India malt output may grow as beer demand rises

India probably will expand malt production in the next few years as international brewers shift focus toward emerging markets, Rabobank International said.

India is set to become a "regional hub" for malt production as beer demand in emerging markets is growing at twice the rate of developed markets, analyst Sudip Sinha has said in an e-mailed report. Malt, made from drying germinated barley or other grain, is an ingredient in beer. India already has the second-biggest malt production capacity in Asia, after China, and it's well-located for exporting to Southeast Asia and West Asia, Rabobank said.

"India offers several tactical advantages to global maltsters and brewers evaluating investment in malt capacity in emerging Asia," Sinha said in the report. "First, the availability of domestic crops provides access to competitive malting barley. India has an established but growing local product demand base."

Less than 40 per cent of India's barley crop is now used to make malt, "which underlines the potential to increase domestic malting barley supply," according to the report. India probably will require extra malt production capacity by 2016-17.

China's rising beer demand means the country's malt exports will probably be absorbed by domestic buyers by 2015, creating opportunities for Indian suppliers, the bank said.

Europe and North America comprise more than 60 per cent of malt production capacity of 24.5 million tonnes, while the Asia-Pacific region, the fastest-growing beer consumers, accounts for 21 percent. Indians drink about 5 liters (1.3 gallons) of beer a year, one-sixth of the global average, Francois Sonneville, a beverage analyst at Rabobank, said by phone yesterday.

"Consumption is low but there is a lot of opportunity to grow," Sonneville said.

Malting barley futures have declined 21 percent from a year earlier on NYSE Liffe in Paris. Prices have fallen in tandem with other grains globally as the US Department of Agriculture predicts world harvests of corn and wheat to rise to records this year.

The European Union is the world's largest barley producer, according to the USDA. The European Commission, the bloc's administrative arm, estimates production in the 28-country EU will be 59.4 million tonnes in the 2013-14 season that started July 1, up from 54.1 million tons in the previous year.