Transcript Global Malting Barley Report

Global Malting Barley Report
Analysis of 2007 Barley Harvest and
the Implications on Malt Availability,
Quality and Costs to the US Craft
Brewing Industry
Ian L Ward
Brewers Supply Group
October 2007
Topics to be discussed
• The Global Nature of the Malt Industry
• Harvests 2007
– North America
– Europe
– Australia
• Outlooks
– Demands on Grains
– Malting Capacity Supply & Demand
• Impact to the industry
Global Barley Production &
Malt Exports
The global barley production
in 2006/7 was 134.378 MMT
Global Malt Trade in 2006/7
was 4.58 MMT
(USDA Estimate)
19%
38%
3%
5%
6%
4%
6%
7%
6%
9%
EU 25
Turkey
7%
Russia
Australia
Source: RM International & USDA
11%
Ukraine
USA
Canada
Others
11%
55%
13%
EU 25
Other
Canada
Argentina
Australia
Uruguay
USA
The Prelude- 2006 Crop
Major Shortages of Malt Quality Barley in Europe and Australia
Source: Euromalt
Europe
• Poor Year: Cold
early, hot dry Summer,
Wet harvest gave rise
to pre-sprout damage
• 1 Million Metric Tons
of Malting Quality
Barley Short
Photograph: Ian Waldie/Getty Images
Australia
• Drought conditions
• Disastrous harvest
In place of a typical 9
MMT only 4 MMT
harvested
North American Harvest 2006
Barley Harvest
MMT
USA
2005
2006
4.41
3.81
Canada
10.84
10.00
•
•
•
Global reduction in barley harvest in 2006
Poor harvests in Europe & Australia has motivated Far Eastern brewers
to favor North American Malsters perceived to be a more reliable supply.
Poor harvest volume in 2006 leaves no carry-over stocks into 2007
Evolution of Barley Pricing 2006
240.00
220.00
Crop 1999
Crop 2000
Crop 2001
Crop 2002
Crop 2003
Crop 2004
Crop 2005
Crop 2006
Average
Euro/MT
200.00
180.00
160.00
140.00
120.00
100.00
Nov
Dec
Source: Emalt
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Month
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
Harvest 2007 Headlines
• Barley harvest in Northern Hemisphere completed
• US Production 4.86 MMT 18% Higher than in 2006,
overall quality variable at best
• US 6 row production excellent but 2 row production
average yield and variable quality
• EU harvested a small crop of variable quality with no
carry-over stocks from 2006
• Canadian crop of greater volume than in 2006 but higher
protein and low plumps
• Australian output is expected to be poor again this year
estimated at 5 MMT
Western USA – Barley Yields
– United States Overall
• Production estimated at 212 million bushels (4.42 MMT)
• 18% higher than 2006
• The last three years of production on an annual crop basis have been lower than any
year from 1936 to 2004
– North Dakota
• Production estimated at 77.8 million bushels (1.62 MMT)
• 60% higher than 2006
• Acreage and yield increases from 2006
– Montana
•
•
•
•
•
•
Production estimated at 31.7 million bushels (0.66 MMT)
2% higher than 2006
Acreage higher but yield lower compared with 2006
Yield at 44 bu/acre average vs. 48 bu/acre average last 15 years
Harvested acreage has been less than 1 million acres each of last 8 years
Before 2000 harvested acreage had not been less than 1 million since 1953
– Idaho
•
•
•
•
•
Production estimated at 44.0 million bushels (0.92 MMT)
3% higher than 2006
Acreage higher but yield lower compared with 2006
Yield at 80 bu/acre average vs. 79 bu/acre average last 15 years
Other than last year harvested acreage lowest since 1968
Western USA - Quality
• Quality
– Six/row areas
• Overall quality is good
• Nice sizing with DON in some areas but should not be a big issue
• Sprout damage in some areas due to wet conditions at harvest affecting
malting quality
• Appearance much darker than last year
• Proteins on the low side
– Two/row areas
• Variable quality crop
– Dry-land areas for the most part are low plump and high protein due to
less than ideal growing conditions
– As low as 50 plump and 15 protein is moving as malting barley for
blending
• High plump and low protein material on the open market is hard to come by
and is trading at a hearty premium
• The general feeling is that there is very little open market high quality barley
available from the 2007 crop
Western Canada - Barley Yields
6
5
MMT
4
3
2005
2006
2007
2
1
0
AB
SK
MB
Province
• Total Barley production estimated at 11.822 MMT vs
10.004 MMT in 2006 (18% higher)
• Planting and harvests delayed due to wet and cold
weather
Western Canada Quality
Barley Crop Quality by Geographic Region
•Southern
•Central
•Northern
Excessive protein and extremely low sizing.
Moderate protein with acceptable sizing.
Discolored and some pre-sprout damage.
Low protein, good sizing, stained, sprouted.
•Overall
No surplus of malting quality barley in Canada.
Expected Malt Quality from 2007 Crop
1.
2.
3.
4.
5.
Protein up both total and soluble
Sizing down
Extracts reduced
Dark in Appearance
May see an increase in β-glucan if germination weakens over the season
Crop 2007 – Seeding Conditions
• Excessive rain in Fall
2006 delayed seeding
by 3-4 weeks in
Central AB and
Northwest
Saskatchewan
• Conditions good in all
other areas.
Crop 2007 – Growing Conditions
Excessive moisture delays
seeding & maturity in Central and
Northern Alberta.
Normal moisture pattern in West
Central Saskatchewan
Crop 2007 – Growing Conditions
Extremely dry during July in Southern
Saskatchewan & Alberta.
Temperatures well above average
in all areas during July.
Crop 2007 Varieties and Trends
12,000
10,000
8,000
Feed
Legacy
Other 6 Row
Excel
Robust
Other 2 Row
Merit
CDC Kendall
AC Metcalfe
CDC Copeland
Harrington
6,000
4,000
2,000
0
2002
2003
2004
2005
2006
2007
Canadian Wheat Board
• Canadian government attempted change through
regulation on August 1, 2007
• Judge rules that changes must be made in Parliament
• Government continues to attempt changes to CWB
monopoly
– Appealing judge’s ruling that denied changes
– Earliest change would be August 1, 2008
• Remains single desk seller of barley for export and
human consumption
• Continues to price pool – poor price discovery for
farmers
• Feed prices approaching indicated returns for malting
barley
Europe – Barley Yields and
Quality
• Climate related poor yields observed in Europe for 2nd
year running 56.301 MMT vs. 56.382 in 2006
• Highly unusual weather in Northern Europe dashed
hopes of a recovery in barley stocks
• Poor output in Northern Europe, better than expected in
Scandinavia
• Low yields and grower withholding of barley propelled
barley pricing to record highs
• Lower bushel weights reported
• Higher proteins and lower plumps expected
• Last 2 weeks have seen markets calm and retreat a little
• Crop 2008 futures of €280 per MT is expected to attract
seeding
Europe Growing Conditions 2007
•Europe has had the
driest and warmest April
in living memory
•A dip in the Jet stream
known as a Rossby
Wave brought Icelandic
conditions to Northern
Europe all Summer.
•In contrast Southern
Europe had very hot and
dry conditions
April
May
June
•July saw the worst
flooding in 60 years in
the UK
1.8 2.2 2.6 3.0 3.4 3.8 4.2 4.6 5.0
very wet
very dry
July
August
September
Source: European Union Directorate General JRC
Evolution of Barley Pricing 2007
340.00
Crop 1999
Crop 2000
Crop 2001
Crop 2002
Crop 2003
Crop 2004
Crop 2005
Crop 2006
Average
Crop 2007
Crop 2008
320.00
300.00
280.00
260.00
Euro/MT
240.00
220.00
200.00
180.00
160.00
140.00
120.00
100.00
Nov
Source: Emalt
Dec
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Month
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
EU Supply & Demand Matrix
2007
In 1000’s
MT
Malting
Capacity
Barley Malt
Production
Barley
Demand
Supply
Country
Winter
Variance
Spring
Benelux
1074
1080
1350
-
170
-1180
France
1260
1200
1500
1500
1250
+1250
Germany
1990
1850
2300
60
1240
-1000
Ireland
128
130
160
-
200
+40
U.K.
1473
1450
1800
600
1400
+200
Denmark
277
280
350
-
1050
+700
Poland
305
320
400
-
150
-250
Czech Rep
515
500
625
-
550
-75
Slovakia
266
240
300
-
300
Spain
442
442
550
-
660
+110
Other
1058
1041
1310
-
1180
-130
2160
8150
-335
(Finland, Lithuania, Sweden, Austria, Romania, Bulgaria, Hungary, Greece, Italy, Portugal)
Total
8788
8533
10645
Note EU will export up to 200,000 MT to third countries. It is likely that out of spec. barley will have to be used to ensure supply
Source: H M Gauger
Australia
• Harvest Underway
• Although drought conditions were relieved
somewhat with early rains these conditions did
not continue throughout the growing season
• Optimistic outlooks of yields of 9 MMT have
been reduced to 5 MMT
• Too early to assess malting quality and selection
rates but yields are only expected to cover
domestic requirement and exports to high value
markets
Future Demands on Global Acreage
• Biofuels: Ethanol & Bio-Diesel
– Government programs in EU and USA
continue to promote growth.
• Wheat Milling & Oils for food
– Improving economies increases demand
• Feed Grains
– Increasing demand for meat adds to growth in
demand for feed grains
Effect of Bio-fuel Production
• As production of bio-fuels goes up year end stocks have gone down, when
viewing these charts consider also population increase since 1976!
• Malting Barley has a new competitor for acreage.
• In a free market, fiscal return will have to promote cultivation
Barley Markets - Ending Stocks
35000
30000
Others
25000
Iran
Saudi Arabia
Ukraine
20000
Russia
United States
15000
Australia
Canada
EU-27
10000
5000
0
2003/04
2004/05
2005/06
2006/07
2007/08
Crop 2007 – Crops and Trends
30,000
000 Acres
25,000
20,000
15,000
10,000
All Wheat
Canola
Barley
Oats
Peas
Flaxseed
5,000
1999
2000
2001
2002 Year 2003
2004
2005
2006
2007
Global Changes in Malt Capacity
Malt Investment/Divestments (2003-2006)
(mt)
E.U.
East Europe
Capacity
Increase
490,000
Capacity
Decrease
970,000
1,040,000
570,000
Net
(480,000)
1,040,000
North America
420,000
South America
230,000
Australia
100,000
40,000
60,000
China
500,000
100,000
400,000
2,780,000
1,680,000
1,100,000
-
• Beer Production
• Malt demand
• Capacity investment shortfall
Source: MaltEurop March 2007 Presentation
(150,000)
230,000
197 mil hl
2.2 mil mt
1.1mil mt
Global Growth in Malt Demand
Beer(1)
• Projected Global Beer consumption
growth rate 2006-2012 = 2.5%/yr
• Add’l Beer demand = 264mil hl
Malt(1)
• Malt demand increase = 2.9 million mt
• Or 500,000mt per year
Capacity
Source: MaltEurop March 2007 Presentation
• 4-5 Brand new expensive malt plants per
year through 2012
Conclusions
Cost of Malt up sharply from previous years
• Poor global barley yields for 2 consecutive
harvests has resulted in barley shortage
• Poor return for growers has resulted in a
flight from malting barley in favor of
alternative crops
• Poor return to malsters has led to lack of
investment in malt plants
Outlook
• Price corrections are
necessary and long overdue
to safeguard supply
• Bio-fuel crops are in their
infancy the potential to
reduce acreage further is
huge
• Climate change has the
potential to produce more
poor harvests.
• Barley prices have eased
somewhat in the last couple
of weeks. Recent price
corrections may be sufficient
• Conversion of plant wastes
using new technology to fuel
may take pressure off seed
crops
• 2008 may produce a good
harvest in Europe alleviating
ending stocks issue
Closer co-operation between brewers, malsters and growers is essential to
provide fair value along the entire supply chain in order to safeguard the raw
materials essential for brewing.