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Nation in Conversation: How Putin’s war impacts the bubbles in beer

Wars, Covid, alcohol prohibition and adverse weather conditions: All these factors lead to global demand changes. A farmer must adjust his risk to make sure he gets good yield per hectare and good prices.

This in turn causes some crops to become more popular than others – for instance canola is currently quite an attractive option compared to other crops. Russia’s invasion of Ukraine places special significance on the Western Cape’s winter crop season of 2022/23, with opportunities arising to boost domestic production, especially of barley. South Africa, like many other countries, has been hit hard by the growing crisis, which has sent the prices of grains, cooking oils, fuel and fertilizer soaring.

A five-year vision is needed to ensure that barley competes sustainably with other crops, that the supply chain works effectively and that risks are limited as far as possible while delivering good quality crops.

While good rainfall during planting bodes well, increased input costs and variable weather conditions will play a major role in determining a good season amid international shortages.

Nation in Conversation event at Nampo Cape Expo invited Manfred Venter of AB InBev, José de Kock of GrainSA, Dr Dirk Strydom of Grain SA and Johan Lusse of Overberg Agri to discuss winter grains and how to boost barley. On the far right is Theo Vorster from HUB van Galileo Capital, facilitating the discussion.
Photo: Nation in Conversation

José listed challenges since 2019: First drought – which meant high nitrogen plus water restrictions. In 2020 there was record harvest in terms of barley but lots of rain in harvest – and of course Covid. “So in 2021 we saw a build up of supplies. The last few years, from a production point of view, were challenging. Now since the risk has increased, one can see barley hectares have decreased. Canola is now value.”

Manfred explained a buyer’s point of view: “Covid, especially the alcohol ban, created lots of uncertainty for role players. The industry came together to tackle issues such as dealing with the surplus and giving producers certainty or an indication where we stand in terms of volumes we want to buy so that people can adjust business”.

Manfred Venter of AB InBev. Photo: Michel dei Cont

Johan gave an overview of the storage risk: “The product that comes in must comply with minimum standards. What makes barley different from canola? We have like 31 criteria to ensure it makes malt material. Intake is a serious business. A big issue for us is germination capacity; which is a bit of a risk. When you store for a long period, temperature and humidity are important factors. It must leave there in the same quality as it arrived”.

Dr Dirk Strydom: “The bubble in your beer is there as a result of a complex system. And in every facet of the process there is more risk. We realized we needed to reorganize. Risk in the barley industry is getting bigger. With Covid and the wars we saw there is no bigger asset than producing locally. Importing is not even on the table. We have to produce our local cultivars for our local beers. We have to look at all the risks in the industries; plot it out right through the system. It‘s become a higher risk game but, as an industry, after consulting with each other, we’ve asked AB InBev to plot the entire value chain. If independent research says here are the biggest risks… okay we’ve identified… now we make the flow right. We can do this with decent partnerships. Quality is important. We confirm that we’ll have the chain system as effective as possible to keep risk low. A few years ago we did not consult as much but in the last year and a half we started finding solutions together. I think we’re making progress but there’s still work.”

It is simply a fact that producers make sums according to alternatives on the table. Wheat and canola are lower risk alternatives. At the end of the day a producer will make his sums about what crops bring him most.

“There is a 100 percent commitment to buying local. We had to make adjustments. We compete globally and need to stay competitive so that we do not need to import. We fight for the local cultivars.” says Manfred

Barley testing AB InBev farm in Caledon. Photo:

Advice to producers: constantly evaluate opportunities and project market-related results. An example is: If your business is storage, you will not invest in a new silo when there are worries that somebody may start importing. If everybody in the value chain brings their part, one player will not need to carry all the risk. For instance if your product is not up to standard you cannot expect somebody to store it.

If you look at agriculture cold and clinical and if you look globally there will always be times that local can simply not compete. But agricultural production and quality cannot see-saw. Trust can help each other though blows. A long-term relationship and commitment will help. Risks will never disappear but with the right cultivars the industry can stay globally competitive.

Barley is well-suited to South Africa. Challenges regarding quality can be sorted out. Individuals should see the whole picture and consider all players in the industry. But the ship is generally in the direction.

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