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South African barley concern

I read a really interesting article today about barley production in South Africa. It seems growers are up in arms. This article is by Shem Oirere.

South Africa has for many decades recorded a deficit in its barley production volumes in spite of government projections of an increase in area under production by 16.2percent to 106,150ha.

Narrowing the barley production deficit in South Africa would require not only an increase in the acreage under the crop but also improvement in the quality of the produce to ensure more sales to the country’s new beer brewing monopoly Belgian-based multinational beverage and brewing holdings company Anheuser-Busch InBev (AB InBev).

Apart from the unpredictable weather in key barley growing areas of Northern Cape, Southern Cape and North West Province, which has in recent times devastated cereal crops in South Africa, concerns have also been raised by the country’s grain producers on the likely impact on production of a review of the barley pricing structure by AB InBev after its recent completion of the acquisition of SABMiller.

The concerns became more pronounced in May 2018 when the barley farmers raised the alarm over possible adverse impact of AB InBev’s proposal to review the nine-year-old barley pricing structure that has been tied to the wheat futures at the Johannesburg Stock Exchange (JSE).

Before the merger with SABMiller in South Africa, AB InBev was supplying beer products such as Corona Extra, Stella Artois, Beck’s Blue and Budweiser brands largely imported and distributed via DGB (Pty) Ltd (DGB), a global distributor of alcoholic products.

SABMiller on the other hand was in the period preceding the merger active in South Africa market as the largest producer of beer products trading under brand names such as Carling  Black  Label, Castle  Large,  Hansa, Castle  Light  and Peroni.

A revised pricing structure for the 2008 barley crop according to Pretoria-based Grain SA, a non-profit organisation that champions interests of grain producers of South Africa, would result in farmers earning less than initially projected.

The grain farmers’ lobby has sought for the intervention of South Africa’s Competition Commission after AB InBev the new pricing structure would result in barley growers being paid 97 percent of the price for top grade wheat (B1) for the 2008 crop from 102 percent of second tier wheat (B2).

SABMiller had in 2009 linked the price of malting barley to the wheat futures price at the South African Futures Exchange (Safex), a futures exchange subsidiary of Johannesburg Stock Exchange Limited exposing the barley producers to a huge price risk.

Who would have thought barley could have such a key role in SA?