Barley sector failing to grow markets for lower quality malt

The Canadian barley industry has been missing out on a lucrative overseas market for medium-grade malting barley that could be worth hundreds of millions of dollars annually to prairie growers.

That is one of the key findings in a soon-to-be-released study aimed at identifying new markets and boosting returns for the Canadian barley industry.

The complete study will be released next month at the Western Barley Growers Association’s annual general meeting in Calgary.

Association president Brian Otto said there is considerable demand for discount priced, mid-quality malting barley among maltsters and brewers in China and other Asian countries.

Canada has traditionally supplied overseas markets with high-quality barley that is best suited to premium, high-end markets.

By offering different grades of malt barley to overseas buyers, the Canadian industry could significantly increase exports and extract more value from crops that would otherwise be sold as domestic feed.

Otto said the industry is also anticipating increased exports of Canadian barley into overseas feed markets now that private industry players have an opportunity to service that segment of the market.

“What we found is that there are some markets for barley out there that we haven’t been accessing … and one of them would be what we’d call a mid-range barley market … where it’s not quite malt quality but its better than feed,” Otto said.

“There’s quite a large market out there, in fact there’s a huge market out there, for that mid-range barley and we have not been accessing that market very well.”

Other opportunities include selling barley into the small but growing craft brewery market in North America and expanding exports of feed barley.

Otto said overseas demand for Canadian feed barley was demonstrated in 2007 when barley was temporarily removed from the Canadian Wheat Board’s single desk.

In that period, private industry exported roughly 800,000 tonnes of feed barley to foreign buyers.

The wheat board also exported feed barley, but Otto believes volumes will increase significantly in an open market environment.

Accessing foreign feed markets is an important consideration for the industry because barley is facing increased competition from wheat- and corn-based dried distillers grain, an abundant byproduct of the North American ethanol industry.

“Instead of being trapped in a domestic fed market, we will be looking at opportunities in export fed markets as well and that is a growing market that we know we can compete in.”

The barley study, which received government and industry funding, was initiated in response to growing concerns about dwindling barley acreage in Canada.

Canadian acreage has dropped from a high of more than 12 million acres in 2002 to a low of six or seven million acres.

“Certainly, the barley industry has been struggling,” Otto said. “The purpose … was to study the barley industry and to try to understand why we’re losing so many acres to other crops.”

John DePape, one of three consultants who helped co-ordinate the study, told delegates at a recent grain industry conference that demand for medium quality malting barley is particularly strong in China.

China is easily the world’s largest brewer of beer, and domestic beer sales in that country are expected to increase significantly over the next few years.

DePape said many Chinese brewers are inclined to use a lower value malt in their brewing process because it allows them to sell discount priced beer that is more affordable to low income earners.

Australia is the main supplier for this market. The Australian industry has been supplying barley known as “fair average quality,” which meets lower visual standards and often has protein levels of 12 percent or higher.

“The thing about malt barley is all you really need is germination,” said DePape. “All the other things are nice to have and good if you want to make high quality beer, (but China’s) quality specs are different than what we have always (offered).”

He said Australia has nearly exclusive access to lower quality malting barley markets in China and other Asian countries.

“They’re doing a great job of clearing their market and by that I mean they’re moving everything,” he said.

“Their carryouts … tend to be much smaller than ours.”

Otto said gaining access to medium grade barley market could significantly affect Canadian acreage.

One of the knocks against growing barley is the significant financial risk that is borne by farmers when malting barley samples are rejected and the crop is sold as feed.

Otto said Canadian growers will continue to produce top quality barley and exporters will continue to supply premium barley to high-end brewers.

However, the ability to generate additional revenue from medium grade crops will reduce the financial risk associated with planting barley and could mark the beginning of a resurgence in barley acres.

Otto acknowledged that Australia, by virtue of its location, will always have a significant advantage over Canada in serving Asian markets.

Despite that, Canada should be able to gain a larger share of the region’s business.

“Our malting barley market right now is around two million tonnes a year,” he said. “I firmly believe … that we can grow that market by a million tonnes at least.”

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