Base Currency: Euro, EUR on 22-September-2004 1 EUR = 1.2340 USD 1 EUR = 0.6866 GBP 1 EUR = 1.5880 CAD 1 EUR = 1.7526 AUD 1 EUR = 135.32 JPY 1 EUR = 3.5403 BRL 1 EUR = 36.0575 RUB	Base Currency: US Dollar on 22-September-2004 1 USD = 0.8107 EUR 1 USD = 0.5563 GBP 1 USD = 1.2869 CAD 1 USD = 1.4203 AUD 1 USD = 109.69 JPY 1 USD = 2.869 BRL 1 USD = 29.22 RUB
EUR/USD Chart

China: InBev announced on September 20, 2004 that it is acquiring remaining 50% of Lion Group's beer business in China for a cash consideration of USD131.5 million, hereby gaining 100 per cent control. In September 2003, Lion Diversified Holdings Berhad (LDHB), a diversified Malaysian group, sold 50 per cent of its China brewing activities to InBev for USD131.5 million, and transferred the management control of the strategic partnership to InBev. Lion Diversified Holdings Berhad (LDHB) is listed on the Kuala Lumpur Stock Exchange (KLSE), and realized a total beer volume of 13 million hectoliters in 2003. This transaction complies with acquisition criteria for InBev: significant potential to grow outside both local and regional markets through strong brands, volumes, economies of scale, and critical mass; continued focus on the core-lager segment; and solid, dependable, management resources. InBev is today the third-largest brewer in China, with 30 million hectoliters of capacity, produced by 18 breweries, and present in 6 major provinces: Zhejiang, Guangdong, Hubei, Hunan, Jiangsu and Shandong. InBev expects this transaction to close by the end of September. InBev is a publicly traded company (Euronext: INB) based in Leuven, Belgium. The company's origins date back to 1366, and today it is the leading global brewer by volume. InBev's strategy is to strengthen its local platforms by building significant positions in the world's major beer markets through organic growth, world-class efficiency, targeted acquisitions, and by putting consumers first. InBev has a portfolio of more than 200 brands, including Stella Artois®, Brahma®, Beck's®, Leffe®, Hoegaarden®, Staropramen® and Bass®. InBev employs some 70,000 people, running operations in over 30 countries across the Americas, Europe and Asia Pacific. In 2003, InBev realized a net turnover of approximately 9.3 billion euro (2003 pro forma).

USA: After seven years of continuous increase, the U.S. beer market declined 0.3% in 2003 to 2.8 billion 2.25-gallon cases, according to the latest Adams Beer Handbook published by Adams Beverage Group. "Beer consumption clearly took a hit from the focus on low-carb diets," said Tiziana Mohorovic, spokesperson for Adams Beverage Group. "Increased competition from spirits and wine products also took its toll." With the booming popularity of the Atkins Diet and its trendy South Beach offshoot, America became obsessed with carbs in 2003. "Beer was quickly stigmatized as a big source of carbohydrates, whereas spirits and wine are carb free," said Mohorovic. Lights - the largest beer segment approaching a 50% share of market - climbed 3.6% and was the only domestic segment of the beer business to post a gain in case sales last year. More than two-thirds of light's gain was attributable to Michelob Ultra and Rock Green Light -- two new low-carb offerings. Several established lights took a hit in 2003. Bud Light recorded its lowest rate of growth ever last year, and Michelob Light fell double-digits after six years of growth. "Not only has everything low-carb negatively affected the entire beer market, but new low-carb brews also appear to be cannibalizing established light beer brands," said Mohorovic. No beer category was spared from carb mania last year. Imports recorded their slowest growth rate in more than a decade and flavored malt beverages fell 7.9% in 2003 after two consecutive years of robust growth.

Russia's largest beer maker, Baltika, jointly owned by Denmark's Carlsberg and Scottish & Newcastle, has started selling its beer in Australia. Baltika is the first Russian brewery entering Australian market. The company is targeting the premium segment with its "Baltika No. 3 Classic," "Baltika No. 4 Original", "Baltika No. 7 Export" and "Baltika No. 8 Wheat" brands, it said on Tuesday. "Baltika will be sold in Australia's bars, restaurants and large supermarkets at a price slightly below most imported world brands present on the Australian market," the Russian brewer said in a statement. One of the most popular beer brands in Russia "Baltika No. 7 Export" will be sold in Australia for A$ 3.5 (US$2.5) per bottle. Baltika exports beer to 32 states, accounting for 6 % of its sales in 2003. In 2003 the brewery exported 992.3 thousand hl of beer that is an increase of 9% versus 2002. Earnings from exports accounted for US$ 39.9 million in 2003 - 8% more than in 2002.

Singapore: Germany's second-biggest bank, HVB Group, said on Tuesday, September 21 it had filed a claim against a unit of Singapore-based Asia Pacific Breweries Ltd (APB) to recover a US$30 million loan after one of the brewer's top executives was convicted of fraud, Reuters posted. The brewer of Singapore's popular Tiger brand beer is at the centre of a scandal involving the former finance manager of its unit, Asia Pacific Breweries (Singapore) Pte Ltd (APBS). Chia Teck Leng was found guilty of fraud in April and sentenced to 42 years in prison for falsely obtaining loans in the name of APBS from Swedish, Japanese and German banks, including HVB, for around $70 million. "We are also pursuing Mr Chia but our primary case is going to be brought against Asia Pacific Breweries (Singapore) Pte Ltd," Peter Vassiliou, managing director of HVB, told Reuters. "The reason why we're obviously taking action against Asia Pacific Breweries is because we believe they are liable to repay our loan," Vassiliou said. However, APB rejected the alleged claims by HVB. "It is HVB that has failed to detect and prevent acts of fraud by Chia. This will become apparent in the trial," it said in a statement. APB is 42.5 percent-owned by Dutch brewer Heineken NV and 37.9 percent-owned by Singapore beverage and property conglomerate Fraser & Neave Ltd. It operates breweries from New Zealand, Papua New Guinea to China, and sells Heineken, Anchor, Baron's and ABC Stout brands. Vassiliou said APBS is bound by the terms of the loan agreement because it was entered into by its most senior finance person. He also said APBS appeared to have been negligent in detecting that Chia had more than S$1 million in gambling debts at the time he was hired. HVB has been providing financial services to corporate customers in Singapore since 1995. HVB said the hearing on its claim will likely take place in the second half of next year. APB shares ended up 0.67 percent at S$7.55 on Tuesday. Since the start of the year, APB has risen almost 20 percent, compared with a 13.5 percent gain in the key Straits Times Index.

Canada: Molson Inc. defended its plan to allow employees to use their stock options to vote on its proposed merger with Colorado-based Adolph Coors Co., saying on Monday September 20 that they were "entitled to vote", Reuters revealed. "It's something that in our lawyers' view and our board's view is absolutely correct and the basis for saying that is that Molson optionholders are stakeholders in the corporation and by virtue of that should be entitled to vote," said Molson's spokeswoman Sylvia Morin. According to a proxy statement released late last Friday, Molson's optionholders will be entitled to one vote for each class A nonvoting share, in effect giving the company potentially 3 percent more in favor of the merger. The merger requires approval of two-thirds of both class A nonvoting and class B voting shareholders of Montreal-based Molson. But with the board chairman, Eric Molson, controlling about 50 percent of the voting power, the fate of the merger seems up to the class A shareholders. So far, two minority shareholders have voiced concern of Molson's plan to give optionholders a vote. "I think it's absolutely immoral for a board of directors to stoop so low in order to win something for a family," said Stephen Jarislowsky, chairman of Jarislowsky Fraser Ltd. which holds a minority stake in Molson. "It gives rights to people who have an absolute conflict of interest and are working for the company and who have been dangled an enormous benefit in millions of dollars if the merger takes place." The other minority shareholder, Ontario Teachers' Pension Plan, was also outraged and said it would block the action in court if need be. "We're unhappy enough about this that we will make our voice heard, no question about it," said Claude Lamoureux, president and chief executive at one of Canada's largest pension funds. "It's a way for the company to skew the vote in its favor." He would not comment on which way the fund is leaning. Analysts and strategists attacked Molson for allowing employees who basically have not paid for their stock to have the same vote as someone who has paid for their stock. U.S. regulators called the move "rare," while Canadian regulators said it was "not unprecedented". ...more info

Ukraine: In January-August 2004 Ukraine produced about 13.63 million hl of beer that is a 10% increase versus the same period last year, according to figures revealed by ZAO Ukrpivo. Sun Interbrew Ukraine increased its beer output by 15.8 % year-on-year for the period holding a market share of 33.3%. ZAO Obolon produced 15.8% more beer in January-August 2004 and controls 27.1% of the Ukrainian beer market. BBH has a stake of 20.2% of the market and raised its beer production by 25.7%. The breweries of Sarmat Group holds 12.2% of the beer market and registered no change in its beer production for the period. According to Ukrpivo, in 2004 Ukraine might produce about 19 million hl of beer.

Malt News

Russia: On September 17 2004 Russian government approved new tariffs for import duty on malt at the rate of 10% from the customs value and not less than EUR 22 per tonne. According to Russian Beer Union this was a positive reply to their request. The brewers’ proposal was based on the fact that some Russian malt importers are lowering the customs costs of malt artificially, that is a violation of fair competition. Now Russian beer industry is one of the most import dependent economic branches of the country. In spite of the fact that lately brewing companies has been developing actively their own raw materials sources, Russian breweries are to import about 50% of malt. Every year Russian beer makers use about 1.2 million tonnes of malt. Russia's malted barley production is limited due to the relatively inferior quality of domestic barley, but Russian producers have been actively expanding malting capacities lately. In the second quarter of this year, Russia imported 158,200 tonnes of malt, up from about 55,000 tonnes imported in January-March. Imports of malting barley amounted to 40,000 tonnes during the period, or 60 per cent more than in January-March.

Barley News

Australia: ABB Grain Ltd announced on September 22 that ABB’s forecast 2004/05 season gross barley pool indicator has increased $5/t for malting barley to $170-180/t, while the gross feed barley pool indicator remains steady at $135-145/t. ABB managing director Michael Iwaniw said that there had been a small spike in feed barley prices due to a hold-up in supply through logistical problems in the Black Sea area, as well as the purchasing of wheat by the Ukrainian government. Barley prices however were still under pressure as a result of the enormity of the crops just harvested in the European and Black Sea countries. “As one of our main competitors, the Black Sea region is a market that ABB watches closely. Barley produced in this region for the 2004 season has been harvested under adverse conditions, however there is still around 5 million tonnes expected to be available for export,” Mr Iwaniw said. “Most of the European feed barley crop has been harvested under excellent conditions, however rains during the latter part of the harvest has caused damage to malting barley and wheat crops. This will result in more feed grain being available in the market, adding further downward pressure to market prices. “Another of our major competitors, Canada, has experienced frosts of late which have resulted in significant quantities of barley being downgraded to feed quality.” Mr Iwaniw said that the firm freight rates that remain in place were another factor still impacting barley prices. “With these activities occurring in the international feed barley market, It is unlikely that we’ll see an improvement in Australian dollar prices for 2004/05 feed barley at this stage,” he said. Meanwhile, Mr Iwaniw said that malting barley prices were remaining firm for now. “2003/04 malting barley is attracting high premiums over feed barley and to date has not followed the sharp downward turn that feed barley prices took,” he said. “Supply and demand for the 2004/05 season malting barley is finely balanced given the damage to some of the Canadian and European malting barley crops; however, with the significant difference between feed and malting prices there is a risk of second grade malting quality barley entering the markets. If this happens malting barley prices could drop closer to feed barley prices.” Mr Iwaniw said that low protein remained an issue for buyers who were requesting 10% protein on their contracts. As a result ABB was seriously considering lifting its minimum protein level to 9.5% from 9%. Growers will be advised when a decision is made on this matter.

Canada: Provincial Plant Pathologist David Kaminski says fusarium levels have been low in all cereal grains this year in Manitoba, especially barley. Manitoba Agriculture, Food and Rural Initiatives says cool summer temperatures have helped keep fusarium infection levels low in the province's cereal crops this year. Fusarium is a fungal infection that affects several crops, including cereal grains. Fusarium graminearum is of particular concern because it produces a mycotoxin which, when fed to livestock, especially swine, reduces performance. "The risk factors that lead to infection are the presence of the fungus, and we have enough of it here built up over the years that it's always going there in susceptible crops and all of our barley crops are quite susceptible, and the environmental conditions that favor infection. Those are heat and humidity that coincide with flowering of the crop. This year everybody realizes it has been very wet and at times quite humid but generally it has not been as warm as it usually is and often we find we're under the threshold for temperature for infection to develop when the crop is most sensitive. It's still wise to have grain tested if it's going to be fed to animals because, of course, the tolerances for the major toxin are quite low. Even though there are low levels of the disease out there, the amount of the toxin is not always very well correlated with the amount of disease in the field so it's still worth having a feed test done," David Kaminski says. Fusarium levels in Manitoba peaked in 2001 and 2002 before dropping off dramatically last year.

Theoretical malt prices.


* - 70/30 = 70% Average two Rows Spring and 30% Six Rows Winter
** - 50/50 = 50% Average two Rows Spring and 50% Six Rows Winter

Theoretical malt prices for crop 2003 are not quoted.

Malting barley prices. French barley prices.

Nominal prices.

EURO = USD 1.2340 September 22, 2004
Crop year		2003		2004
Parity		FOB Creil		FOB Creil
Position		July 2003		July 2004
Type	Variety	EURO	USD	EURO	USD
2RS	Scarlett	nq	nq	111.00	137.00
2RS	Prestige	nq	nq	110.00	136.00
2RS	Cellar	nq	nq	110.50	136.50
2RS	Aspen	nq	nq	109.50	135.50
2RS	Optic	nq	nq	109.50	135.50
2RS	Astoria	nq	nq	109.00	134.50
2RS	Cork	nq	nq	109.00	134.50
6RW	Esterel	nq	nq	100.00	123.50

nq - Not quoted Prices for Danish and UK malting barley are available on site www.e-malt.com/MarketPrices

Table of the week

Canada: Barley Supply and Disposition   2002-2003  2003-2004 p  2004-2005 f    Harvested area (thousand ha)  3,348  4,446  4,265    Yield (tonne/ha)  2.24  2.77  3.02    Production (thousand tonnes)  7,489  12,328  12,900    Imports (thousand tonnes)  259  45  40    Total Supply (thousand tonnes)  9,795  13,847  15,046    Exports (thousand tonnes)  945  2,400  2,600    Food & Industry Use (thousand tonnes)  175  320  375    Feed, Waste, Dock. (thousand tonnes)  6,755  8,601  9,116    Total Domestic Use (thousand tonnes)  7,376  9,341  9,946    Ending Stocks (thousand tonnes)  1,475  2,106  2,500    Average Price (CA$/tonne)  171.88  136  110-130  p: preliminary estimates f: forecast, Agriculture and Agri-Food Canada, September 10, 2004 Source: Statistics Canada, Cereals and Oilseeds Review Series, Cat. No. 22-007

Graph of the week

Agenda

September 2004:
6th BELGIAN BEER WEEKEND;
China Brew 2004 / China Beverage 2004;
International Brewery and Soft Drinks Industry Exhibition;
FOOD & BEVERAGE PROCESSING & PACKAGING INDONESIA 2004;
Pivoindustria International Beer Industry Exhibition;
National Beer Wholesalers Show 2004;
PAN ASIAN FOOD & BEVERAGE TRADE SHOW 2004;
Barley Malt Quality Evaluation Short Course;
EUROMALT BARLEY SEMINAR 2004;
OCTOBERFEST Famous German Beer Festival;
Agro + Food + Drink + Tech Expo Georgia Food, Beverages and Processing Equipment Trade Fair;
bevex Beverage Trade Fair;
InterBev 2004;
YUGOSLAVIA INTERNATIONAL FAIR OF FOOD & BEVERAGES 2004;
BevExpo 2004;
Great American Beer Festival;

October 2004:
OCTOBERFEST Famous German Beer Festival;
Great American Beer Festival;
bevex Beverage Trade Fair. Germany;
Great Welsh Beer & Cider Festival;
ST. PETERSBURG FOOD SALON 2004;
Beer Fair. Spain;
Expo Bebidas Beverage Exhibition. Mexico;
EXPOALIMENTOS Y BEBIDAS 2004. Panama;
Fall Eastern PA Breweriana;
Knoxville Brewer's Jam - A Memorial to Tom Rutledge;
INTERPRODTECH Food and Beverages Processing Exhibition. Russia;
Alko and Drinks Show Alcoholic Beverages and Non-alcoholic Drinks Exhibition. Russia;
WORLD FOOD KAZAKHSTAN 2004;
PAN ASIAN FOOD & BEVERAGE TRADE SHOW 2004. Canada;

More events are available on site e-malt.com