Canada & China: China’s thirst for high-end beers fuels Canadian barley surge

At a laboratory in downtown Winnipeg, Peter Watts samples a golden pale ale, admiring the silky foam top and smooth, slightly grain-tinged taste. A new variety of barley grown in Canada’s Prairies helped flavor this beer, and brewers anticipate that the kernels will one day end up in shipments to meet China’s increasing thirst for premium ales and lagers, Bloomberg reported on December 4.

“We saw a real uptick in the last couple of years” in China’s demand, said Watts, managing director of the Canadian Malting Barley Technical Centre, a non-profit research facility funded by some of the nation’s malting companies, exporters, brewers and farmers. “We think that’s because they’re producing more premium beer.”

As brewers target discerning drinkers, the center is helping to fuel research of new malt-barley varieties that produce a richer mouthfeel, color and flavor 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 top shipper.

China is the world’s largest beer market, and consumers are increasingly shifting to premium and foreign brews from mass-market brands amid rising incomes. The market share of premium lager in the five years ended 2017 more than doubled, according to data from Passport, Bloomberg Intelligence analysts Shen Li and Thomas Jastrzab said 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 foam retention. Acreage in the North American nation jumped 13 percent in 2018, and output is poised to climb to 8.2 million metric tons, government data show. Planting had declined 30 percent 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, reduced the supply of quality crops suitable to be turned into malt. Exports to China are still expected to top 1 million tons, the second-highest ever, Watts said. Malt-barley shipments to China reached a record 1.4 million tons 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 percent since April and spot prices in Saskatchewan gained as much as 10 percent this year. Firm prices may 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.

“This year, the world barley fundamentals are historically tight, and that’s benefiting Canadian exports,” Klassen said in a telephone phone interview. “We might be able to pick up additional demand.”

Trade tensions between China and Australia may give Canada an opportunity to boost exports, Klassen said. China is starting an anti-dumping probe 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 specifically at craft brewers, produce higher yields and boost the chances that farmers will grow a quality crop that can be turned into malt. That in turn will make Canadian barley more competitive, Watts of the technical center 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 color and foam retention to aroma and flavors 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 flavors associated with pale malts, Watts said after taking a sip of a new batch starting to gain a foothold in the Chinese market.

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