As drought continues to batter Australia’s east coast, a heatwave hammers much of Europe and freezing temperatures hit Western Australia, malt stocks and pricing are under pressure.

Michael Lamond, forecaster with the Western Australia branch of the Grain Industry Association, told the Australian Financial Review that at least 500,000 tonnes and possibly double that, could be affected by the frost. Lamond also said that in a worst-case scenario, these losses may reduce the on-farm value of the crop by about $400 million.

GrainCorp advised Brews News that the company will “continue to monitor the availability of malting barley and while Western Australia is currently forecast to have a good sized crop, it is too early to be able to see any impact from the recent frost”.

While the latest FY18 report by GrainCorp remains optimistic, with its earnings guidance for the year ending 30 September 2018 rising to $255-$270 million, the company did admit that the grains business was experiencing “ongoing challenging operating conditions” in eastern Australia.

GrainCorp Managing Director and CEO Mark Palmquist said in the report, that “the substantial drought challenges in eastern Australia have slowed export volumes as farmers and the domestic market move to secure supplies”.

“Since GrainCorp’s half-year results on 11 May 2018, cropping conditions across the east Australian grain belt have deteriorated substantially, with large areas of New South Wales and Queensland in severe drought.

“Winter crop hectares planted were reduced and yields may continue to decline if the season progresses without decent rainfall in coming weeks.”

Cryer Malt General Manager, David Cryer, assured Brews News that the company would be getting enough of a crop this year to satisfy the brewing industry.

“There is no danger of us not being able to provide the industry with malt,” Cryer explained.

He said that because there are so many factors that determine the price of malt and hops, like excise, the increase in barley prices doesn’t necessarily drive beer prices up.

“Obviously prices are going to be higher than last year, but it’s prices to the brewery that might go up and not to the consumer.”

The pressures on malt haven’t deterred start up businesses from looking to add to supply.

Barley grower and owner of newly established Barossa Valley Craft Malt, Thomas Ryan, told Brews News there was plenty of opportunity to develop craft malt in Australia based on its success in the US market.

“Firstly, it was proven in America, which made it a lot easier,” Ryan explained.

“So, it was a business model that was already up and running and working in America.

“I just thought it was a great opportunity… I thought it would be a really good venture for our farm.”

At the time he was looking into diversifying into the craft malt business, Ryan said that barley was fetching about $180 a tonne, while a pint of beer was $7.

“It logically seemed a way to supply the craft beer industry that hadn’t been there before… 20 years ago there wasn’t a craft beer industry to supply, so it was seen as a new opportunity and an interesting engineering challenge.”

Located four kilometres out of Greenock and 66 kilometres from Adelaide, Barossa Valley Craft Malt spans 1,200 acres, of which over 90 per cent are cropped.

Ryan informed Brews News that he is currently experiencing the area’s driest year since 1982 but said that his crops have held on really well.

“Years ago, this would have been a real bust season,” Ryan said.

“But with modern farming systems… we’ve actually grown what looks like a really good crop.”

While this is good news for the feed industry, Ryan isn’t sure his crop will reach malt grade barley requirements.

“The two things that will happen in a dry year, grain size will reduce making it harder to crush, and protein will rise because of the additional amounts of fertiliser needed to increase yield.

“You’d typically be targeting 9 to 10 per cent protein but in a dry year the protein will push up in proportion to total tonnage per hectare.”

Higher protein levels will mean a hazier beer for brewers.

In hard years, Ryan said that it’s not uncommon for companies to loosen malt grade barley requirements.

Ryan cited the example of Canadian-based grain handling business Viterra has this year decreased the acceptance of the density of the barley from 65 kilograms per 100 litres to 62.5 kilograms per 100 litres.

This, Ryan explained, has little effect on malting and brewing but can add to storage and transport costs.

Protein and retention are the two parameters that will have more of an impact on brewers, the higher the protein and the thinner the grain makes crushing the barley more difficult and may change the structure of the beer.

“The changes in my opinion have been driven by malt buyers like Malteurop that would be concerned that there will not be enough malting grade barley grown in New South Wales, Victoria, Queensland and South Australia to meet demands.”

In a statement prepared for Brew News, Viterra confirmed that “strong domestic demand from the east coast is driving strong [barley] prices”.

“Harvest in South Australia is only just commencing, with small volumes of barley received in the early harvest regions. Barley received so far has shown some higher screenings, protein and test weight. Based on the seasonal conditions and feedback from growers, Viterra expects to see a mixture of quality and has prepared a segregation plan to meet a broad range of requirements for growers and end-users.

“Viterra will continue to open additional segregations during harvest based on grain that is being delivered,” the statement concluded.

Ryan said that climate change was a concern for his business and a problem that he would have to deal with.

“It will be interesting to see how this year does go, 1967 was a bad one and this year is better than that and a touch better than 1982.”

Ryan advised Brews News that there’s really only a $10 difference between feed and malt grade barley per tonne.

So, for growers, it’s unlikely they will be chasing malting grade barley, “it’s more of if it happens it happens,” Ryan explained.

“Given the high price of feed barley I very much doubt any receival standards changes were lobbied for hard by the growers.”