Only when brewers realize that they shall keep together we’ll get well-balanced industry – Alexander Mordovin (2013-12-05)

We would like to bring to your attention an interview of Mordovin A.N.
in the journal «APK-Inform» from 2.12.2013.

While on the subject of niche crops we couldn’t ignore such crop as malting barley. Recently in Russia we observed various directions of malting barley production. What is the reason for that? Will “Beijing Program 2012-2015” change radically the position of malting barley in the grain market of the RF – told the President of the Union «Barley, Malt, Hops & Beer in Russia» Alexander Mordovin to journalists of’ APK-Inform”.

– Alexander Nikolayevich, what do you think about dynamics of malting barley production in Russia over the last years? What is the reason for that?

– In 2007 and 2008 against the background of increasing of beer production volumes there was produced a maximum quantity of malting barley – 2,5 mln. tons. Drop in production and beer consumption as well as a global economic recession totally injured malting barley industry. It is worth noting that this crop is niche and the problem resides in a limited number of consumers with a great number of producers and rather expensiveness in terms of necessity of following to agro-technologies and the chemical protection system. Taking into account the process of switching of the basic consumers- transnational brewing companies to using of sacchariferous components and malt-free grain material there were produced no more than 700 thousand tons of malting barley with synchronous import growth which was over 500.000 tons in 2011. The Federal Law 218 was put in force in 2012. This law limited using of unmalted grain products to 20% where 2% were sacchariferous components. According to our estimates it led to the instant growth of malting barley demand to 500 thousand tons. Dynamics was distinctly observed against malt production growth in 2012 as compared to 2011 – the raise was 21%!

– How will the reduction of beer production influence on malting barley industry? What is your opinion on this topic?

Decrease in beer production in Russia doesn’t cause concerns because beer sales against officially declared beer production volumes are not declining, meaning strong demand. Unfortunately it shows the growth of illegal beer market and it will result in toughening of requirements towards beer producers.

In 2007 declared beer production volumes in Russia were approximately 115, in 2008 – 114, in 2009 – 109 million hectolitres. Based on the estimates of beer consumption growth in 2007 and 2008 the representatives of the industry produced “extra volumes” and slowdown in sales compounded matters in 2009.

In the following years beer production volumes were approximately the same and sales volumes exceeded production.

Also in 2013 beer sales aren’t coming down (according to the statistic data for January – September, a sales figure is 76 million hectoliters. It will result in the same annual amount – 100 million hectoliters by comparison with previous years). But a real decrease of sales volumes took place only in 2009 – over 10%.

What is the profitability of malting barley production in Russia? Please, tell about the price tendencies.

The price situation at the barley market is rather tangled. If the production is included in the agro-project (malting barley production is on instruction from malting and brewing companies) the price can reach 9 thousand rub./free on wagon, sending station. But the price at the free market is 7000 – 7.500 rub./t. Everything depends on barley quality characteristics (purity of variety – min 95%, germination – min 95%, protein – max.12,5%, kernel size after sieving – 2,5 mm and so on). When agricultural companies produce products that are not up to the company requirements then it is purchased by discount. And agrarians who grow barley for more than one year have profitability at the level of 50%.

Production figures of the brewing industry

 

Beer production volumes

(mln., hl.)

Beer sales volumes

(mln., hl.)

Malt production

(thou. t.)

Malting barley sales

(thou. t.)*

Malting barley import

(thou. t.)

Brewers malt import

(thou. t.)

2008

113,9

113,8

1394,2

1700/2300

172,9

134,4

2009

109,1

102,5

1134,4

1000/1500

64,8

70,3

2010

98,4

100,4

1107,1

650/900

12,9

115,92

2011

99,4

101,15

970,5

450/700

369,1

99

2012

97,6 (incl. 2,4 beer beverages)

101,75 (excl. cocktails, beer and malt beverages)

1241

860/1200

521,7

127,7

2013 (january-september)

68,7 (incl. 4,7 beer beverages)

75,89 (excl. cocktails, beer and malt beverages)

817,9

Data will be available as of year-end 2013

233

Data will be available as of year-end 2013

* Excluding small business/including

Please, tell about “Beijing Program 2012-2015” in more detail. What is the bottom line of this program?

–  The largest beer manufacturer China produces 49 billion litres per annum importing over 2 million tons of malting barley from Canada, Australia and European Union. Why is Russia absent in the supplier list? There are all necessary conditions for barley cultivation in Russia. Having asked this question Barley, Malt, Hops & Beer Union together with Chinese colleagues and with the support of interested public authorities created a program “Organization of scientific tests of malting barley varieties”, better known as “Beijing Program 2012-2015”. Chinese brewers are not interested in domestic raw materials because manufacturing companies are small and can’t provide brewing companies with homogeneous barley lots. Moreover malting barley is only one cereal crop in PRC not subsidized by the State. That’s why China takes an interest in Russia.

At the present time research tests of malting barley varieties from different selection companies were organized in four agro-climatic areas of Russia. As a result of this test the most in-demand barley variety for Chinese brewers will be defined. Also in the course of implementation of Beijing Program optimal agricultural technologies will be developed and different variants of barley supplies to PRC will be explored. Approximate export potential is 5 million tons per year.

How is it planning to reach these malting barley volumes?

The fact is that in every country approximately 90% is feed barley producers and 10% – malting barley producers. We’ve got barley varieties with both malting and feed barley parameters. If you carefully follow agro technologies – you’ll get malting barley. In other circumstances – high yielding feed barley.

But it should be noted that not all agrarians agree with this statement. In order for brewing companies to buy barley it must have protein index 12%. And if the cattle feed barley with protein not less than 15% they’ll get maximal use. It is worth noting that the way out lies in the fact that forage base in the country is so imperfect that everything is fitted for the feed purposes in our agricultural business.

– What difficulties does Barley, Malt, Hops & Beer Union face?

– The main problem of the production chain “malting barley-beer” in the RF at the rise of establishing of our Union lied in inconsistency of the companies and lack of cooperation. And if the primary producers of malt and beer products tries to keep together then brewers stand separately. As you know, there is a union of the large brewers – transnational companies and we – primary producers and Russian independent brewing business and also there are companies standing aside – for example “Ochakovo”. Only when brewers realize that they shall keep together we’ll get well-balanced industry and solve all problems including political ones.

Still a sore point for brewers is hops deficit. In the last 15 years Russia has lost the greatest industry sector as hops production. Now we don’t import hops but only hop products from the other countries to the value of 250 million dollars. It seems that two crops – barley and hops can provide business with profitability and with sales area. Meanwhile agricultural producers stick at sowing wheat, at times of low quality that can’t be sold at best. To change the situation we are carrying out activities on increasing of malt proportion in beer production according to “Beijing Program”, program for renewal of hops production and also subsidy program for malting barley producers towards reimbursement of expenses for crop protection chemicals.

Evgenia Severina

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