The sharp distinction between malt and feed barley is starting to get a little muddy on the Prairies, with a third class of barley expected to create more opportunities for farmers under the new open market.

Traditionally, about 20 per cent of the barley grown in Western Canada in any given year would hit the malt specifications, and everything else would be relegated to the feed market. However, increasing demand for lower-quality malt barley from China and other countries, along with the looming end of the Canadian Wheat Board's single-desk approach to marketing the crop, should open the door for a new class of barley.

Often referred to as "fair average quality," this is malt barley that may not meet the top-end specs, but can still be used to make beer.

"It's always been a black and white scenario, where you either have malt or you have feed," said barley broker Rod Green of Central Ag Marketing at Airdrie, Alta., noting that the concern over not meeting malt specifications has hurt barley acres.

While malt barley is a profitable cropping option in Western Canada, he noted, feed barley does not pencil out as well. As a result, the possibility of premiums for lower-quality malt barley, that would have gone to feed channels in the past, will allow farmers to have more confidence when seeding.

In order to be sold as "fair average quality" malt barley, the germination still needs to be 95 per cent, but other factors, such as protein levels, are not as important, said Green.

He could not speculate on the potential price opportunities, but said the market for "fair average quality" barley will likely fall somewhere between feed and malt values.

Different companies will have different specs, he said. "If you fall within those specs you'll get a certain price, and if you fall into the next area you'll get a certain price, and eventually you'll get feed."

"Not as discriminating"

Grain companies and maltsters in Western Canada are already working toward having a "fair average quality" class of barley, as the Chinese market has been buying lower-quality malt barley from Australia for several years, said Green.

The looming end of the CWB single desk at the start of the 2012-13 crop year on Aug. 1 is helping speed up the move toward more "fair average quality" barley, said Green. Additional players in the export market, he noted, will mean those demand niches that may have been overlooked by the CWB in the past will now be filled by the commercial trade.

"Australia recognized there was a market for 'fair average quality' medium-range malt quality barley five years ago," said Warner, Alta. farmer Brian Otto, president of the Western Barley Growers Association.

Malt companies in China and other areas, he said, were "not as discriminating for quality as malt plants in North America or Europe."

Canadian barley is recognized for its quality in the world market, said Otto, but the additional market for lower-quality malt barley will help create additional revenue for producers.

While it may not happen overnight, he estimated that the "fair average quality" malt barley would allow the amount of the Canadian crop accepted for malting to increase by at least a million tonnes, from the current average of 2.1 million tonnes.

Annual Canadian barley production (both malt and feed) has declined in recent years, with only about 7.7 million tonnes grown in 2011-12. Otto predicted that number could increase back to the 12 million-tonne level under an open market, as the lack of the CWB single desk and increased competition will allow international market signals to find their way back to the farm in a more transparent manner.

Demand for special varieties from craft brewers and the declining U.S. barley area will also create need for more barley acres, he added.

"More eyes are better for specialty markets," added Errol Anderson of ProMarket Communications in Calgary, noting that the increased competition in the malt market will be beneficial for barley growers.