Global Trends in Malting Barley, Malt and Beer Crop Sphere 2016

Peter Watts Managing Director Canadian Malting Barley Technical Centre January 12, 2016

Premier Global Malt Barley Supplier • Canada is one of the word’s largest producers and exporters of malting barley • Recognized for high quality and world class value chain: breeding, production, execution, after sales service • Investments in breeding, agronomic research ensure Canada is the premier supplier to the global market

• Industry is adjusting to the post CWB era • In future malting barley be competitive, transition to new varieties, focus on market development and new opportunities

Select Barley Producers – 2015 - Mln tonnes -

70 60

59.8

50 40

32.5

30 20 10

8.2

8.2 4.7

3.4

US

Argentina

1.5

0 EU

FSU

Source: USDA/Statistics Canada

Australia

Canada

China

Major Crops in Canada 2015 - mln tonnes 25 22.2

20

17.2

15

13.5

10 8.2 5.9

5.7

5

5.4 3.3

0 Wheat

Canola

Source: Statistics Canada

Corn

Barley

Soybeans

Pulses

Durum

Oats

Barley production/seeded area in W Canada 2006-2015 13,000

6,000

12,000

11,000 4,000 10,000

9,000

3,000

8,000 2,000

7,000 1,000 6,000

5,000 2006

2007

2008

2009

2010

Production

Source: Statistics Canada

2011

2012

2013

Area Seeded

2014

0 2015

hectares (000's)

Tonnes (000's)

5,000

Barley production in W Canada Seeded Area

Production

(thousands of hectares)

(thousands of tonnes)

2015

2014

2005-2014 average

2015

2014

2005-2014 average

Manitoba

155

132

259

486

141

750

Saskatchewan

971

789

1,274

2,787

2,105

3,353

Alberta2

1,400

1,354

1,626

3,927

4,181

4,779

Western Canada

2,527

2,275

3,160

7,600

6,700

9,192

Malting barley

1,354

1.178

54%

52%

Percent MB

Source: Statistics Canada

Malting barley area in W Canada - thousand hectares 4,000

3,500

3,000

2,500

2,000

1,500

1,000

500

0 2002

Source: CGC

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Source: CGC

Distribution of barley by class in W Canada 70.0

60.0

50.0

40.0

30.0

20.0

10.0

0.0 2002

2003

2004

2005

2006

Two rowed Malting % Source: CGC

2007

2008

2009

Six Rowed Malting %

2010

2011

2012

2013

Feed & Hulless %

2014

Seeded acres of malting barley cultivars (as a % of total area seeded to malting barley)

Two-rowed cultivars

1

Six-rowed cultivars

2015

2014

2015

2014

AC Metcalfe

38.1

38.9

Legacy

3.2

4.4

CDC Copeland

35.0

29.8

Celebration

1.3

1.1

CDC Meredith

5.2

9.8

Tradition

0.9

1.3

Newdale

5.2

5.7

Stander

0.3

Bentley

3.3

2.4

CDC Yorkton

0.2

0.3

CDC Kindersley

1.7

0.9

Robust

0.2

0.3

CDC PolarStar

1.4

2.0

Stellar ND

0.2

0.5

AAC Synergy

0.8

0.2

Lacey

0.1

0.3

Merit 57

0.7

0.6

Major

0.4

0.8

Merit

0.2

Harrington

0.2

0.3

CDC Kendall

0.1

0.1

Source: Sask Crop Insurance, Alberta Ag Financial Services Corp, & Manitoba Management Plus Program

Typical global malting barley S&D - tonnes Malting Barley Export Supply

Malting Barley Import Demand

Canada

1,000,000

China

Australia

1,750,000

Other Asia

200,000

EU

1,000,000

USA

400,000

US

100,000

L America

800,000

Argentina

300,000

Africa

150,000

Uruguay

100,000

Other

200,000

Other

100,000

4,350,000

Source: CMBTC

2,600,000

4,350,000

Canada Malting Barley Exports 2014-15 (tonnes) 600,000

500,000

502,350 433,864

400,000

300,000

200,000

100,000 45,000 14,600

0

China Source: Statistics Canada/CMBTC

United States

Colombia

Ecuador

Global malt demand Global beer production (bln hl) 2.5

2.0

16 million tonnes of malt or 20 million tonnes of malting barley

1.5

1.0

0.5

0.0 Global beer production

Source: CMBTC

Global Malt Trade - Tonnes 5,400,000 5,200,000 5,000,000 4,800,000 4,600,000 4,400,000

4,200,000 4,000,000 2007/08

Source: E-Malt

2008/09

2009/10

2010/11

2011/12

2012/13

2013/14

2014/15

Global Malt Exporters (2012-13) - Tonnes 2,500,000

2,274,856

2,000,000

1,500,000

762,508.00

1,000,000

671,000

668,117

643,519

500,000

-

EU

Source: E-Malt

Australia

Canada

Argentina

Other

Canadian Malt Exports - tonnes 800,000 700,000

600,000 500,000

400,000 300,000

200,000 100,000

0 2007/08

Source: Statistics Canada

2008/09

2009/10

2010/11

2011/12

2012/13

2013/14

Canadian Malt Exports - Kilograms 350,000,000

300,000,000

250,000,000

200,000,000

150,000,000

100,000,000

50,000,000

0 2009

2010

US

Source: Statistics Canada

Japan

2011

Mexico

2012

S Korea

2013

S Africa

*Forecast

2014*

Global Beer Trends • Global beer production rising in Asia, Africa and Latin America

• China, world’s largest beer producer and malting barley importer, slower growth but shift to mid-premium beer • Consolidation (ABInBev/SAB Miller) contrasted with diversification in the market (expansion of craft brewing)

• Adjunct vs craft brewing – different needs • Growing global demand for malt, and therefore malting barley

World Beer Production

50% in 15 years

- mln hl 2.00

1.93 1.82 1.82

1.96 1.97 1.96

1.85

1.75

1.48

1.50 1.31 1.25

1.00

0.75

0.50

0.25

0.00 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Source: E-Malt

China Beer Production

186% in 15 years

- mln hl 550 507 490

500

490

492

448

450

424 410 393

400 352 350 306

291

300 254 250 220

227

236

205 200

173

150

100

50

0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: E-Malt

U.S. Passes 4,000 Breweries September 28, 2015

US Craft brewing industry Four Craft Beer Industry Market Segments 1. Brewpubs 2. Microbreweries

3. Regional craft breweries 4. Contract brewing companies.

Source: US Brewers Association

Additional US Malt Usage due to craft industry mln brls beer

lbs malt use in malt/brl lbs

malt use in tonnes

Craft

21.77 13%

55.0

1,197,350,000

544,250 34%

Non craft

145.9 87%

16.2

2,360,147,059

1,072,794 66%

Total

167.7 100%

If all non craft

167.7

1,617,044 100%

16.2

2,716,740,000

Additional Usage

Source: CMBTC

1,234,880

382,162 29%

Quality requirement by different barley users Barley user

Asian

North & South America

Craft malting & brewing

Availability

Barley quality Larger quantity Larger quantity

Local barley

Storability

> one crop year

>one crop year

Vary

Protein

11.5-12.5%

11.5-12.5%

95%

>95%

>95%

Malt quality 6-7days

Process duration

6-7 days

Vary

Extract yield

>79 or >80 High as possible

>79 or >80 High as possible

Not as critical, Prefer high

Enzymes

Medium-high (100-140/120->140)

Medium to high (100-140/120->140)

Low-medium (100-120)

Soluble protein

> 5.0

> 5.0

< 5.0

FAN

>200

>200

< 200

Beta-Glucan

Variable, 135 Max.

Variable, 135 Max.

As low as possible

Quality requirement by different barley users Barley user

Asian

North & South America

Craft malting & brewing

Brewing quality Conversion time