Thirsty beer market tests shrinking malt barley base

Will beer drinkers feel the pinch as barley loses ground to rival crops?


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Depressed global cereal markets and more farmland dedicated to oilseeds has eroded the world's barley cropping area

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The world’s increasing thirst for beer is at risk of crashing head-long into a declining trend in malt barley production.

“We have a pinch point coming,” says GrainCorp managing director, Mark Palmquist.

“We need to find new sources and ways to get the supply up so we can make sure malt production is good to meet demand from the beer market, and effectively priced.”

Traditional malt barley production regions in North America are increasingly growing new generation maize and soybean crops, while Australia continues to have a variable production track record because of fluctuating seasonal conditions.

Depressed global cereal markets have also eroded farmer interest in barley plantings in many regions, given grain which doesn’t meet malt specifications after weather setbacks, slumps in value, especially if stockfeed markets are well supplied with other options.

Australia’s total feed and malt barley plantings were estimated at about 3.8 million hectares last winter – down from about 4.1m two years earlier and 4m hectares in 2016-17.

About 35 per cent of the crop sells as malt, depending on the season.

Lately we’ve been living off some pretty decent weather trends around the world and good yields have ensued - Mark Palmquist, GrainCorp

Yields soared in 2016-17 on the back of good growing conditions, resulting in a 13.4m tonne total crop, which subsequently slumped to what the Australian Bureau of Agricultural and Resources, Economics and Sciences (ABARES) estimated at 8.9m tonnes last season.

Australia, one of the world’s top three malt barley exporters, supplies about a third of the traded market or about 1.5m to 2m tonnes a year, plus about 600,000 tonnes of processed malt.

However, in the northern hemisphere Mr Palmquist said the trade had been blessed with relatively stable growing conditions which he feared had created a false sense of security.

“Lately we’ve been living off some pretty decent weather trends around the world and good yields have ensued – although, obviously Australia was not so lucky last year,” he told GrainCorp’s recent annual general meeting.

Production base shrinking

A generally shrinking global production base was unlikely to deliver enough quality malt production if seasonal conditions turned tough in key production regions such as Canada or Europe.

New malt barley varieties in Australia are delivering big yield increases.

New malt barley varieties in Australia are delivering big yield increases.

“In the long term it is a concern that we need to address,” he said

“We need to be looking at breeding programs that can increase economics per acre for malt barley so the crop attracts the grower attention the malt market requires to supply growing beer markets, especially craft beer markets.”

Aside from its other grain sector activities, GrainCorp has one of the world’s biggest malt businesses, with four malt houses in Australia and operations in the US, Canada and Britain.

We need to be looking at breeding programs that can increase economics per acre for malt barley so the crop attracts the grower attention the malt market requires - Mark Palmquist, GrainCorp

Tasmanian-based malt industry consultant, Dr Evan Evans, agreed barley had lost favour in some traditional malting grade production zones from China to Canada and the US.

Genetically modified soybean and maize varieties offered farmers faster maturing cropping alternatives with better economic returns a hectare.

Weather conditions also appeared to have been warmer in the past half century and more conducive to non-cereal options.

The northern US Red River Valley, which extends into Manitoba in Canada, had also encountered problems with a fusarium head blight in barley crops.

This could cause beer to explosively “gush” from a bottle, and also contain mycotoxins harmful to human health.

Fewer price incentives

Tougher buying tactics by big US brewers in the past two decades had screwed down price premiums paid for malt, and thus malt quality grain, eroding farmer interest in barley.

Total barley production in Canada has fallen from about 13.5m tonnes to 8m or 9m tonnes in the past 15 years.

In China malt barley plantings have declined as urbanisation and small farm quality inconsistencies left it losing out against other cereals or oilseeds which support domestic food security.

“If the maltsters want more barley grown, there is the traditional signal – lift the price - Dr Evan Evans, malt consultant

However, China, with its soaring beer consumption habit – up from 220m hectolitres early this century to more than 500m now – is importing more than 3m tonnes of malt grade and fair average quality (FAQ) barley annually to help brewers keep up with demand.

That compares with a much more modest 200,000t of malt barley imported across the rest of Asia; 400,000t by the US, and 800,000t to South America.

Dr Evans is, however, not as concerned about a production shortfall as some.

Chinese beer consumption has doubled in 15 years, but barley production has dropped.

Chinese beer consumption has doubled in 15 years, but barley production has dropped.

He cited potential for increased production in the Black Sea region of Eastern Europe and Latin America, in particular Argentina.

“I doubt if GrainCorp’s access to supplies will prove any worse or better than it has been in the past,” he said.

“Any overseas shortfall would also be good news for Australian growers as stronger demand should bolster malting grade barley prices.

Better yielding varieties

Dr Evans is also confident in the capacity for new barley varieties to provide the extra yields with malting quality which malsters need.

New Australian varieties in the past decade reflected what was achievable.

He pointed to the widely popular Hindmarsh variety which set new benchmarks for yield, but was only classified as a “food” grade product, not malt (yet was still popular with Chinese malt buyers).

More recently breeders achieved excellent yields from the likes of Compass, Sparticus and LaTrobe with their 17pc up to 25pc better yields than southern and west Australian malting stalwarts Gairdner and Baudin.

He also noted cereal growers needed a break crop in their wheat programmes and barley still represented one such option, particularly as the yield gap between malt and feed varieties had narrowed so much, more growers were being tempted to try malting varieties.

Even if the growing season didn’t reward them with a malt quality harvest, their yield of feed grain would likely be far more rewarding than in the past.

“And if the maltsters want more barley grown, there is the traditional signal – lift the price,” he said.

“Admittedly, that may be a little easier said than done, given the traders still have to sell into a  competitive global market.”

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The story Thirsty beer market tests shrinking malt barley base first appeared on Farm Online.

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