At a laboratory in the city of Winnipeg, Peter Watts samples a golden pale ale made with a new variety of barley grown in Canada’s Prairies which brewers think will one day help to meet China’s increasing thirst for premium ales and lagers.
“We saw a real uptick in the last couple of years” in China’s demand, said Watts, the managing director of the Canadian Malting Barley Technical Centre, a non-profit research facility funded by maltsters, exporters, brewers and farmers. “We think that is because they’re producing more premium beer.”
As brewers target discerning drinkers, the centre is helping to fuel research of new malt barley varieties that produce a richer colour and flavour than lower-quality grain. Canada, the second largest malt barley exporter to China, is trying to gain a bigger slice of the burgeoning market from Australia, the leading supplier.
China is the world’s largest beer market, and consumers are increasingly shifting to premium and foreign brews from mass-market brands as incomes rise. The market share of premium lager in the five years to the end of 2017 more than doubled, according to data from Passport, Bloomberg Intelligence analysts Shen Li and Thomas Jastrzab wrote last month in a report.
Canada’s barley has higher protein than crops from nations including Australia. That quality helps in fermentation to give the final product more body and head retention. Acreage in the North American nation rose 13 per cent in 2018, and output is poised to climb to 8.2 million tonnes, government data showed.
Planting had fallen by 30 per cent in the past decade as farmers opted for more profitable crops such as lentils and peas.
Adverse weather that delayed barley harvests in parts of the Prairies – which comprise Alberta, Saskatchewan and Manitoba provinces – reduced the supply of crops suitable to be turned into malt. Exports to China were still expected to top a million tonnes, the second-highest yet, Watts said.
Malt barley shipments to China reached a record 1.4 million tonnes in 2017, surpassing the amount used in the domestic market for the first time, he said.
Demand remains strong amid tight supplies as global barley stockpiles are poised to tumble to a 35-year-low after dry conditions cut production from Europe to Australia, boosting costs for brewers and distillers. The shortfall has pushed up the cost of feed barley in places including Germany by more than 30 per cent since April and spot prices in Saskatchewan gained as much as 10 per cent this year.
Firm prices might spur farmers to plant additional acres in 2019, said Jerry Klassen, a manager of Canadian operations and trading at Gap SA Grains & Produits in Winnipeg, Manitoba.
“This year, the world barley fundamentals are historically tight, and that is benefiting Canadian exports,” Klassen said. “We might be able to pick up additional demand.”
Trade tensions between China and Australia might give Canada an opportunity to increase exports, Klassen said. China is starting an anti-dumping investigation on imports of Australian barley.
From the Winnipeg lab, test batches and samples of new varieties of malt barley, along with technical data and potential brewing recipes, are shared with prospective Chinese buyers. The new varieties being tested, including one aimed at craft brewers, produce higher yields and boost the chances that farmers will grow a good quality crop that can be turned into malt. That, in turn, would make Canadian barley more competitive, Watts said.
His colleague, malt technician Sherwin Santiano, is tracking the progress of two tests as the kernels spin, soak and are dried into malt before making their way to the building’s pilot brewery to be turned into beer. Every batch is sampled and evaluated for everything from colour and head retention to aroma and flavours to give buyers a sense of what they can expect.
“It’s got a little bit of bitterness to it, a little bit of sweetness,” along with flavours associated with pale malts, Watts said after taking a sip of a new batch starting to gain a foothold in the Chinese market.