Cover Story: Is There a Market for Ontario-grown hops and malt barley?
Tuesday, February 3, 2009
Industry experts and growers themselves express caution. But demand from local craft breweries is growing and replacing malt barley coming in from Western Canada may offer opportunities
Brian Besley cheerfully admits enjoying the occasional beer.
"I haven't yet found a really bad one," jokes the Shelburne-area dairy farmer and cash cropper, who has grown malt barley on and off for the past 10 years.
He favours a local brew. For him, local means a 20-minute drive south to Orangeville or a slightly longer trip to Creemore, both of which are home to craft breweries.
Besley isn't the only one who likes locally-brewed beer. Brew pubs, venues for sampling small batches of beer, and small breweries are popping up everywhere.
Brewers themselves are eager to buy local ingredients. "It's somewhat hypocritical to talk about the virtue of supporting your local brewery if the brewery does not support local agriculture," says Steve Beauchesne, who owns Beau's All Natural Brewing in Vankleek Hill near Ottawa with his father and some outside investors.
But, although it may sound like a good idea, finding local ingredients can be a challenge for local brewers. Ontario has no hops growers in full production. And, other than ordering from one small malting facility based in Fergus which offers some Ontario malt barley, the small, specialty brewers obtain their main ingredient from the same place as their larger counterparts do – malting facilities using mostly Western Canadian malt barley.
South of the border, farmers appear keen to meet brewers' demands, especially when it comes to hops. Attendance at a December hops growers' workshop co-ordinated by Michigan State University had to be capped at 150. "We didn't expect this much interest," offers a bemused Rob Sirrine, the university's LeeLanau County extension program director.
He anticipated 40 would sign up.
So why aren't Ontario growers answering the demand?
As he looks at fields where a significant portion of his feed corn crop still lies buried under snow, Besley wonders about growing malt barley next year. He had dropped the crop from his rotation to make room for more feed corn.
Malt barley won't offer him the types of prices corn or soybeans might. Parrish & Heimbecker (P & H), to which he has sold his malt barley in the past, offers a premium of $40-$60 per tonne above the price of feed barley, which is currently about $200 per tonne. Based on the 2007 average bushel an acre yield for "regular" barley in Ontario, that works out to $316.94 to $343.27 an acre ($5.23-$5.66 a bushel).
What it does offer him are savings on the cost of crop inputs. It's a "fairly cheap crop to grow," he says. "We'd be looking at about 150 pounds per acre of fertilizer, your seed costs and a normal 2,4-D weed spray. Generally, we will spray it with Folicure when it's coming out into head."
Although values for inputs such as fertilizer have plummeted on stock exchanges since their peak last summer, Besley isn't convinced that local prices will drop fast enough to affect the coming growing season. With crop prices also heading south, it may be time to plant malt barley. He'll decide after seeing what sort of premium P & H will be offering, due to be announced in January.
Interest rising for 2009
Steve Kell, a P & H grain merchant, says that he's fielding more inquiries from Ontario growers about malt barley for the 2009 growing season. But it doesn't have anything to do with responding to the demand for locally-produced malt barley, which he says comes from craft brewers. Instead, he attributes the rising interest to concern about the cost of inputs and a growing disillusionment with spring wheat. "I think interest has really rallied going into 2009."
Craft brewers, defined by their Ontario organization as majority Canadian-owned and producing less than 400,000 hectolitres a year, hold two to three per cent of the province's beer market. Planting a few acres of malt barley to supply a local brewery or two simply isn't enough volume to generate interest, Kell says. "If we're going to go to commercial farmers and do a malt barley program, it's not going to be based on a craft brewery."
Replacing some of the malt barley that Canada Malting Co. Ltd. acquires from Western Canada to supply its plants in the east presents a more viable opportunity for growers, he says.
Canada Malting operates plants in Thunder Bay and Montreal. Its Montreal plant, the destination of the Ontario-grown malt barley P & H buys, annually produces 80,000 tonnes of malt which ends up in breweries in Quebec, the Maritimes and along the eastern seaboard in the United States.
P & H's annual buy of Ontario-grown malt barley has averaged 2,000 tonnes in recent years. For 2009, Kell says he'd like to contract 10,000-15,000 tonnes. The motivation is transportation savings. "It's a freight play," he says. "If there's a plant in Montreal, Ontario's a lot closer than Saskatchewan."
Generating such a volume is well within Ontario growers' grasp, he says, pointing to annual provincial yields of as high as 5,000 tonnes over the past decade. Capturing a greater portion of this larger market would make it more feasible for growers to supply their local breweries. "We need the big commercial maltsters in order to create the kind of demand it takes to have an industry."
Kell grows 50 acres of malt barley on his farm near Barrie and claims that it will out-yield spring wheat. That's the appeal for growers, he says. "It's a far surer thing than milling oats or spring wheat in terms of hitting the grade."
Vulnerable to weather
Matt Letki, a sales manager with Canada Malting, is more cautious about the potential of generating large volumes of malt barley in Ontario.
The problem is the province's humid climate. "Typically, eastern barley suffers at the hands of weather more than western barley," he says. Quality varies from year to year. All barley acreage in Ontario has plummeted over the last number of years (see Figure1).
Scott Banks, emerging crops specialist with the Ontario Ministry of Agriculture, Food and Rural Affairs, agrees. Acceptance guidelines for malt barley are strict, he adds. Malt barley must be clear of any foreign material and the presence of disease. Even a tiny amount of fusarium, a form of mildew, can greatly change the beer's taste. Protein levels must be below 12.5 per cent.Larry Roche's experience growing malt barley outlines the hurdles facing growers trying to grow malt barley on a small scale. Last year, Roche, who farms in Prince Edward County, responded to his local brewery's appeal for malt barley by planting seven acres using organic practices. The year was very wet and he lost the entire crop to fusilium.
He plans to grow the crop this year but observes that it's hard to guarantee the brewery supply on such a small scale. "If I had 20 acres in, then you know some of that is going to come through."
Roche is also among a handful of growers along the north shore of Lake Erie, near Guelph, in Prince Edward County and in the Ottawa area who are responding to craft brewers' demand for hops. They are mostly small-scale and, like Roche, use organic practices.
He planned to start with 800 plants last summer, but 350 died before he could get them into the ground. He's not sure why, but suspects too much time in storage at some point during shipment.
Hops are a vine and can grow up to 20 feet. To support their growth, Roche has built trellises using 24-foot red cedar posts and a grid of quarter-inch aircraft cable strung 18 feet off the ground. He's added drip irrigation, too. "New plants require immense amounts of water, especially for the first year that they grow," he says.
Roche estimates that the cost of establishing the infrastructure for his three-quarters of an acre at $15,000 – "plus a lot of man-hours."
The plants are susceptible to powdery and downy mildew and pests such as leafhoppers, mites and aphids. As a precaution, Roche trims leaves three and a half feet to the ground to allow better air circulation. He's hoping that the strategy will help control downy mildew and, so far, it has worked.
The plants will take three years to reach full production. He estimates that they will produce 1.5 to two pounds of hops each for a total yield of 1,500 or 1,600 pounds. Right now, the price of hops is high – up to $25 per pound depending on the variety, say those in the industry, because of a worldwide shortage. But, with the recession, he doesn't expect current prices to last.
Long-term, he sees a promising opportunity in specialty or organic hops for "little niche farmers like ourselves." However, he notes that the only certified organic hops in the world come from New Zealand.
Facing many unknowns
Artje den Boer, who operates a 10-acre mixed farm in north Glengarry County, decided to grow hops after learning that nearby Beau's brewery was interested in obtaining them locally. Den Boer uses the brewery's spent grains to feed her heritage pigs and likes the idea of completing the circle by supplying the brewery with a main ingredient.
She also likes the idea of resuscitating a crop that had been grown in the area until prohibition and persistent disease wiped it out in the first part of the 1900s. The crop will diversify her operation and has potential markets beyond breweries, she says.
So far, she has planted 100 plants on about a quarter of an acre. She doesn't think the venture will be a "gold purse" and expects hops prices will drop as the shortage eases. Yet, long-term, she anticipates a "profitable return."
These Ontario growers face a lot of unknowns. So far, no one in Ontario is making money from growing hops. The only large-scale hops growers are brothers Remi and Frank Van De Slyke near Tillsonburg. Interviewed by the Toronto Star in September 2008, Remi Van De Slyke said that he has yet to see a profit on the four acres of hops planted five years ago. He declined Better Farming's request for an interview.
Rick Pedersen, who farms in the Finger Lakes region of New York State, has grown hops since 1999. He says that 2008 was the first year in which he broke even. Not only were there start-up costs to recoup, which he estimates at $10,000 US per acre (not counting the capital needed for specialized equipment). He also suffered financial setbacks early on because of poor yields due to bad weather.
"A hop actually grows fairly easily – anybody can grow one," says Pedersen. "But not anybody can grow it commercially and make money."
If considering hops, growers should look very carefully before they leap, cautions Letki. Despite high prices fostered by the shortage, those prices are beginning to drop and hops markets are limited.
Bittering and aroma are the two types of hops used in brewing. Bittering hops production drives the market and is dominated by growers in the United States, Britain and Germany. What opportunity exists for the Ontario grower lies mostly in producing aroma or organic hops for local craft brewers.
Craft breweries often use aroma hops varieties to distinguish their product recipes and Letki recommends that those planning to serve this market make sure that brewers are on side before planting.
Ron Godin, a researcher with Colorado State University specializing in sustainable agriculture, is more upbeat about the opportunity hops present. He admits that the cost of production is high, estimating it to be $4-$5 US lb, not including capital costs.
Hops sell wholesale for $15 per pound, he says. With average hop yields of 1,600-2,000 pounds per acre, there's a potential for growers to gross $24,000-$30,000 an acre.
If brewers want specific kinds of hops that are not grown a lot, it's more. "And if they want organic, it's also more expensive," he says.
Those numbers are why Godin encourages growers in his state to consider hops production. "If you do the calculations, it's possible for growers to make quite a bit of money." There are also ways around having to acquire expensive, specialized equipment. He uses the example of converting an old apple sorter to pick hops.
Ontario's relatively small proportion of craft brewers raises questions about the size of the demand for locally grown hops and how quickly growers could flood the market. At Beau's brewery, for example, projected output for 2008 was 2,000 hectolitres (the equivalent of 560,000 12 fluid-ounce glasses of beer). That translates into an annual demand of about 440 kilograms of hops, the yield of a bit more than half an acre of hops in full production.
Don't be fooled by the craft brewers' small percentage of market share, says John Hay, president of the Ontario Craft Brewers. In 2007, craft brewers delivered the equivalent of five to 7.57 million 12-fluid-ounce glasses of beer. He estimates that the craft brewers' market share is growing at a rate of 10 per cent a year and predicts it will continue to do so over the next few years. Demand for brands introduced in sales outlets such as the Liquor Control Board of Ontario show an even greater rate of growth – somewhere around 30 per cent, he estimates.
And there may also exist a possibility of larger-scale brewers looking closer to home for their hops supply. Labatt Breweries of Canada spokesperson Brad Hagan says his company would consider buying from local hops growers, "assuming the quality and the variety is there."
But it would depend on the amount of hops grown, he says, pointing out that it takes years for the plants to reach full production. "It just doesn't happen overnight, we'll see." BF
Sidebar: Malt barley – a crop best suited ‘to the fringes of the cornbelt'
Brian Besley started growing malt barley after touring a small malting facility in nearby Tottenham with his marketing club (the facility has since closed). "All their malt barley was coming in from the West," Besley recalls. "One of the older guys (in the club) said ‘you know we used to grow malt here in Ontario.' That kind of got the wheels going."
For the past 10 years, he has added malt barley on and off to the crop rotation on the 1,000 acres he farms. He usually reserves half of the 150 acres he allocates to barley production for malt and describes the crop as "one more option that you've got and in a lot of cases it is a good option."
Yield is about 85 to 95 per cent of other barley varieties.
As long as the crop is accepted for malting, which earns the price premium, that shouldn't pose a problem. As feed it's expensive, he says.
Yields tend to be "pretty constant," he says. "You don't get the yield jumps that you can in beans and corn." Prices also don't fluctuate much.
However, the crop doesn't require a lot of inputs and in years when the price of these is high, it can be competitive to grow, he says. "One of the neat things about growing malt barley is it's the top class you can grow for barley. If it makes malt barley, then that's the most money you're going to get for your barley."
If it doesn't make malt barley, growers can see if it meets distillers' barley specifications or those for pearling barley "and if it doesn't make any of those, you can always move it into feed barley."
Steve Kell, says the crop is best suited to "the fringes of the corn belt." BF