Reprinted with permission from Meristem Land and Science - www.meristem.com

The Canadian brewing industry needs more, high-quality Canadian malt barley.

Although domestic brewers can't buy barley directly from producers, they want to establish a stronger relationship with growers as part of its plan to expand into international markets.

"The brewing industry needs to know it has the barley supply and quality so we can negotiate new international agreements," says Luke Harford, a spokesman for the Brewers of Canada. "The drought of 2002, which reduced barley supplies, was a real wake-up call for brewers. We need to get the message out to farmers that our industry has a year-in, year-out demand that has to be met."

Harford, who spoke recently to a Western Barley Growers Association conference in Canmore, Alta., is based at the Brewers of Canada office in Richmond, Ont.

The brewing industry is a significant contributor to the Canadian economy, Harford points out. The association's 16 members who produce 97 percent of beer produced in Canada, have invested more than $2 billion over the last 10 years to expand and upgrade beer making and distribution facilities. Along with buying 380,000 metric tonnes of barley from Canadian growers annually, beer sales also contribute about $4 billion to federal tax coffers.

Growers' want change

Although many growers favor an open or dual-marketing system that would allow them to contract barley production directly to the malt and brewing industries, that option isn't available to the Canadian Wheat Board (CWB) monopoly over wheat and barley sales. All export and human-food quality wheat and barley produced in Western Canada must be marketed through the CWB.

"And we're not out to 'get the board'," says Harford referring to the long-running debate. "But we do want to ensure that the Canadian Wheat Board operates in a more commercial fashion."

While some producers claim the CWB was only paying farmers between $1.50 and $2 per bushel for malt barley, Canadian brewers on the other hand were paying the board as much as $6 per bushel for barley. "While $4.20 to $4.90 per bushel is more average, at one point we were paying as much as $330 per tonne ($6/bushel)," says Harford. "We want to work with producers and the Canadian Wheat Board to close the price spread and have an assured supply of malt barley."

Expensive supply options

Canadian brewers have few economical or convenient alternatives for sourcing malt barley, says Harford. The United States – actually a net-importer of malt barley – produces only a limited amount of the two-row malt barley used in Canada. While malt can be shipped in from Europe, transportation costs are high. Because most Canadian breweries are located in-land, the malt has to be shipped by containers. "And container transportation is very expensive," he says.

Tariffs also apply to most malt imported to Canada. The first 20,000 metric tonnes are exempt from tariffs, but for an industry using nearly 400,000 tonnes, it doesn’t take long for tariff charges to apply. "Between tariffs and transportation bringing malt in from some other source is a real cost issue," he says.

With a quality-product reputation and plant capacity, Canadian brewers are looking to expand into international markets. "As the industry becomes more globally integrated, we want to develop relationships outside of Canada," says Harford. "This could mean brewing other beers for sales in Canada or brewing beers for the export market. But the commercial foundation to these relationships depends on having the guarantee of supply and quality of malt barley. We need to know we will have the barley available before we can negotiate these agreements."

While the brewing industry would welcome the opportunity to deal directly with producers, Harford says the CWB has shown no interest in pursuing that option.

Until that happens, the brewers are prepared to work within the current system. "We accept the Wheat Board as a reality," he says. "We believe that its continued existence as a major single desk seller is a matter for growers to determine. However we also believe that the role and mandate of the Canadian Wheat Board needs to be expanded to take into account its impact on Canadian value added activity – like brewing and malting. It also needs to be expanded in the context of its impact on the ability of farmers to be innovative."

Reprinted with permission from Meristem Land and Science - www.meristem.com