Malt sales are plummeting as COVID-19 hammers North American beer consumption but that will be offset by increased malt barley demand out of China, say industry officials.
“For sure the malting companies are struggling,” said Peter Watts, managing director of the Canadian Malting Barley Technical Centre.
He spoke to one grain industry official who told him there could be as much as a 25 percent drop in demand from Canadian malting companies in 2020-21.
The Canadian malting industry typically buys about one million tonnes of malt barley from Canadian growers annually, so that could be a 250,000 tonne reduction in sales.
But the same official expects Canada to make that up through increased exports to China at the expense of Australia. China recently slapped an 80 percent tariff on Australian barley.
Tom Steve, general manager of Alberta Barley, said Rahr Malting Company and Canada Malting Company have signaled to growers that they are delaying old crop deliveries and offering fewer new crop contracts.
“That’s just a function of what has happened to the beer markets with COVID-19,” he said.
Anheuser-Busch InBev, the world’s largest brewer, recently reported that April sales fell 32 percent from the previous year.
Steve agreed with Watts that strong demand from China will help offset slumping North American markets for malt barley.
Successive droughts in Australia followed by a trade war have created an opening for Canadian malt barley in China.
“We’re really trying to make sure that we secure that market on the basis of our quality and our ability to deliver it,” he said.
Derek Squair, president of Exceed Grain Marketing, thinks Canada will have less malt barley to export this year.
Statistics Canada is forecasting 7.24 million barley acres, down slightly from last year’s 7.4 million acres.
“I think we lost a lot more acres than that,” he said.
He thinks the number will be closer to 6.3 million acres because while beer sales are up in liquor stores, they are way down in other retail outlets due to the dearth of concerts, sporting events and night club activity.
“The malt industry is really in trouble right now with all the bars and restaurants shutting down,” said Squair.
Maltsters started telling growers prior to seeding that they were going to have to push back old crop deliveries into the new crop year.
He believes growers responded to that message with a 15 percent drop in seeded acres.
“That’s not what we’re seeing,” he said.
Watts acknowledged that malt sales are languishing, particularly to the United States.
And exporters are having difficulty finding containers to ship product to Japan because COVID-19 has disrupted the influx of containers from China loaded with consumer goods.
But he does not think the slowdown in domestic sales impacted 2020 acres because it happened too close to seeding time and because exports have remained strong.
He believes Statistics Canada’s number of 7.24 million acres is pretty accurate.
Steve said there is no significant decline in Alberta’s barley acres. In fact, he anticipates a slight uptick as has been the trend in recent years.
He said barley works better than wheat in many areas of the province due to moisture conditions and a shorter growing season.
“Farmers don’t turn on a dime with their rotations,” said Steve.
Another factor keeping acres steady is that feed barley prices have held up despite the partial shutdown of two beef packing plants.
There is a backlog of cattle that are going to be on feed for the foreseeable future.
“Farmers have a reasonable expectation of a return on that barley in the feed market if it doesn’t work out for malt,” said Steve.
Lastly, he thinks grain companies see an opportunity to move crops like wheat and barley to export markets due to reduced competition for rail capacity.
“Touch wood, we’ve had really good rail movement in the last four months,” he said.