United Malt Group, whose Canadian assets operate under the Canada Malting banner, last month locked in on a previously announced deal to sell itself to France’s Malteries Soufflet for A$1.5 billion (C$1.3 billion).

Sydney, Australia-based United Malt and Soufflet reported Aug. 7 they now have written confirmation from Canada’s Commissioner of Competition that the office “does not intend to make an application” to challenge the transaction.

Thus, United Malt said, the condition for Canadian regulatory approval “will be satisfied” if the commissioner’s notice isn’t reversed by Aug. 23.

United Malt reported separately Monday that it and Soufflet now also have confirmation from the United Kingdom’s Competition and Markets Authority (CMA) that the CMA has “no further questions in respect of the proposed transaction.”

Much like the “no-action letter” Canadian regulators provide in such cases, “no further questions” is the CMA’s standard response when the authority doesn’t intent to mount a public inquiry into the deal, United Malt said.

The world’s fourth largest commercial maltster, United Malt makes bulk malt for brewers, craft brewers, distillers and food companies and has 12 processing plants in Canada, the U.S., Australia and the U.K., with combined malting capacity of about 1.26 million tonnes. It had been owned by Australia’s GrainCorp since 2009 and was spun off in 2020.

United Malt’s Calgary-based Canada Malting unit, which alone produces about 400,000 tonnes of malt per year, includes malting plants at Calgary, Montreal and Thunder Bay, nine country elevators in the Prairie provinces, and Country Malt facilities at Delta, B.C., Brampton and Calgary.

Soufflet, which has 28 malt houses in Europe, Asia, Africa and Latin America with combined production capacity of 2.36 million tonnes per year, has been an arm of French agribusiness InVivo since last year. InVivo has previously said it plans to be the world’s top malt firm within five years. — Glacier FarmMedia Network

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“We’ll lose a lot of malting barley this year, because of the weather,” said Peter Watts, managing director of the Canadian Malting Barley Technical Centre.

While harvest is near completion in some areas of Manitoba, Watts said “it’s a real struggle this year” on a more general level across all three Prairie provinces. “There’s a lot of barley still out there that hasn’t been harvested.”

Adverse weather in the spring also split up seeding, with some of the barley crop going in early and other fields late due to rains in May. That wide planting window adds uncertainty to the final quality.

Anecdotal reports for what has come off so far are highly varied. Watts said that while there have been some reports of good-quality malting barley, he had also heard of more chitting than normal.

Chitted barley, also called pre-germination, refers to grain that has prematurely started to sprout before being harvested. Chitted barley can still be made into malt shortly after harvest, but degrades quickly in storage.

Staining will also be a problem due to the rain, Watts said.

Canadian farmers did seed a larger barley crop this year, and Statistics Canada’s August survey pegged production at 9.6 million tonnes — well above the 8.4 million tonnes grown in 2018-19 and the previous five-year average of 8.1 million tonnes. Watts said some estimates still point to a crop of 10 million tonnes or more.

“We’ll have a pretty big pool to choose from, but if the weather doesn’t smarten up it will compromise a lot of the quality,” said Watts.

“Quality will be all over the map this year, and it will be a struggle for grain companies and malting companies to find enough good quality malting barley.”

Canada’s domestic malting industry typically takes about one million tonnes per year. Canada has also been exporting over a million tonnes of malt barley on an annual basis in recent years, which means the country needs at least two million to 2.5 million tonnes of malt barley.

Watts was confident that the demand would be met, but said end-users may have a harder time finding supplies.

“There’s no question that we’ll see feed prices ease off,” he said, noting the price spread between feed and malt barley will likely widen.

Feed barley bids over the past winter were strong due to tight supplies and even traded at a premium to malt in some cases. In 2019-20, producers with unpriced malt-quality barley will be looking for prices to go up, said Watts.

From a protein standpoint, early indications are for slightly lower average protein barley compared to the past few years, which Watts said was a function of larger yields.

In 2018-19, Canada’s malt barley averaged 11.9 per cent protein, according to Canadian Grain Commission data. Watts expected the 2019-20 selected barley would be in the lower 11s.

— Phil Franz-Warkentin writes for MarketsFarm, a Glacier FarmMedia division specializing in grain and commodity market analysis and reporting.

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“I really suspect that anything left in the field now, any barley now, will not be malting quality,” said Jeff Nielsen, a farmer near Olds, Alta., and director with the Alberta Barley Commission.

Nielsen said he managed to get his barley off during a brief harvest window in early September, as many others did. However, he said Wednesday, he had not been able to get into fields since Sept. 10.

Cameron Goff, a farmer near Hanley, Sask., and a director on the Saskatchewan Barley Development Commission, agrees chances are small that any barley left in fields will be good for anything but feed.

However, he said, he still holds out hope that some of the late-seeded barley still standing will be able to meet malting quality specs, provided it wasn’t hit too badly by frost.

Like Nielsen, Goff said he managed to get all of his barley taken off before the heavy precipitation hit.

“It’s a shorter-season crop and if you’re really after malt you do try and get it in because bad weather in September isn’t all that uncommon,” he said. “It can really kick malt barley more than anything else as far as downgrading.”

On the supply side, Nielsen said he thinks maltsters will be able to draw on old crop and that should get them enough to see them through.

He managed to recently sell some of his old-crop barley, he added, and thinks a fair amount of supply is still sitting in bins thanks to a large, high-quality crop last year.

“I think there is a good supply of good quality (old-crop) malt out there.”

Prices for malt barley have ranged between $5.50 and $5.60 per bushel at elevators in his area. Feed barley prices have been around $5.25 per bushel, he said, although by shopping around and calling brokers, farmers might be able to do better than prices posted at local elevators.

Goff, meanwhile, wonders if maltsters might have to stretch a bit to source supplies this winter. He said he agrees last year’s crop will help, but he doesn’t know how many farmers still have some of those stocks left. Many farmers moved old crop when it appeared that another large, good-quality harvest for barley and wheat was imminent.

He said he heard from companies about three weeks ago, looking to buy barley for fall, winter and next summer delivery and that tells him they do not have enough.

“So, I can’t see if they got that many orders on the books, if you will, they were still looking for it two to three weeks ago, I can’t see them getting them filled.”

Prices of about $5.25 per bushel were being offered, he said, but it was when many believed there was not going to be much feed around. The longer that harvest drags on under heavy precipitation, the more that situation will change.

But of five different places around his area, he said $5.25 per bushel was the best offer — $5.40 if he was willing to accept spring delivery.

This year’s long, wet harvest might have come at a bad time, just as export markets were growing. Nielsen said he hoped those buyers would not suddenly be shorted and left to find new suppliers. Foreign buyers may be able to find new opportunities within Canada to fill their needs, he added.

Some higher-protein barley grown in drier areas of the south, which was not suited for malt, may be headed that way. As well, Nielsen said, a lot of other grain, such as wheat, may yet enter the feed market.

Statistics Canada estimated Alberta farmers would grow 4.042 million tonnes of barley in 2018. Saskatchewan farmers were tapped to grow 3.237 million, Manitoba farmers 492,900 and Canadian farmers overall were expected to harvest 8.227 million tonnes this year.

According to the latest crop report, for conditions as of Oct. 2, the Alberta barley crop was 45.7 per cent harvested. That accounts for 82 per cent completed in the south, 41.5 per cent in central regions, 14.4 per cent in the northeast, 17.2 per cent in the northwest and 29.3 per cent in the Peace district.

Saskatchewan’s barley harvest overall was reported as 81 per cent complete in the latest crop report as of Oct. 8; Manitoba’s barley crop was estimated at 97 per cent harvested in the Oct. 9 crop report.

The latest Statistics Canada stocks report, released in September, stated 1.256 million tonnes were still on hand, but it did not break out how much of that was planned for malt.

— Terry Fries writes for Commodity News Service Canada, a Glacier FarmMedia company specializing in grain and commodity market reporting.

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“We get our base malt locally, but we don’t have any maltsters in the province making the specialty malt we need,” Colin Enquist, sales and marketing manager with PEG Beer Co. in Winnipeg, said via email.

The specialty malt being imported from the U.K., Germany, and other countries “comes down to the availability and some suppliers just having a better product,” he said.

Malt is created through a three-step process which sees grain soaked, germinated, then kilned, converting the starches in the grain into sugars.

Variations in that process, from the grain used to how long the end product is kilned or roasted, can impact the flavour of the resulting beer.

“We’ve actually had a couple people come into the pub and ask if they opened a specialty malt shop if we’d be interested in buying more locally grown malt,” said Enquist, adding “we absolutely would buy all local if we could and it was to the quality we need.”

An added irony of the situation is that in some cases the European malt finding its way into Canadian beers could have been created using Canadian barley to begin with, said Lawrence Warwaruk of Farmery Estate Brewery at Neepawa, Man.

The Farmery brewery creates beer using grain grown on its own farm, but that barley is still malted offsite through an agreement with the Malteurop facility in Winnipeg.

“There is definitely a market for specialty malts,” said Warwaruk, adding that while the large malting companies “do a fantastic job of what they do,” specialty malts have a higher value and could find a home both domestically and even abroad.

“You need to create a demand for locally sourced barley, malted locally, and sold locally,” he said. His company has looked into malting its own grain as well.

The Canadian Malt Barley Technical Centre (CMBTC) in Winnipeg runs training programs a few times a year for aspiring maltsters and those already in the industry.

Peter Watts, managing director of the CMBTC, noted the craft malting sector is very small in North America, accounting for less than one per cent of the total malt production.

He estimated that of the 40 to 50 craft maltsters in North America, only about half a dozen were in Canada. However, he said, there was plenty of interest from the craft industry.

“With the growth and expansion in the craft brewing industry in the last ten years, it has created demand for craft maltsters,” said Watts.

From a theoretical perspective, malting grain is rather basic, but in practice “it’s a pretty big investment up front,” said Watts.

Matt Hamill of Red Shed Malting in Red Deer went through the CMBTC course and is now operating a small-scale maltster. The company’s genesis came from a conversation between Hamill’s father, a farmer, and his brother, who was brewing his own beer.

“Why are we getting malt from Germany, when we grow pretty amazing malt-quality barley right here on the farm?” was the question asked, which, after a number of steps along the way, eventually led to a malt house.

“We certainly felt, and still do feel, that there is a need and a place for craft maltsters,” said Hamill.

“We can play around with different barley varieties and production methods,” he said, adding that the smaller scale also allows them to work closely with craft brewers “to make sure we’re giving them exactly what they’re looking for.”

Craft brewing also uses more barley to make the same amount of beer, said Hamill, noting craft beer may need three to seven times more barley compared to mass-produced beers, as brewers are not supplementing with corn, sugar or other adjuncts.

“The big maltsters make a great base malt, but we feel there is an opportunity to do some unique things and put our own twist on it,” said Hamill, adding that “seeing your product make it into beer that you can get at the local liquor store is a pretty amazing thing.”

— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting. Follow Phil at @PhilFW on Twitter.

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Spot malt barley prices are about $4.75-$4.85 per bushel in Western Canada, Prairie Ag Hotwire data said, which compares with last year’s harvest prices of about $5.25-$5.75.

“We do have a lot more quantity this year than last year. There’s fairly large quantities of unchitted, unsprouted barley, consequently the domestic maltsters are close to being full,” said Rod Green of Central Ag Marketing Ltd.

While domestic needs are mostly filled, ongoing exports are limiting further weakness in the market, he added.

Excess moisture throughout the growing season has caused some quality issues, he said, and producers are still assessing damage.

“Quality is maybe not looking as good as it did even a month ago,” he said.

“We’ve seen a lot of weather, which is never usually good for malt barley.”

The level of chitted — partially sprouted — barley was lower this year compared to last growing season, he said.

“But as we get further into this crop we’re seeing germination issues, so that’s not good.”

Total production of barley, which includes both malt and feed, is expected to be 8,704,300 tonnes this year, estimates from Statistics Canada said, compared to last year’s 8,225,700 tonnes.

— Jade Markus writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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Harvest typically begins in late August for many growers, but steady downpours have forced delays across much of the province.

“We actually started Sept. 1, but we only got two days in before it started to rain. We got two days in the following week and four days last week and that’s the extent of it; it’s just been that wet,” said Jason Lenz, an Alberta Barley director who farms northwest of Red Deer.

“I think the maltsters are definitely not going to get the quality they’re hoping for. That may increase the price of malt, but anyone that has barley that’s starting to chit bad and lose its germination, they’re going to take dockage,” he said.

His concerns are echoed by fellow director Jeff Nielsen, who has an operation near Olds. “I’ve had two days of harvest weather the whole month of September.

“Conditions are questionable right now; there is the possibility of higher chit in the barley,” he said.

As a rule, malt generally does worse in high-moisture situations, as the germ will break away from the kernel too easily. Maltsters have strict specifications for the malt they accept, which usually requires protein content of roughly 11-12.5 per cent (dry basis).

Both producers said they think it’s possible companies may decide to lower the requirements if too much of the barley is wet.

“They have in the past, because they need certain volumes to keep their plants full,” said Lenz.

Rain is threatening to push back the entire harvest to a point where damage is unavoidable, Nielsen added.

Current prices are already lower than last year, when they crept above the $6 a bushel mark, he said.

“We contracted some for $5.40  or $5.50 this year. I believe the last two months it went down to about $5.25. I would expect (the price) would go up a little bit due to these wet conditions.”

At the end of the day, Lenz said, what’s needed is warm weather and dry winds.

“It’s a double-edged sword: there’s a lack of quality stuff, but the price will go up. Still, anyone that does get accepted for lower-quality malt will endure a discount.”

Nielsen decided to swath his barley after some of it became lodged.

Both he and Lenz expect the true state of the crop to become clearer as more samples are sent to maltsters.

— Dave Sims writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting. Follow CNS Canada at @CNSCanada on Twitter.

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Maltster demand has been well met so far this year, one market participant said, but previous years’ weather has caused supplies to fall, propping up spot prices.

Demand from the craft brewing industry is keeping malt barley prices supported at a time when demand for beer in North America and Europe is mostly flat, said Rod Green, manager at Central Ag Marketing Ltd.

Malt barley is increasingly becoming a specialty crop that’s pre-contracted in advance of the required time of movement, he added.

New-crop malt barley prices are being offered between $5.05 and $5.25, according to data from Prairie Ag Hotwire.

“It’s a good return and that’s why you’re seeing barley acres gradually increasing,” Green said.

Barley’s seeded area (including feed) is estimated at about 6.8 million acres this year, compared with 6.5 million the year prior, according to data from Statistics Canada.

“The maltsters are well covered for their needs for the summer,” Green said.

Farmers are closely watching crop conditions, as chitting in the past couple of years has driven spot malt barley prices higher, and caused supply to fall short of demand.

Chitting, or pre-germination, is when barley starts to sprout inside the kernel and dries out.

“The whole essence of the malt barley business is to get as many kernels switched from starch to sugar as possible, but it’s not supposed to happen in the fields,” Green said.

— Jade Markus writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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