| | Industry background | Current situation and accomplishments | The hurdles/challenges ahead | The road ahead | Summary
Industry Background
The Malting Industry Association of Canada (MIAC) is comprised of four firms that operate six plants:
- Canada Malting Co. with plants in Calgary, Thunder Bay and Montreal
- Dominion Malting Limited located in Winnipeg
- Prairie Malt Ltd. located in Biggar, Saskatchewan
- Westcan Malting Ltd. with a plant in Alix, Alberta
When at full capacity, the industry employs approximately 400 staff and produces 900,000 tonnes of malt (consuming 1.2 million tonnes of malting barley annually). Approximately 350,000 tonnes of malt are sold domestically; 500,000 - 550,000 tonnes are exported.
The malting industry is the largest value-added exporter of grain in Canada and the largest barley customer of the CWB, purchasing over 50% of available CWB stocks annually. In the early 1990's, the industry increased its capacity by 350,000 tonnes (40%) with the additional investment of $250 million in building new plants and expanding others.
Today, replacement cost of the industry assets is estimated to be between $800 million - $1 billion. Between 1985 and 2001, the industry virtually tripled its malt exports to approximately 550,000 tonnes and Canada became the second largest malt exporter in the world.
Current Situation and Accomplishments
Varietal product development
- 2002/2003 drought created a very poor and limited quality crop.
- Industry operating at 55% capacity utilization.
- Domestic and international brewing customers extremely concerned about Canada's ability to continue to provide a 'secure supply of high quality' product (more discussion on this later).
- Five years ago, industry collectively began an international 'Generic Market Promotion Program' to highlight the benefits of newer malting barley varieties i.e. Manley, Kendall, Stratus, Copeland, Newdale etc. to replace the aging Harrington.
- Test malting and brewing trials, limited introduction in customers' blends.....MIAC/gov't spent $300K on advertising/promotion materials campaign (4 languages) highlighting benefits of the Canadian malting barley system.
- Campaign is working.....In 1999, Harrington barley comprised 56% of 2-row seeded acreage, while Metcalfe, Kendall, Stratus comprised only 10% of acreage. In 2002, Harrington comprised 26% of acres while Metcalfe, Stratus and Kendall alone made up almost 58%.
- However, challenges have been in getting a consistent quality which more accurately represents the attributes of the barley.....re: 2 years of poor weather.
EU subsidy elimination (temporary or permanent)
- MIAC spent 4 years of semi-annual trips and meeting with the EU Commission building the case for removal of subsidies on malt and malting barley.
- In 2000, EU agreed thus increasing Canadian malting barley farmer's revenue by $20-40/mt annually.
MIAC/CWB accomplishments
Closer cooperation with CWB has resulted in the following benefits to farmers:
- Higher storage payments (back end) for on farm storage.
- Payments to farmers based on PRO not initial.
- Reduced risk through industry ability to begin 'on site' and 'off site' inventory storage programs (malting companies' ability to purchase more at harvest time).
Hurdles/Challenges Ahead
International competitiveness = secure quality recognition and customer satisfaction
- Becoming increasingly more difficult to satisfy our brewing customer's requirements and continue to maintain market share (global competitiveness ).
- Why.....ability to provide 'segregated quality' malt to increasingly very sophisticated brewers is becoming more difficult.
- Issue is 'segregation' vs. blending because of a continuously evolving grain handling system and the emergence of China as the 'Gorilla' in its increasing appetite for world malting barley supplies.
- Issue is 'What's changed in the last 10 years'?
Early 1990's success: WHY?
- Single car allocation system.
- Regulated rail system.
- Elevator storage.
- Minimal competition for malting barley.
Post 1995: What happened?
The continuing evolution/reorganization of the grain handling system has led to our industry's declining ability to segregate quality barley to meet our customer's needs. The events include:
- Elimination of the WGTA/Transportation deregulation.
- Reduction in available storage.
- Elevator company consolidation.
- Competition for barley (China).
The Road Ahead
- Canada's malting industry's future global competitiveness will be directly proportional to our ability to select malting barley 'by lot' not by blended 'aggregated' quantities.
- Creating or 're-establishing' Canadian malt as a high quality branded product and not as an average quality commodity will be the most critical factor in determining whether we 'fade or flourish' in the intemational marketplace.
- Our brewing customers are demanding a more consistent, high quality segregated product.
- Remember, our customers are also our Australian and EU competitors' customers and they are more than ready to increase their market share at our expense.
- Without question, if we cannot attract segregated quality barley.....we will become increasingly globally uncompetitive and lose value-added opportunities in existing and future markets.
Summary
- There are always opportunities which arise out of adversity.
- Our challenge, given the constraints on the handling system, will be to continue to work collectively with the CWB, farmers, line companies and the government in finding ways to meet our customers' needs.
- Over the course of the past several years, the malting industry and the Canadian Wheat Board have been working collectively in addressing the needs of farmers and industry together.
- The challenge now becomes: How do you get back to segregated selection when there will be continued pressure to move to a 3.5 million tonnes malting barley pool and move it through the existing handling system??
Segregated quality malting barley for 'branded' value-added product sales vs. Aggregated 'average' blended quality for bulk barley commodity exports.......
That is the challenge and collectively we are all going to have to work smarter and harder in meeting the needs of our value added customers.
It will not be easy, but as an old farmer expression goes: 'where there's a will, there's a way'.
Phil de Kemp
Malting Industry Association of Canada
Presented at the 3rd Canadian Barley Symposium, June 19-20, 2003 |
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