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Craft beer boom driving revival in barley demand
[PERTH] A batch of barley that lay forgotten for almost 100 years in storage at A farm in Portland, Oregon, has found new life - thanks to booming demand for craft beer.
It turns out the barley makes a malt that is much in demand from Oregon's growing legion of craft brewers and is among a wave of ancient varieties revived by the likes of GrainCorp Ltd, the giant Australian crop handler that also ranks as the world's fourth-biggest malting company.
"We have had retired farmers step forward and say 'I've had this stored for years', and we can go back and trace what it is by DNA," GrainCorp chief executive officer Mark Palmquist said in Sydney.
"We produce a cascade malt that comes from a cascade variety that hasn't been grown for many, many years. We only grow it in a certain geographic region and you can attach it to that area, all the way down to the farmer that is growing it."
Craft beer has underpinned a revival in barley demand because it uses twice as much malt as regular pilsner. Demand for speciality brews is set to continue to grow and consumption of dark and craft beer in the US has grown at about 9 per cent a year since 2007, according to Bloomberg Intelligence, citing Euromonitor Passport data. Barley is steeped in water, partially germinated, dried and roasted to process it into malt.
Demand for craft beer rose 6.2 per cent in volume terms in the US in 2016 and 10 per cent in value terms to US$23.5 billion, according to the Brewers Association. Total beer demand was flat. North America has led the revival in demand for craft beer, though it's now spreading as far away as India and China, buoyed by demand from the millennial generation, Mr Palmquist said.
"Millennials are different in terms of what they consume," he said. "They look for more customisation and specialisation and some of that comes into the sustainability and the provenance aspect. They don't want to drink their mum or dad's beers."
Millennials are also helping drive demand for single malt whiskies. As their name implies, malt whiskies are made entirely from malted barley, unlike grain whiskies which can use blends of other grains such as wheat, corn and rye. Exports from Scotland gained 3.4 per cent in value in the first half of the year with single malts up 7 per cent, according to the Scotch Whisky Association.
For some malt whisky makers in the UK, GrainCorp is providing "single-paddock" malt, Mr Palmquist said. "It gives that connection and provenance. It gives that whiskey producer something unique."
In Australia, some Japanese shochu distillers visit individual farms a couple of times a year to source the barley they need. "That's what we malt and that's what we supply them," Mr Palmquist said.
GrainCorp, which started as a government-owned crop handler in 1916, made a major move into malt in 2009 with its US$655 million acquisition of Nebraska-based United Malt Holdings. It added companies including GermanMalt GmbH & Co and Kirin Australia Malt House in 2011 before announcing major expansions at its US facilities in 2015. The segment provided almost 60 per cent of GrainCorp's profit in 2016, up from 25 per cent in 2013.
"Malt just keeps getting better," Mr Palmquist said. "Opportunities present themselves on a much better basis for us - that could be the expansion of plants, that could be acquisitions, that could be distributions."
In Oregon alone, the number of craft brewers has more than doubled since 2011 and there are now more than eight breweries for every 100,000 Oregon adults in the state, according to the Brewers' Association. Craft beer "has a pretty good runway in front of it for the next four to five years," Mr Palmquist said.
Australian beer drinkers are consuming more golden ales and summer ales, while Indian pale ales are always popular, according to Chris McNamara, executive officer at Australia's Independent Brewers Association. The independent brewing sector Down Under has grown tenfold in the decade to 2016 and there are now 380 businesses, according to the industry group. "We still have a lot of market share available given we only represent 3 per cent at the moment," Mr McNamara said.
"There is also lots of opportunities for the brewpub model, which is yet to reach the same sort of popularity as it has in the US."
CBH Group, Western Australia's largest grain handler, has also noted a boost in demand for barley, according to general manager of marketing and trading Jason Craig.
In China alone, there are now about 350 craft breweries from just a couple in Shanghai and Beijing in 2013, according to barley trader Evergrain Germany.
"Craft beer is experiencing unprecedented growth in South-east Asia and North Asia," Mr Craig said.
"This growth is driving an increase in the percentage of malt being used in craft beer, which results in increased demand, in particular for specific malt barley varieties."