China: 2005 malting barley imports of China, the world's biggest beer producer, are likely to recover to at least 2 million tonnes, up from 1.71 million tonnes last year and 1.36 million in 2003, industry officials and traders said, with stocks running low after years of low imports after droughts in producing centres drive up prices. They commented China is stepping up purchases of malting barley despite high prices as its brewers prepare for the peak summer beer-drinking season, according to Reuters.

Chinese breweries have learned to keep use of costly malting barley to a minimum, using rice and other grains in some cases to keep costs down, but they are nearing the limit, officials said. "There's only so much you can do," said an official at one of China's biggest maltsters. "They don't want to buy expensive barley, but they have to to bring it (beer quality) up to a certain standard." Another industry official agreed: "This year, they don't have any carry-over. They have to import enough barley in order to meet demand, maybe two million tonnes or more. Beer production is increasing."

Fierce competition in the Chinese beer market, keeps retail prices as low as 12 U.S. cents for a bottle. Companies like Tsingtao Brewery and Kingway Brewery operate in a market that has grown by 7-10 % a year in recent years. The industry has attracted a flood of overseas investment in the past few years, with top U.S. beermaker Anheuser-Busch Cos. Inc raising its stake last week in Tsingtao, the country'sa number one brewer.

The maltster official said Chinese breweries were squeezing about 10 tonnes of beer from a tonne of malt, up from 7-7.5 tonnes in the past.

Preliminary customs data showed China's malting barley imports jumped 69.2 percent to 620,000 tonnes in the first quarter. It was more than double of 309,991 tonnes in the fourth quarter last year.

"A growing number of Chinese breweries are paying attention to the quality of barley as they try to develop medium and high-quality products," the China Daily quoted Jean-Jacques Vorimore, president of France Export Cereals, as saying. "A stable supply of high-quality is where France excels," Vorimore told an industry conference in Dalian last month.

In addition to malting barley from Australia and Canada, traditionally the top suppliers to China, the traders said China had booked at least 150,000 tonnes from France so far this year in the first sign that imports from Europe might increase. It had no imports from France last year. Of the 2004 total, 1.27 million tonnes came from Australia, 431,179 tonnes from Canada and 3,224 tonnes from Belgium.

Though barley prices are still high at about $210-$215 a tonne, including costs and freights, against 2004 prices of $180-$195, high-quality French quality barley would also help offset a poorer standard from Australia this season, they said.

France had a chance to boost its sales to 300,000 tonnes or more this year as droughts limited also the quantity from Australia to 600,000-700,000 tonnes, compared with 1-1.5 million tonnes in a normal year, they said. Were it not for the high freight rates and the weak dollar against the euro, they would have placed orders for French malting barley much earlier, they added.

The traders and industry officials said Chinese 2005 domestic output of malting barley was unlikely to increase much from about 1.1 million tonnes last year, despite some price increases in domestic malting barley. Though Beijing has supported farmers to grow more grains in the past two years, it excluded malting barley from the promotion, they added. "Barley is only an industrial material. People can live without beer," a trader at a major Chinese trading house said.

The Chinese Brewery Industry Association said domestic beer production stood at 29.45 million tonnes in 2004, up from 25.40 million tonnes in 2003.

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