Is there a barley surplus? Anheuser-Busch/Miller Coors dramatically cut back malt barley contracts

Around 75 percent of the barley grown in the United States is produced in Idaho, Minnesota, Montana, North Dakota and Washington. It’s an essential brewing commodity, and over the last few years farmers have been aggressively growing more barley for brewers, distillers, food, feed and even pharmaceuticals. Maybe they’ve been too aggressive — at least for brewers — because it seems like there might be a surplus on the market.

It’s been said that malting barley is a risky crop for farmers to grow. It’s also been said that there would be a constant request for barley due to the increasing popularity of craft beers. But check this quote from The Great Falls Tribune.

“Everything that I’ve been told is that there is just a lot of good quality malt barley in the bin already,” said Collin Watters, bureau chief for the Montana Wheat and Barley Committee. “We had a good crop in 2015, followed by a bumper crop in 2016. The brewers are looking at their balance sheets saying, ‘We’ve got a lot of grain on our hands,’ and if everything goes as normal this year they won’t need much more.”

That article is about how Anheuser-Busch and Miller Coors are slashing contracts for malt barley this year — big time. Officials from the same Montana Wheat and Barley Committee confirmed that the number and size of production contracts being offered by the two brewers has been reduced anywhere from 20 to 60 percent, according to the article (that’s a pretty big range, but you get the idea — too much!).

It reminds us of this story we read in November of last year where excess Idaho barley was being sold for grain instead of malt and at half the price. Idaho grain companies were begrudgingly blending barley into cattle rations because of surplus production, being unable to sell to the major malting companies.

According to this article on the Capital Press (a damn fine pub):

Idaho growers raised more than 62 million bushels of quality malt barley this season [2016], up 10 percent from the prior year, according to the Idaho Barley Commission.

IBC has been working with existing buyers, Mexican beer manufacturers and Latin American growth markets to move as much of the surplus as possible, and encouraged growers with storage to be patient while options are explored. Grain buyers Scoular and Lansing Trade Group vow they’ll find a home in feeding channels for unwanted malt — and many growers without sufficient grain storage have already taken them up on their offer, selling at about half the malt value.

Growers have reported malting companies have been hesitant to buy surplus production beyond contract volumes — even of the best malt — and have also indicated their intentions to contract for about 15 percent less acreage next season.

Barley had been a bright spot on the agricultural landscape of late — especially with declining wheat prices — but that might soon change. According to The Great Falls Tribune:

In 2013, the crop hit record prices, with Montana’s barley growers cashing in on nearly $273 million in sales that year. That encouraged more production, pushing supply beyond demand; an economic cycle well known to the nation’s farmers and ranchers.