Barley/Wheat
Inputs/Production
Desember 2013
34
The relative value between barley and
wheat from a production point of view:
Northern Cape irrigation areas
DR ANDRÉ VAN DER VYVER, UNIVERSITY OF PRETORIA
Barley is a short-seasoned, early maturing crop. About half of the world’s
crop is used as livestock feed, while the rest is used for human food and
for malting. Most beer is made from malted barley.
Malt barley is the perfect combination of starch enzymes, flavours and
aromas for brewing and distilling. Some of the principal characteristics
used to define malting quality are protein, malt extract, enzyme activity
and beta-glucan.
Feed barley is used as animal feed. A rule of thumb is that good malt
barley is good feed barley, but the reverse is not true. In general, malt
barley commands a premium over feed barley, but yields less.
World barley production
The world’s barley production reached 129,9 million tons (USDA, 2013)
during the 2012/2013 season, which is lower than the previous season.
The production trend line over the past twelve years is almost stable on
a level of 140 million tons, but in the previous three seasons production
fell below this trend.
Barley is grown in about 100 countries worldwide, with three regions,
namely the European Union (mainly Spain, Germany and France), the
Russian Federation and Canada, responsible for more than half of the
world’s barley. Canada is the top malt barley producer.
Most of the growth in demand for malt barley and malt during the next five
years will be in countries with rapidly expanding beer production. Africa is
the largest nation in this regard with a 21% annual growth rate. The rapid
growth also means that SABMiller plans to invest up to $2,5 billion in Africa
over the next five years to build and revamp breweries.
The South African barley industry
In South Africa, barley is mainly planted for malting purposes as there
is no significant feed market for barley due to the oversupply of maize.
Barley differs from most other agricultural commodities in that there
is only one major barley buyer in South Africa, the SA Maltsters; they
supply their major stakeholder, South African Breweries Ltd, with malted
barley. Barley producers mostly had a guaranteed market, but lately are
exposed to price risk – the price of barley is now linked to the wheat price.
Production of barley in South Africa
South Africa’s total annual production of barley is around 225 000 tons to
250 000 tons. Approximately 80% of all barley produced is classified as
malt barley. This however, still results in a shortfall of about 75 000 tons
of malt barley, which is imported either as malt barley or as malted barley.
South Africa is the fourth leading country importing Canadian malt barley
and the third leading country importing Canadian malted barley.
Until 1997, the production of barley was almost exclusively limited to the
Southern Cape. Production on an experimental basis was only brought
to the inland irrigation areas of Vaalharts during 1997. Today the inland
irrigation areas produce on average around 75 000 tons on 14 000 ha. The
production of barley is mainly concentrated in three irrigation production
areas, namely Vaalharts (about 33 000 tons), GWK (about 17 000 tons)
and Taung (approximately 7 000 tons).
GWK consists of Douglas (the majority), Rietrivier and Barkley West.
Smaller quantities are also grown in the Modderrivier and Hopetown
areas, which are typically included in the GWK numbers. Lately some
experimentation has also been conducted in the Brits/Koedoeskop
irrigation areas, providing approximately 2 000 tons. For all practical
purposes, SAB is the only buyer and barley is produced under contract.
A significant yield difference exists between the Southern Cape (dryland)
and the Northern Cape (irrigation), but there has been a constant im-
provement over the years.
Pricing
With the Southern Cape historically being the only production area
and with wheat virtually the only alternative for producers, the price or
profitability of barley production has always been compared or “linked”
to that of wheat.
Graph 3
illustrates the relationship between the average
barley and wheat producer prices deflated with the producer price
indices for field crops.
It has only been since the 2011/2012 season that an alternative agreement
has been reached between SAB and the producers whereby the price
has been linked to the Safex wheat December futures contract. This
now enables both the producers and the buyers to price individually and
according to their respective price views. Pricing could also take place
post-harvesting.
SAB investment
In South Africa, SAB is investing in a new state of the art, R700 million
malting plant in Alrode, Gauteng. The new plant will allow it to reduce
the amount of malted barley it imports and assist in providing support
to small scale black farmers. At present SAB sources about 65% of its
barley locally.
Once the new malting plant is completed, this figure is expected to
increase to between 90% - 95%. The Caledon plant in the Western
Cape (WC) malts about 180 000 tons of barley a year and the old Alrode
plant about 42 000 tons a year. The new plant will have a capacity of
130 000 tons of malted barley by its completion in 2015.
It is not possible to competitively deliver Cape barley to the Alrode plant.
The expansion of this plant to more than double its capacity, will bring
additional production opportunities to inland producers.
The Northern Cape irrigation areas
In the Northern Cape, the total area under barley stands at 39% of the
total area under wheat production. This necessarily implies that when
a producer decides what to grow, he will base his decision mainly on
technical production factors and profitability.
Technical factors will include aspects such as rotational patterns,
diseases, improved cultivars and soil quality. Profitability implies a
comparison of the potential net income from the production of barley
compared to that of wheat. Risk will also be taken into account, meaning
that a comparison will be made of the potential for complications
occurring during the growth period that will affect the yield of barley, with
that relating to wheat. From a production perspective, barley is generally
regarded as a more technically challenging crop compared to wheat.
