Markets

GIWA barley forum hears malting contracts eyed in west

Liz Wells, July 27, 2022

Boortmalt Asia Pacific managing director Ian Maccan.

BOORTMALT is looking into upping its purchasing of Western Australian barley direct from the grower as it seeks to increase malting efficiency.

The insight came from Boortmalt Asia Pacific managing director Ian Maccan, speaking at the Grain Industry of Western Australia (GIWA) barley forum held in Perth and virtually on Monday.

While maltsters and brewers in eastern Australia have built relationships with growers in recent years to develop supply chains fully or partly outside bulk-handling system, maltsters in WA still appear to rely heavily on CBH Group as the state’s dominant bulk handler.

When asked if Boortmalt would be interested in having long-term agreements contracts directly with growers, and incentivising them to store contracted malting barley on farm, Mr Maccan said “yes”.

“We are looking for niche varieties,” Mr Maccan said.

“The bulk handlers don’t necessarily want to be bothered with smaller segregations, so in that context…the only way I can do that is to get them out of the supply chain and for them to store on farm.

“If we can come to a commercial arrangement where a farmer has certainty to invest and there’s some pricing mechanism, then of course the answer has to be yes.”

Mr Maccan said Boortmalt in WA alone was buying just under 300,000t of malting barley per annum and wants to increase its access to segregations of niche varieties.

“If I can buy 10 per cent or even 15pc of that, I’d be happy, but I struggle to get that.

“I’ve got to use it judiciously.

“We’re trying to reach out to growers to have those direct one-on-one contracts because we think that’s the only way we can secure that barley.

“In the eastern states, we are contracting directly with growers on varieties because the mainstream can’t be segregated and it gets lost in the feed pool.”

Between the periods of his previous and current stint working in Australia, Mr Maccan said he was surprised by how much yields of malting barley varieties had increased.

However, he had nothing to say about improved quality, and an earlier comment from GIWA barley chair and Esperance zone grower Lyndon Mickel indicated that while it may be delivered, it was not necessarily segregated.

Mr Mickel spoke about “voluntary downgrading”, where harvest pressure sometimes prompted growers including himself to deliver malting into CBH feed bins if malting was not available at the closest site.

Greater efficiency sought

Boortmalt is the world’s largest maltster, and produces about 3Mt of malt annually.

It is also the biggest maltster in Australia, with a national capacity of about 550,000t of malt per annum.

It sells around 120,000t per annum into the domestic market, and exports the balance.

After barley, Mr Maccan said the cost of energy was the biggest overhead for Boortmalt, and inflationary pressure, as well as the company’s push for sustainability to meet its own targets, was driving the push for increased efficiency.

“I’m seeing big increases in energy – three or four times what they were 12 months ago.”

He said using barley varieties with higher extraction rates and reliable results was central to increasing efficiency in the current inflationary and carbon-conscious climate.

“The malting industry is very energy intensive — a lot of water, heat and electrical energy — and part of my company’s ambition is to reduce our carbon footprint.

“That fundamentally comes down to varieties being malted.”

“We want to use non-additive grains; that’s where we see the pipeline as going.”

“The buzzword is sustainability; it’s driven by the consumer.

He said low-carbon products were being developed and marketed and progress was afoot in Australia.

“Some of the international brewers are way ahead…but we’re catching up very quickly.”

“We have to work collaboratively – brewers, maltsters, farmers, breeders – because our livelihood depends on it.

“We can’t do it individually; we need everybody in the tent and I think for me that’s where we need to be from a business point of view.

Malting barley premiums

Mr Maccan said global malt prices were at a record high of around 2.5 times their historic value.

“That’s testament to the fact that there are good malting varieties available, and there’s that point of distinction between feed and malt.

“We expect to pay a premium, but at the same time we expect the quality too.

“This diminution…moving towards FAQ industrial grade… isn’t really going to help malting premiums.”

Mr Maccan said the buoyant malt market reflected expanding global demand from breweries, which consume around 90pc of the world’s malt.

“There’s general anxiety around supply of malt.

“Brewers are getting worried about strategic supply.

“They want to put the responsibility on me to meet their requirements, so what they are in fact doing is they are locking in volume.

“I’m talking to bulk handlers, I’m speaking with growers directly so we can try and get a closed-loop market to put some certainty in the business so people can plan.”

Source: Boortmalt

Mr Maccan said part of the reason for the malt market’s rally has been crop failures globally in recent years, including two drought years and a wet harvest in New South Wales, and Canada’s drought last year.

“There are strong premiums for the current crop, and there’ll probably be strong premiums for 2023; I don’t know about 2024 – you tell me what’s going to happen in Europe and elsewhere – but I think we’ll continue to see premiums.”

“I think we’ve got a different floor now within the business.”

Beer dearer

He said a tightening of the belt in the current global economic climate might see some consumer demand shift from wine to beer or from premium beer to budget beer, but beer demand generally is inelastic.

“All malting companies globally are running at over 100pc capacity.”

He said Boortmalt in Australia was running at 104pc, and maltsters globally were replenishing pipelines after COVID disruptions as well as supplying traditional and new markets which in Boortmalt’s case include its new malting plant in Ethiopia.

Mr Maccan said global brewers were projecting an increase in the price of beer, with Heineken having lifted its beer price by 4-5pc already as part of an overall jump of 15pc.

“If you’ve got some spare dollars in your pocket I suggest you go and buy some beer and put it in your fridge ready, because prices will probably go up.”

 

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