Canada: Beer companies urge farmers to grow malt quality barley

Canada's beer companies put out a news release this week saying they want Prairie farmers to grow malting barley, The StarPhoenix published May 2.

Considering that in an average year more than two million tonnes of malting barley are selected from barley grown by Prairie farmers – and those farmers are expected to increase seeded barley acreage in 2007 – encouragement from the beer industry may seem a bit unnecessary.

Howard Collins, president and CEO of the Brewers Association of Canada said the association is committed to keeping "malting barley a viable alternative to other crops and ensuring that Canadian malt barley is globally competitive."

Canada's 14 breweries buy up about 350,000 tonnes of the malting barley selected, with the rest sold to global markets, the release notes. It concluded by saying Canada's brewers are "committed to forging stronger relations with growers and building value chains."

University of Saskatchewan agricultural economist Richard Gray says the system may some day evolve where beer companies pay a premium to farmers, but he says currently there is no mechanism for that.

Even if the brewers have to pay extra some day to encourage production, Gray says barley prices don't make a huge difference in the end price of beer.

"A bushel of barley makes about 300 bottles of beer, so there's 1.5 cents worth of barley in a bottle of beer," he said. "If that doubles, they (brewers) should add a cent and a half to a bottle of beer, but you could expect it to go up more than that."

A controversial plebiscite this past winter has removed the Canadian Wheat Board (CWB) monopoly on malting barley sales both domestically and abroad. In the wake of the plebiscite, the CWB is refusing to price barley into the next crop year, which begins Aug. 1. Gray says that's adding to the uncertainty about the type of barley being grown this spring.

"There's a lot of higher-yielding, non-malt varieties out there and that way your yield will offset the fact that you won't get a malting premium," Gray said.

Saskatoon commodities expert Larry Weber says the news release makes no mention of any actual cash that could flow from brewers to encourage farmers to go to the extra trouble and expense of trying to grow malt barley. In fact, Weber says the news release from the brewers misstates the actual size of the malt barley crop.

"They don't produce two million tonnes," Weber said. "Farmers produce nine million tonnes of malting barley, of which two million gets selected for malt, and these guys (Canada's breweries) get to pick the cream, or 350,000 tonnes, of that."

However, one brewing executive says there is a reason for brewers to send an encouraging word to farmers.

Ron Waldman, president and CEO of Saskatoon's Great Western Brewing Company and a board member of the Brewers Association of Canada, says the brewers association is only taking the first step to "open a dialogue" with farmers. He says Western Canada remains one of the best places in the world to grow top-quality malting barley, but the beer industry is worried recent trends, such as farmers growing grain for biofuel production, will affect traditional agricultural land use.

We cannot allow a system to evolve without having our voice heard," Waldman said. "Farmers have been growing and we've been brewing beer from the finest malting barley in the world.

"That rich history and that rich opportunity is not going to go away."

Jack Foster, who is in charge of barley procurement for Prairie Malt in Biggar, says grain and malting companies are just trying to encourage farmers to stick with the crop in a confusing year.

Realistically, there is a shortage of barley in Canada and in the world for malt quality," Foster said. "So there's a hell of an opportunity for producers and we're saying, 'Don't miss out on that opportunity just because of uncertainty.' "

In the CWB system, export and domestic malting barley was pooled for farmer payouts, so an individual producer had rail freight rates to Vancouver deducted from their malt barley payment even if they grew their crop within sight of the Prairie Malt facility.

Under a free market, Foster says farmers will be getting direct signals about incentives being offered by grain buyers or by malting companies, whether that be Prairie Malt or Canada Malt in Calgary.

"Somebody growing barley a little south of Biggar should make more money trucking it to us than trucking it 300 miles to Calgary," Foster said.

Gray, a co-author of a past study that showed the former CWB monopoly was collectively worth about $59 million annually to Prairie farmers in recent years, doesn't expect farmers will end up gaining as much as the malting and beer industry in the post-CWB world.

In a free-market situation, Gray says farmers will see their neighbours as competitors.

"Under those conditions, are you going to let your neighbour sell his malting barley for a premium and not offer yours at a competitive price?" he said. "I doubt it."

02 May, 2007