(Corrects statement about AB InBev malting barley shipments in sixth paragraph in story that first ran June 18.)
Syngenta AG (SYNN), the world’s largest maker of crop chemicals, said an agreement to help bolster the supply of barley to beermaker AB InBev NV will be a template for future deals with food and drinks companies.
Syngenta is providing seeds, chemical treatments and agronomic advice to 160 farmers in Argentina to increase supplies of malting barley used for InBev’s beer brands, which include Budweiser, Corona and Stella Artois beer, according to the companies. Stocks are low in the region, which has rising demand for beer, as farmers traditionally favor other crops. The 14,000-hectare (34,600-acre) first phase could be ramped up to 100,000 hectares over three years, about 2 percent of the current global planting.
“This is the first time that we had a really big deal, multiterritory, with a big company in a high-profile way,” Syngenta Chief Operating Officer John Atkin said in a phone interview today. “As food production spreads, as demand grows in emerging markets, this will become more and more important.”
Partnerships will help Chief Executive Officer Mike Mack show that a strategy to combine seeds and crop chemical portfolios unveiled three years ago is bearing fruit. Last year, Basel, Switzerland-based Syngenta sales growth of 3.4 percent lagged the 10 percent growth at competitor Monsanto and the 5.2 percent at Bayer AG (BAYN)’s Crop Science unit.
Malting barley is a profitable niche in Syngenta’s $1.8 billion portfolio of cereals including wheat and barley that accounted for about 12 percent of 2013 sales.
For AB Inbev, the deal ensures a supply of high-quality grain which meets exacting standards for beer production, Karen Couck, a spokeswoman for the Leuven, Belgium-based company said. The pact cuts the risk of the product deteriorating during long-distance transport, Atkin said.
AB InBev’s suppliers account for more than one-fifth of the 5 million hectares or so of malting barley planted globally. The crop is traditionally grown in Western Europe, where Syngenta has 40 percent market share of malting barley seeds. Along with crop chemicals, the market is worth about $600 million globally, according to Syngenta.
Barley of various types is grown on about 55 million hectares worldwide, often as part of crop rotations in between more cash-generative wheat, the world’s most widely produced cereal crop. Animal feed is the number one use for protein-rich barley, with about 10 percent of total barley production used for beer.
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