30 Nov Indiana Craft Brewing and the Barley Crop of 2018
Malted barley is one of the four crucial ingredients for making beer. Just for the sake of clarity – pastry is not one of the other three (water, yeast, and hops). Just as for any agricultural product, man is at the whim of Mother Nature when growing and bringing in the crop. Sub-optimal weather can ruin a crop, and it doesn’t have to be a growing season’s worth of bad weather, it could just be too much or too little rain at a crucial point in time.
In the United States, the barley crop is small compared to other grains. From 2008-2012, the US averaged about 205 million bushels of barley a year; that’s a lot of barley, but with 3 billion bushels of soybeans or 25 billion bushels of corn a year on average, it “pales” in comparison. Most of the US crop comes from North Dakota, Montana, Washington, and Idaho – places that are a bit drier and don’t get the blistering summer heat.
You might then guess that barley doesn’t grow extremely well in Indiana; it’s too hot, too humid, and too wet here. Some years bring a decent harvest for those few Midwest acres in the state planted with barley, but other years are disasters. Caleb Michalke and Sugar Creek Malt Co. does the malting of barley for beer, but they also grow some barley, both on the Michalke family farm and at farming partners in different parts of Indiana, Kentucky, and Ohio. If the weather is too hot, too wet, or too humid in one area, they will still be able to get high quality barley for malting from the other farms. It must be nerve racking to be a farmer.
The late 2017 growing season in Canada was warm and dry, and they had their best harvest ever last year. In 2018, the yields from previous years led to more acres being planted (chance to make more money) but the growing season wasn’t as good. Therefore, the harvest was basically flat (8 million tons in 2018 vs. 7.9 million tons in 2017), and without the increased acres the harvest would been decreased by about 9.1%. What’s more, the late wet weather reduced the amount of starch in the grain, making it of lower quality for malting. According to a Bloomberg article from Nov. 13th, prices in Canada have already risen 12%, and could go up another 9%.
Canada is one of the world’ leading exporters of barley, so the flat harvest along with poor harvest in Australia and Europe has resulted in a 35 year low for barley stockpiles. This could mean that there will be less malted barley for brewers – that means the price might go up. In order to prevent beer prices from spiking downstream, craft brewers will need to take less profit, and margins are thin on beer to begin with, especially since craft brewers use 4x the malt/beer as mega-brewers. To offset this, brewers may try to become more efficient in their brewing, but who in their right mind has been purposefully inefficient up to this point?
Because the yields have been so high recently in the US, fewer acres are being planted for the next crop, according to a report by Farm & Ranch Guide. Nationally, acreage is expected to be down about 8%, with larger or smaller changes seen from state to state. North Dakota, for example, is scheduled to plant 23% fewer acres for the next growing season. It remains to be seen if the recent flattening of production will affect that plan. Barley contracts and choices made for accepting barley for malting complicate the process for deciding on what the market might look like in the next year.
Bloomberg and Fortune reports recently have raised concerns amongst drinkers and brewers, but an even more recent report from VinePair says that it might not be so bad. The article from Cat Wolinski includes some quotes and reflections from Bart Watson, chief Economist for Brewers Association, saying that increased prices are a concern, but not a large concern for craft brewing as a whole. Small brewers don’t contract for malt, so their costs might rise with respect to malting barley, but the regional and national breweries won’t see much change according to Watson.
I have to say, that doesn’t make me feel much better, since the vast majority of beer that Walter and I drink is from small to very small breweries. And we haven’t even talked about what the barley crop might mean for craft distilleries. Bryan Smith, distiller for Hard Truth Distilling at Hard Truth Hills in Nashville told me, “Typically for a whiskey distillery making mainly bourbon or rye, barley makes up around 5-15% of the mash bill. It’s a small amount, though depending on the scale of the operation, it can be significant if prices fluctuate greatly. At Hard Truth, we don’t have grain contracts through the distillery here, so I just deal with price fluctuations. I am seeing an increased interest in the US craft distilling industry toward malt whiskeys which can be composed 100% of barley. This is most likely a result of craft breweries adding distilling operations and brewers know barley and like to use it to make interesting whiskeys.” Therefore, more distilleries than before will be affected by poor barley harvests, and even more may be affected in the future.
The conclusions to be drawn here are few, but they include the idea that more barley is going to be needed in the future, while at the same time, the foibles of how much to plant and how the weather will affect the growth and harvest makes it hard to match supply with demand. Therefore, there is always going to be variations in the price and those breweries/distilleries that make enough beer/spirits to buy barley by the silo will be able to handle those fluctuations much better. My best solution, we all get behind Sugar Creek Malt Co. and make Indiana a barley capital – and then none of it gets to leave the state.
banner image credit: Craft Brewing Business