Rod Nickel, Reuters · Monday, Mar. 7, 2011
WINNIPEG, Manitoba — Brewers may get a reprieve this year from tight supplies of malting barley in top exporter Canada, but higher costs will likely to force them to raise the price of beer next year.
Flooding lowered the quality of the latest barley crops in Canada and Australia, leaving some unsuitable to turn into malt, the germinated barley product used in beer.
And by July, maltsters dependent on Canadian supplies will be "running on fumes" ahead of the harvest in autumn when the price of malting barley will jump by one-third, an official with the Canadian Wheat Board said.
"The tightness isn't just in Canada, it's everywhere," said Lorelle Selinger, manager of barley marketing and sales at the Wheat Board, which has seen its malting barley exports fall by half this crop year, which ends July 31.
Tight barley supplies are one example of how weather-caused crop disasters last year in Russia, Canada and Australia have pushed grain and oilseed prices to 2-1/2-year highs.
Many North American maltsters and brewers have a 2011 cost buffer because of forward pricing contracts with the Wheat Board, the monopoly seller of Western Canada's malt barley.
Barley is the second-biggest cost, after labor, for some brewers.
Molson Coors, one of Canada's two biggest breweries, is largely safe from barley price shock this year, said company spokesman Adam Moffat.
But barley prices are unlikely to ease soon, leaving the cost of next year's pint in question, other brewers say.
"(Crop) prices will stay very high probably much of 2012," said Michael Micovcin, Chief Executive of Saskatchewan-based regional brewer Great Western Brewing. "Ultimately, it will be passed on to the consumer, no question."
"DRINK UP NOW"
Beer price increases may happen in the second half of this year, but are more likely starting in 2012, said Dwayne Dubois, chief financial officer at Alberta's Big Rock Brewery.
"Drink up now, is my advice."
Brian Sawatzky, director of grain at Canada Malting Company, the country's biggest maltster owned by Australia's GrainCorp, said maltsters with lots of storage can sometimes ride out high prices, although stocks will be tight.
"Everybody really shoulders risk," he said.
Canada's biggest grain handlers generally like high crop prices. But they'll also take a hit — Viterra Inc. and Cargill Inc., Canada's No. 1 and 3 grain handlers, face higher costs through the jointly owned Prairie Malt.
Maltsters and brewers also face the challenge of turning lower-quality barley into malt that will produce consistent beer quality, said Great Western's brewmaster Viv Jones.
The smallest malting barley supplies in about nine years mean some barley doesn't germinate properly and is discarded.
Wet growing-season weather in Canada and Australia has forced the same quality problems on brewers around the world.
QUALITY MATTERS
Global malting barley exports look to be flat around 4.1 million tons in the current 2010/11 crop year, but the Wheat Board's Selinger said that's not the whole picture.
"This year all of the demand was met, but it was met with very poor-quality barley."
The Wheat Board will need the upcoming crop to satisfy beer thirst in China, the world's biggest malting barley importer and top beer brewer, which last year agreed to its biggest-ever purchase from Canada.
The industry is also eyeing spring planting decisions by Canadian farmers, who enjoy a rare chance to choose from many highly-priced crop options.
The Wheat Board forecast last week total Canadian barley production this year at 8.5 million tons, up 12% from last year, but still well off the five-year average.
Wet ground has raised chances of delayed planting, which might favor a barley rebound since the grain has a shorter growing season than other crops.
"The 2011 crop is going to be critical," said Dubois of Big Rock Brewery.
© Thomson Reuters 2011
|
