Global barley marketing issues. John Stuart 25 February 2013

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Clarence Hardy
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1 Global barley marketing issues John Stuart 25 February 2013

2 Key messages to think about 1. Do you have the right product for the right market? 2. Are all businesses in your supply chain profitable? 3. How do you generate repeat business and sustainable demand for your barley? How does this fit into global marketing issues?

3 Opportunities: 1. Canadian market deregulation. 2. China needs 2+million tonnes of barley and still growing. 3. Growing beer demand in some areas / declining beer demand in others. 4. Major beer companies dominating in some areas, but not in others. i. Maltsters are constantly watching this. 5. A growing world corn crop at the expense of barley plantings.

4 Challenges: 1. Growing Argentinian barley crop, that may now decline? 2. A more dominant Russian/Ukraine barley crop. 3. Barley demand changes in the Middle East, Asia and Australia. 4. End Point Royalty collections/support of breeding and development. 5. Quarantine country restrictions implemented with little notice. i. (Eg: China quarantine on canola blackleg, Korea quarantine requiring square-holed screening of barley).

5 WE JUST HAVE TO PLAN OUR WAY ACROSS TURBULENT WATERS A LITTLE BETTER

6 Malting Barley Markets 50% China 65% Export Malting Barley Processed Malt 15% Japan/Other Total 88% Exported 35% Domestic 23% Asian Brewers 12% Domestic Brewers 6

7 Capacity

8 As the major malt exporter, the French malting industry generally sets the price benchmark Competitive Drivers Barley price Exchange rate Risk Management Freight costs

9 Main barley production areas Comparative productions over three seasons Canada U.S.A. EU - 27 RUK Argentina Africa & Middle East Australia

10 Barley Global 12/13 production (vs 11/12) Canada 5% EU % Nth American drought Russia/Ukraine 21% Argentina 14% Quality issues % weathering Australia 13%

11 Usd/mt Australian barley prices $450 $400 $350 $300 $250 $200 $150 $100 $50 $0 Malting Barley FOB Usd/mt Feed Barley FOB Usd/mt

12 BULK SHIP FREIGHT DEMAND DRYBULK SEABORNE TRADE 5,000 4,000 3,000 2,000 1, Mill. dwt (Red Line) Other Steel product Grain Steam coal Met coal Iron ore Data courtesy The Baltic Exchange and Clarkson s Research

13 Mill dwt NET FLEET CHANGE an oversupply of ships 03 FLEET DEVELOPMENT Mill dwt Deliveries Scrapping Net fleet (right) Data courtesy The Baltic Exchange and Clarkson s Research

14 Global Beer Demand Evolution 5% 5% 6% 6% 7% 20% 28% 35% 37% 40% TOTAL AFRICA/MIDDLE EAST 36% TOTAL ASIA/PACIFIC 34% TOTAL AMERICA 30% 30% 29% TOTAL EUROPE 39% 33% 29% 27% 25% F 2015F 2020F Source: Plato Logic

15 Beer Consumption China beer consumption per head/population

16 World s 4 largest brewers Producing approx 45% of the world s beers est. production in billion gallons AbInbev / Modelo 10.8 SAB Miller 6.2 Heineken 4.4 Carlsberg 3.1

17 $80 $70 $60 $50 $40 $30 GrainCorp Boortmalt Cargill Soufflet Malteurop Supertime Rusky Solod COFCO Vitterra Rahr Global Malt $20 $10 $- Maltsters SAB Miller 17

18 1. The right product for the right market? What does a malting barley buyer look for? I. Germination vigour II. I. (test weight, falling number, weathering) Variety (domestic or export brewing) III. Moisture (impacts germination shelf-life) IV. Protein (contractual, impacts brewing) V. Grain Size (contractual, impacts brewing)

19 What is your target market? Export Barley Market Middle East feed barley China Malting Barley Domestic Barley Market Feed barley Domestic Maltsters Australian brewers Asian brewers

20 A standard China malting barley contract - specification shipment terms Variety: Gairdner or Buloke or Baudin Moisture: 12.0% max Varietal Purity: 95 % min Protein (N2 X 6.25 dry matter basis): 9.5% min 11.5 max Germination: 95% min Barley retained above a 2.5mm long-holed sieve: 85% min Barley passing through a 2.2mm long-holed sieve: 3% max 1000 Kernel Weight: 40 grams min. Test Weight: 68 kg/hl min. Foreign Material: 1% max. Independent Superintendence analysis and certificates issued after shipment Arbitration under GAFTA London, terms and conditions

21 2. Are all businesses in your supply chain profitable? Without these, supply chain profitability falls. I. Germination vigour II. I. (test weight, falling number, weathering) Variety (domestic or export brewing) III. Moisture (impacts germination shelf-life) IV. Protein (contractual, impacts brewing) V. Grain Size (contractual, impacts brewing)

22 Steeping Malting Process Germination Kilning 22

23 Barley What s in it 23 Grain respires as we do

24 24 Barley Endosperm starch granules, protein deposits, encased in cell walls

25 Typical Malt Analyses Parameter Baudin WA Gairdner Specification Export Moisture % max Fine Extract d.b.% min Total Protein d.b.% Kolbach Index % Diastase WK min Viscosity mpa.sec max Wort Beta Glucan mg/l max FAN mg/l min

26 Extract - $$ to a brewery and demand for a specific barley variety

27 3. How do you generate repeat business and sustainable demand for your barley? I. Germination vigour II. I. (test weight, falling number, weathering) Variety (domestic or export brewing) III. Moisture (impacts germination shelf-life) IV. Protein (contractual, impacts brewing) V. Grain Size (contractual, impacts brewing)

28 Australia s common / popular barleys Main production areas and market demand Go to: for the full list Market Demand Production (Australian States) Variety Export Domestic Brewing Brewing VIC NSW SA QLD WA Gairdner High High X X X X X Baudin High Low X X X X Buloke High Low X X X X Commander Low High X X X Flagship Medium Low X X Flagship High Low X Vlamingh Medium Low X Bass X Navigator X X X

29 Questions? Contact:

CBH 2015/16 QUALITY REPORT

CBH 2015/16 QUALITY REPORT CBH GROUP Our business OUR CUSTOMERS Flour millers, Maltsters Feed manufacturers Food processors OUR GROWERS 4500 members 10 million tonnes production average Largest Co-op in