers’ business under the new regime. Farmers can decide if they want to sell directly to maltsters or work with the new board.
Producers who deliver directly to the plants will be paid on the day of shipment and there will be no CWB administration costs or minimum initial payments.
However, some pricing arrangements and risk management programs may change.
De Kemp said removing the wheat board’s malting barley monopoly should also allow for price transparency and predictability.
However, better prices for other commodities continue to edge out barley. Seeded acres are down 20 percent in the last 20 years, said Rob McCaig, managing director of the Canadian Malting Barley Technical Centre.
The world produced 15 billion tonnes of malting barley last year. Production is dropping in Canada, the United States and European Union and growing in Argentina, Ukraine, the Middle East and Australia.
As well, canola acres are spreading because of the increasing demand for more trans fat-free oil and biodiesel. It may replace wheat as the number one prairie crop.
Barley also fell in tandem with the declines seen in the Canadian cattle and hog population.
Less available barley has made malt expensive, which has prompted some foreign brewers to use carbohydrates such as corn and rice.
“The accountants have taken over and we will not see them return to barley malt,” McCaig said.
