Farm truths hidden in barley to beer trade
PremiumIn the winter of 2019, Chamkor Singh, a well-to-do farmer from Sri Ganganagar in Rajasthan, fell for the words of a local trader and commission agent
In the winter of 2019, Chamkor Singh, a well-to-do farmer from Sri Ganganagar in Rajasthan, fell for the words of a local trader and commission agent. That year, Singh decided to bet big on malt barley, a cereal that is used to manufacture beer. After all, Singh was promised a bonus of ₹100 over and above the minimum support price (MSP). The high returns prompted him to take over 30 acres of land on lease. Four months later, his hopes came crashing down.
Instead of the promised ₹1,625 per quintal, Singh sold his harvest to the same agent at a discount of ₹300. It was a take it or leave it offer. Singh did not know who the actual buyer was, nor did he have any means to enforce the contract, which was verbal. The only evidence he had was a receipt for the seeds that he had purchased from the agent for planting.
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Months later, he reacted in a way farmers often do—by slashing the area under barley to less than a fifth of the previous year’s acreage. That was the winter of 2020. A similar strategy was adopted by hundreds of other farmers in Rajasthan, a leading grower of barley, prompting prices to shoot up to ₹1,800 per quintal in April this year.
This roller-coaster ride is common to barley, a commercial grain that is used as an animal feed and also to manufacture high-value items like beer, whiskey and health drinks. Farmers in India grow less than 2 million tonnes of barley in a year—compared to say over 100 million tonnes of wheat. But the vagaries of this minor cereal, in a nutshell, capture a glaring market failure—the inability of commercial buyers to guarantee remunerative prices to growers, or even the semblance of a will to nurture a long-term relationship.
In a way, it also goes to show why farmers have such deep distrust toward markets. Growers from the desert state of Rajasthan would rather stick to wheat—which consumes more water and fertiliser—than plant barley. The main reason: wheat prices are steady due to assured government purchases. So, farmers sow barley only on land which is severely water-starved and where a crop like wheat is impossible to grow—a phenomenon best described as a Hobson’s choice: apparently a free choice, but one without any real alternative.
Last September, India passed three new laws to liberalize agriculture markets, introduce contract farming and amend the decades-old Essential Commodities Act in order to incentivise post-harvest storage and processing. The objective was to wean farmers away from cereals like rice and wheat, where assured minimum support prices distort cropping patterns. On paper, the new laws made sense: Why not align cropping patterns with market demand?
However, the lived experience of farmers is somewhat different. Commercial farming catering to the market—be it cotton, soybean or barley—is dependent on both domestic and international supply-demand dynamics, which often results in unstable prices and returns. And too many Indians who don’t have the financial muscle to withstand such risks are still deeply dependant on agriculture for sustenance. This is nowhere more evident than in the barley fields of Rajasthan.
For an industrial grain like barley, price fluctuations are so recurrent that even quality-conscious large malt companies desist from writing formal contracts with farmers. Come harvest season, if the wholesale prices crash, the manufacturers will incur a loss; if market prices shoot up beyond the contracted price, farmers can renege too, they fear. This is one reason why thousands of farmers who are protesting at Delhi’s doorstep are sceptical about market solutions.
Losing currency
Where Kulwinder Singh sat in his living room, a giant framed photograph of the Sikh religious shrine, the Golden Temple with its sacred pool, made for an arresting backdrop. “If we get water on time, we would not be growing barley at all," said the 65-year-old farmer from a village named 14Q at Ganganagar. The villages in these parts are named after the outlets of an irrigation network that was built way back in the 1920s by Maharaja Ganga Singh of Bikaner, following a devastating famine.
Singh explained that while the wheat crop needs five irrigations in a growing season, barley can thrive with less than half that volume of water. Wheat yields a little over 10 quintals per bigha (0.6 acre) and barley, about 8-9 quintals. Also, wheat sells for more than ₹1,900 per quintal while barley prices fluctuate between ₹1,000-1,500 per quintal—making the later a risky proposition on all counts. So, for local farmers like Singh, the importance of barley has receded into the realm of tradition: having the occasional bejar ki roti—nutritious flatbreads made out of barley and chickpea flour.
Harman Brar, Singh’s son, who set aside a prestigious management degree in order to take up citrus farming at 14Q noted that the highways leading into Ganganagar are lined with state-of-the-art warehouses but farmers mostly do not have the means to store their grains or to time their sales according to price surges.
“Large commodity trading companies, local traders and commission agents dictate prices. We usually have no option but to dump at whatever price is offered since the grain is prone to damage due to pests and moisture," Brar said.
Brar’s friend at village 2T, a young farmer named Jitender Pal Singh, was visibly frustrated at the mention of barley. Juban ke pakke he hum (We never go back on our words), Singh said citing the instance of the 2020 harvest when he was promised a price of ₹1,625 per quintal for growing seed-grade barley by an agent, but was forced to sell at ₹1,150 per quintal. “We don’t even know which company we are selling it to. Maybe it is Shaw Wallace or United Breweries (liquor manufacturers) or some seed company. But what I understand is that they don’t buy our harvest. They buy our compulsion."
The problem with barley is that large buyers like United Breweries often push farmers to grow more and then disappear when the market prices crash (as was the case in 2020 when the first wave of the pandemic hit India), said Swarn Singh, manager of a local cooperative society. “Most companies do not want to invest in a long-term relationship with farmers. They are guided by short-term profits, which is why they do not enter into formal contracts. The remoteness of Ganganagar where there are no malt units adds to our problem," he said.
Even when farmers decide to grow barley, they prefer to sow low-value feed varieties and not high-value malt ones which are expensive to grow and require more care and irrigation. So, 73-year-old Devi Lal Saharan’s only connection to malt barley is the whiskey he sips on some evenings. “I can’t stand beer for it has got no current," Saharan jokes. He planted a desi (local) variety which is used to make animal feed in 2020; his third year of staying away from malt varieties.
Quality concerns
When I met him last month at the Ganganagar mandi, Gurcharan Singh, a young farmer and trader, had just returned from the farmer’s protest site at Delhi’s border after a month of volunteering with the international charity KhalsaAid. “When there is a shortage, the companies buy even feed varieties for malting (as long as a certain weight per thousand grains parameter is met). But in surplus years, they create tantrums and refuse to lift the harvest by raising quality concerns," Singh said.
Overall, corporate purchase of malt barley hovers around 300,000 tonnes every year, close to 20% of India’s barley production.
Singh added that once the new farm laws are implemented—they have been stayed by the Supreme Court for now—and state-regulated mandis weaken (due to zero taxes on trade outside government established wholesale markets), farmers will be left with no choice but to sell their produce to corporations at whatever price is offered.
United Breweries Ltd, the largest beer manufacturer in India which procures barley from the farmers of Sri Ganganagar, did not respond to queries from Mint.
Water plus taxes
Barley is a unique agricultural commodity where the price of the produce, alongside other factors, is also driven by taxation. The industry joke is that beer is nothing but water plus taxes (to be sure, barley accounts for about 70% of input costs), said Unupom Kausik, president at National Collateral Management Services Ltd, a leading player in the post-harvest commodity value chain.
“Beer sales were disastrous last year due to the pandemic, which was bound to impact farm gate prices... but then, beer consumption in India is dismal as consumers prefer hard liquor (which has higher alcohol content) over beer as a value-for-money proposition," Kausik adds.
Indians, on average, drink about two litres of beer in a year, compared to the over 30 litre per capita consumption in Europe and China.
According to Vikram Chitlangia, a Ganganagar-based trader who engages farmers to grow seed-grade barley, instability in demand and usage often leads to price fluctuations. For instance, over 80% of India’s barley production is used to manufacture animal feed. Since crops like soybean, maize and sorghum are also used as animal feed, barley prices are often determined by supply-demand dynamics in these competing crops.
Along with prices and acreage under cultivation, barley production fluctuates too: from 1.44 million tonnes in 2015-16 to a high of 1.78 million tonnes in 2017-18, which subsequently fell to 1.72 million tonnes in 2019-20. To make up for the shortfall, India often ends up importing up to a quarter of its domestic demand.
“For better price realisation for farmers, we need to invest in improved varieties. Malt varieties which farmers are growing are at least a decade old, while non-malt feed varieties are three decades old," Chitlangia added.
India needs to crack varietal research in barley keeping in mind its agro-climatic diversity, concurs Punit Gupta, country director at TechnoServe, which works closely with farmers to help them access better technologies and practices. “International brewers prefer two-row barley varieties, where yields are usually lower. The malt varieties which farmers are pushed to grow do not make economic sense," Gupta added.
However, some have found a solution in the interim. “The focus of our work with farmers has been to get the desired quality and purchase at an assured price," said Ashwin Kak, procurement and sustainability head for India and South-East Asia at Anheuser-Busch InBev, the world’s largest brewer. According to Kak, the company has partnered with over 800 farmers in Haryana and Rajasthan to source quality barley for its premium brands. Ab InBev supplies farmers with seeds and growing instructions and its field staff monitor barley fields at regular intervals. This has encouraged a new breed of farmers to gradually move away from wheat and take up barley cultivation.
Mukesh Chauhan, 30, a small farmer from Gurugram district of Haryana is among them. In his second year of barley cultivation, Chauhan converted half of his six acres to grow a malt variety, prompted by assured prices and lower input costs compared to wheat. Last month, Chauhan sold his harvest at ₹1,750 per quintal, a significant premium over the government announced MSP of ₹1,600 per quintal. “Gradually, I want to convert most of my land into barley, leaving just enough to grow wheat for home consumption," Chauhan said.
While it is true that per capita beer consumption in India is low compared to other markets, another way to look at the situation is the potential for future growth, Kak said. “In recent years, many new brands have been launched in India. There are new flavour variants; smaller brands have come up with a regional focus. The future looks bright, which is why we are focusing on long-term sustainable partnerships with growers."
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