New Opportunities Likely For Low-Grade Canadian Malt Barley

New Opportunities Likely For Low-Grade Canadian Malt Barley

The distinction between malt and feed barley in western Canada is starting to get a little muddy, with a third class of barley expected to create more opportunities for farmers under the new open market.

Traditionally, about 20% of the barley grown in western Canada in any given year would hit the malt specifications, and everything else would be relegated to the feed market. However, increasing demand for lower-quality malt barley from China and other countries, along with the looming end of the Canadian Wheat Board’s single-desk approach to marketing the crop, should open the door for a new class of barley.

Often referred to as “fair average quality,” the new class is of malt barley that may not meet the top-end specs, but still can be used to make beer.

“It’s always been a black-and-white scenario, where you either have malt or you have feed,” barley broker Rod Green of Central Ag Marketing in Alberta said, noting concerns over not meeting malt specifications have hurt barley acres.

He said while malt barley is a profitable cropping option in western Canada, feed barley doesn’t pencil out as well. As a result, the possibility of premiums for lower-quality malt barley that would have gone to feed channels in the past will allow farmers to have more confidence when seeding.

To be sold as “fair average quality” malt barley, barley must have germination at 95%, but other factors, such as protein levels, aren’t as important, Green said. He couldn’t speculate on the potential price opportunities, but said the market for “fair average quality” barley likely will fall somewhere between feed and malt values.

Grain companies and maltsters in western Canada already are working toward having a “fair average quality” class of barley, as the Chinese market has been buying lower-quality malt barley from Australia for several years, Green said.

The looming end of the CWB single desk at the start of the 2012-13 crop year on Aug. 1 is helping speed up the move toward more “fair average quality” barley, Green said. He noted additional players in the export market will mean those demand niches that may have been overlooked by the CWB in the past now will be filled by the commercial trade.

“Australia recognized there was a market for “fair average quality,” medium-range malt-quality barley five years ago,” Brian Otto, president of the Western Barley Growers Association, said. He added malt companies in China and other areas were “not as discriminating for quality as malt plants in North America or Europe.”

Canadian barley is recognized for its quality in the world market, Otto said, but the additional market for lower-quality malt barley will help create additional revenue for producers. Otto estimated the “fair average quality” malt barley would allow the amount of the Canadian crop accepted for malting to increase by at least a million tonnes from the current average of 2.1 million tonnes.

Annual Canadian barley production–both for malt and feed–has declined in recent years, with only about 7.7 million tonnes grown in 2011-12. Otto sees that increasing back to the 12 million-tonne level under an open market due to the lack of the CWB single desk and increased competition.

Otto also expects demand for special varieties from craft brewers and the declining U.S. barley area to create a need for more barley acres.