Barley crop can bring N$200 million boost to local farmers says Namibia Breweries

FMCG SUPPLIER NEWS

Economist.com.na - Nov 18th, 10:50

Brewing giant Namibia Breweries Ltd (NBL) says local production of malted barley and other related crops will result in a financial boost to the agricultural sector as farmers are expected to generate around N$200 million in revenue annually. 

NBL said since barley is a seasonal crop planted between May and October its production under irrigation would provide opportunities for the production of other crops such as maize, creating 2500 direct jobs while generating N$200 million in revenue to farmers. In addition, around N$30 million will go to the government coffers as VAT.

NBL said at full capacity it requires 40,000 tons of barley annually. To meet this demand, Martin Krafft the Project Manager for the barley project dubbed Project Kernel said 12,000 ha of irrigation land, an investment of N$1 billion in infrastructure, and the development of new irrigation land will be required.

So far NBL says it has invested close to N$3 million during the trials of the project. The NSX-listed company intends to set up a malting plant at a cost N$250 million as well as storage facilities that would cost N$60 million to build. The company will also invest millions to provide expertise to producers.

After successful trials in the past three years, 24 ha of land were put under irrigation for the planting of barley this year. NBL said it is looking at planting approximately 300 ha in 2014 with the ultimate goal of becoming self-sufficient, depending on economic and quality factors.

Krafft said: “The quantity that is grown and harvested locally depend on factors such as price competitiveness to the import parity price, the availability of land under irrigation that can be made available for barley crops, as well as the quality of the local barley crop. Currently our demand for irrigation land is much higher than the available land.”

Krafft said it is too early to determine how much savings will be realised as a result of the local production of barley because of the absence of a pricing structure. “We are busy developing a pricing structure. The savings that can be obtained depend on many factors such as costs to produce barley, harvesting and transport costs and so forth.

The last three years of trials have shown that the main cost drivers are electricity costs for irrigation, fuel and fertilizer costs. “Currently the import parity price is more or less the same as the local payable price. To realise savings, the process from seed to harvest has to be optimised by learning from the trials, installing adequate handling equipment and other infrastructure.

NBL is willing to drive procurement of local barley, but a price structure has to be found that is attractive to the producer and to NBL as a client that makes barley crop a feasible alternative. Krafft said local barley production will reduce exchange rate risks. He, however, cautioned that poor yield in bad seasons will increase supply risks.