As spring sunshine warms the fields, Konen, 65, and other barley farmers worry tariffs will take away crucial export markets and increase the cost to grow the grains, even as sinking U.S. beer consumption has slashed demand for barley.

Why it matters: Reciprocal tariffs from Canada and Mexico may raise costs and limit export opportunities for U.S. barley growers, at a time when beer demand is also falling. 

“Down here on the farm we’re already stretched pretty thin financially,” said Konen, who is also vice president of the National Barley Growers Association. “It makes us wonder whether or not we can even stay in business.”

Roughly half of Konen’s barley is destined for Mexico, where it will be turned into beer. Some will be shipped back to the U.S. in bottles of Modelo, Corona and Pacifico.

Mexico is the third largest importer of U.S. barley and the biggest importer of U.S. malt, made from germinating kernels of barley and a key ingredient in beer. If Mexico issues tariffs in retaliation or switches to buying barley from other trading partners, experts say it could deal another economic blow to American farmers as U.S. consumers increasingly ditch beer.

Tariffs may decimate U.S. malt barley exports to Canada

Canada, the largest importer of U.S. malt barley, issued tariffs against U.S. barley and other agricultural goods that went into effect on March 4. Frayne Olson, crop economist at North Dakota State University, said farmers are worried that tariffs could decimate U.S. barley exports to Canada.

U.S. President Donald Trump has said his back-and-forth tariffs against major trading partners are intended to curb the flow of illegal drugs and migrants into the U.S., and has downplayed the market impacts for U.S. companies and consumers.

“The people who pay for tariffs are the farmers,” said barley farmer Steve Sheffels, vice president of the Montana Grain Growers Association. “We grow way more barley than we can possibly consume, so if those markets go away, then farmers are going to be competing for a much more limited number of buyers.”

Costs for fertilizer, which is mostly sourced from Canada, will rise with tariffs. Prices for imported crop chemicals from China have already risen because of tariffs that took effect on February 4.

“There’s a sinking feeling and a feeling of dread that things are bad, and things are going to stay bad for a while,” Sheffels said. “We are scared almost to death about tariffs.”

Beer consumption slowly declining

Beer consumption in the U.S. has been sliding and in 2024 it hit its lowest level in over 40 years as more Americans chose other alcoholic beverages, said Bart Watson, chief economist at the Brewers Association. Recently, hard seltzer drinks and canned cocktails have posed particularly bruising competition to beer.

Others are giving up alcohol altogether. Gen Z-ers and millennials are drinking less than most previous generations, according to a 2024 Gallup poll. In January, former U.S. Surgeon General Vivek Murthy called for cancer warnings on alcoholic drinks. Multiple high-profile studies have stated no amount of alcohol is safe to drink.

Watson believes major beer companies such as Anheuser-Busch, maker of Bud Light and Michelob Ultra, may keep prices steady to preserve market share and maintain sales volume. Craft breweries may be less able to absorb higher costs and are likely to raise prices, he said.

The 25 per cent tariffs the White House has slapped on metals will likely hike the costs brewers pay for kegs and cans, which are often made from steel and aluminum imported from Canada.

The price of a bottle of Corona or Modelo, both produced in Mexico, may be more likely to spike if U.S. malt is subject to tariffs by Mexico as it heads south and the finished beer is slapped with tariffs again as it is shipped north.

“Breweries are going to have to choose to pass this along or choose to eat it,” Watson said. “It will have an impact.”

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“I think barley is something producers should always consider in their crop rotations,” the Centre’s managing director Peter Watts suggested.

“There are some advantages to growing barley. It’s an early maturing crop. It can be a week earlier than other crops. In terms of timing at harvest you can spread that out if you get your barley off early and follow with your wheat and canola,” Watts added.

He also noted input costs for barley are relatively low as farmers need to limit the amount of nitrogen, they apply in order to keep protein levels below 13 per cent.

“You can sell malting barley into the feed sector, but you can’t sell feed barley into the malting sector,” Watts explained, citing there’s often a premium associated with barley selected for malting. The Centre’s website that premium can be C$1 per bushel.

In the latest supply and demand estimates from Agriculture and Agri-Food Canada released on Jan. 20, the preliminary forecast for barley production in 2024/25 was pegged at 9.28 million tonnes, up from the nearly 8.90 million harvested in 2023/24.

For food and industrial use of barley, AAFC held its estimate for 2024/25 at the previous year’s 319,000 tonnes, while feed, waste and dockage was bumped up from 5.59 million tonnes to 5.95 million. As well, the carryover was nudged up from 750,000 tonnes to a projected 800,000.

As prices for canola and wheat have been getting hit hard in the markets lately, Western Canadian cash prices for malt barley have been unchanged for the last month, according to Prairie Ag Hotwire.

In Manitoba, the price stood firm at C$5.25/bu., while in Saskatchewan the crop fetched C$6.50 to 6.80, and it was C$6.50 in Alberta.

— Glen Hallick reports for MarketsFarm from Winnipeg. 

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Total barley production across the Prairies was down by 10 per cent on the year, at 8.707 million tonnes, according to the CGC. Average barley yields were placed at 61.3 bushels per acre in Western Canada, which was down from 70.5 bu./ac. the previous year and the 10-year average of 66.4 bu./ac.

AAC Synergy was the most popular malting barley variety seeded in Western Canada, while the area seeded with CDC Copeland continued to decline. The popularity of newer varieties, such as AAC Connect, CDC Fraser and CDC Churchill, increased noticeably, according to the CGC.

The malting barley was generally of good quality, with average protein levels steady on the year at 12.3 per cent. That compares with the 10-year average of 11.9 per cent.

The average test weight was 65.0 kg/hL, which was lower than the previous year’s average (66.7 kg/hL) and the 10-year average (66.9 kg/hL). The average 1,000 kernel weight was 46.8g, which is higher than last year’s average (45.0g) and the 10-year average (45.7g).

The newer varieties, such as AAC Connect, AAC Synergy, CDC Fraser and CDC Churchill that have kernels larger than AC Metcalfe and CDC Copeland, contributed to the overall high average kernel weight.

Soil moisture and precipitation were lacking in many areas through the growing season but a stretch of relatively cooler temperatures during a portion of July helped relieve some crop stress, as did haze from wildfire smoke, according to the report. Harvest operations started relatively early in August, as crop development was ahead of normal across a good portion of the Prairies due to the hot and dry conditions throughout much of the season. Occasional rain in August did lead to some sprouting and prevented the harvest from being completed in a timely manner.

— Phil Franz-Warkentin is an associate editor/analyst with MarketsFarm in Winnipeg.

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United Malt Group, whose Canadian assets operate under the Canada Malting banner, last month locked in on a previously announced deal to sell itself to France’s Malteries Soufflet for A$1.5 billion (C$1.3 billion).

Sydney, Australia-based United Malt and Soufflet reported Aug. 7 they now have written confirmation from Canada’s Commissioner of Competition that the office “does not intend to make an application” to challenge the transaction.

Thus, United Malt said, the condition for Canadian regulatory approval “will be satisfied” if the commissioner’s notice isn’t reversed by Aug. 23.

United Malt reported separately Monday that it and Soufflet now also have confirmation from the United Kingdom’s Competition and Markets Authority (CMA) that the CMA has “no further questions in respect of the proposed transaction.”

Much like the “no-action letter” Canadian regulators provide in such cases, “no further questions” is the CMA’s standard response when the authority doesn’t intent to mount a public inquiry into the deal, United Malt said.

The world’s fourth largest commercial maltster, United Malt makes bulk malt for brewers, craft brewers, distillers and food companies and has 12 processing plants in Canada, the U.S., Australia and the U.K., with combined malting capacity of about 1.26 million tonnes. It had been owned by Australia’s GrainCorp since 2009 and was spun off in 2020.

United Malt’s Calgary-based Canada Malting unit, which alone produces about 400,000 tonnes of malt per year, includes malting plants at Calgary, Montreal and Thunder Bay, nine country elevators in the Prairie provinces, and Country Malt facilities at Delta, B.C., Brampton and Calgary.

Soufflet, which has 28 malt houses in Europe, Asia, Africa and Latin America with combined production capacity of 2.36 million tonnes per year, has been an arm of French agribusiness InVivo since last year. InVivo has previously said it plans to be the world’s top malt firm within five years. — Glacier FarmMedia Network

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Anglia Maltings operates seven malt facilities in the U.K., Poland, and Germany, with combined production capacity of 440,000 metric tonnes.

Privately-owned Richardson, which has operated since 1857, has been interested for 20 years in entering the malting business, but never found the right opportunity until now, CEO Curt Vossen said.

The deal fits Richardson’s strategy of processing the crops it buys from farmers, ranging from canola crushing and canola oil bottling to milling durum and oats, Vossen said.

“Now that we’re a food processor as well as an agricultural company, malting serves a fundamental purpose, it’s a natural fit,” he said in an interview.

Vossen said Richardson will buy European barley for its malting facilities.

He said Richardson will take time to understand the specifics of malting before deciding whether to expand the business.

The deal follows an announcement last week by French agribusiness InVivo of an agreement to acquire Australia-based United Malt in a $1 billion deal to create the world’s largest malt producer.

That deal, to be handled through InVivo’s Malteries Soufflet arm, was first proposed in March but now has approval from United Malt’s board of directors. Approvals from United Malt shareholders and regulators are still pending.

Among United Malt’s other assets in the U.S., Australia and the U.K., that deal would give Soufflet control of Calgary-based Canada Malting, which alone produces about 400,000 tonnes of malt per year.

Winnipeg-based Richardson, which employs over 3,000 people worldwide, handles and processes grain and oilseed crops. In 2021, it acquired Italgrani USA, North America’s largest durum wheat miller.

— Reporting for Reuters by Gus Trompiz in Paris and Rod Nickel in Winnipeg.

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“Producers have made their [planting] decisions for the most part. You might see people adjust their plans a little bit based on some of the fluctuations we are seeing in the market right now,” he said.

Agriculture and Agri-Food Canada (AAFC), in its March 2023 report, pegged the amount of barley to go into the ground this year at around 7.4 million acres. That would make for a 5.2 per cent increase over what was planted in 2022.

Of note, Statistics Canada is scheduled to issue its planted acre projections on April 26.

While malt barley prices are rather steady at this time, Watt pointed to the volatility in commodity futures, noting the recent sharp drop in canola prices and the upticks in wheat.

“Barley prices remain relatively firm in Western Canada. That would still encourage farmers to keep barley in their rotations,” Watt said.

Over the last month, malt barley prices have remained steady for the most part, according to Prairie Ag Hotwire. Old-crop in Saskatchewan continued to sit at $8.10 per bushel delivered, with Alberta at $8.40. In Manitoba, the price slipped back $1.50 at $6.90/bu.

New-crop bids stood at $7.30-$7.70/bu. delivered in Saskatchewan and $7.40 in Alberta. Prices for Manitoba were $6.40-$6.90/bu.

— Glen Hallick reports for MarketsFarm from Winnipeg.

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Wheat “is not pulling barley prices with it, as far as we can see on our end,” Moric said, noting that a lack of demand has kept prices stable.

“Some of these malting companies are getting coverage locally. Based on the feedback we have been getting from the farmers, even with their local companies, there simply isn’t as much demand as there used to be,” he added.

Moric said a few days will go by in between dealing with barley and those farmers willing to part with it have been selling less volume.

Moric pointed to old-crop barley in particular to highlight the lack of demand, with a small gap between it and new-crop.

Old-crop barley, he said, was going for $8.50 to $9 per bushel picked up as of Monday, — the same range as on Friday.

Meanwhile, he said new-crop barley was fetching $7.50-$8/bushel on Monday, down from $8-$8.75 from the previous Friday.

— Glen Hallick reports for MarketsFarm from Winnipeg.

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Feed barley is trading in the $4-$4.95 per bushel area in Alberta, according to Prairie Ag Hotwire data. Prices top out at just over $4 per bushel in Manitoba and Saskatchewan.

Feed bids typically see some strength in the spring, as farmers turn their attention to spring seeding and away from delivering grain. Spring road bans that hamper logistics can also lend some support.

However, a large amount of spring-harvested grain will soon be looking for a home across the Prairies, and the anticipation of those deliveries should be limiting nearby demand.

Large carryout supplies and expectations for increased Canadian barley acres in 2020 are another limiting factor.

In addition, declining beer demand, as bars and sporting events shut down due to the COVID-19 coronavirus pandemic, may cause some malt barley to move into feed channels instead.

A number of brewers and distillers have already shifted some production capabilities away from making beverages and are making hand sanitizer in an effort to help fight the virus.

— Phil Franz-Warkentin writes for MarketsFarm from Winnipeg.

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Malt prices in 2018 were driven about 15 per cent higher due to a global shortage. According to Farmlink, drought conditions caused Australia to produce “one of the smallest barley crops in recent memory.” The crops were 18 per cent smaller than the previous growing season, and 25 per cent below the five-year average.

Canadian barley prices saw a boost at the end of 2018 due to these tightened global supplies, and prices have remained strong throughout 2019, said Geoff Backman, manager of business development and markets for Alberta Barley.

While attractive 2018 prices boosted 2019 acreage, some believe the approximately seven million acres of malt and feed barley reported by Statistics Canada may not come to fruition due to nationwide lack of seed.

“Some are saying it would have been larger if more seed could be found,” Backman said. “Some are saying it’s overstated because there wasn’t enough seed available.”

Statistics Canada reported 2019 total acreage to be approximately one million acres more than what was planted in 2018.

“We’re still waiting to see if those numbers develop. We do expect an increase, we’re just not sure of the size.”

Prices for malt barley have been between $5 and $5.50 per bushel.

— Marlo Glass writes for MarketsFarm, a Glacier FarmMedia division specializing in grain and commodity market analysis and reporting.

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“All indications suggest we’ll see an increase in malt barley, as well as feed,” confirmed Peter Watts of the Canadian Malting Barley Technical Centre.

In light of China’s consummate ban of Canadian canola, some worry other commodities will be treated similarly. However, there aren’t yet any indications that that is the case for malt barley.

According to Statistics Canada, China’s demand for barley and malt is expected to increase steadily due to China’s lower grain production due to urbanization and limited farmland.

“It’s impossible to predict what will happen but there aren’t any indications that Canadian malt barley will be shunned to the same extent as Canadian canola,” he said.

Though China has a history of importing the majority of its barley and malt from Australia, Canadian-grown malt is steadily increasing its market share.

Australia grew 60 per cent of China’s imported barley in 2016, while Canada accounted for 20 per cent. However, given Australia’s inclement weather in recent years, Canada has gained some of the market share in China.

“Australia had a severe drought which curtailed their production significantly,” Watts said. “If they return to normal crop levels they’ll be back competitive on the global market.

“Malt barley production depends heavily on harvest conditions, particularly weather, so we’ll have to wait and see what sort of supplies there are.”

Aside from increased acreage, Watts hopes to see diversity in varieties of malt barley.

“As an industry, we’re looking to transition to new varieties,” said Watts. CDC Copeland and AC Metcalfe have dominated the industry for almost 20 years.

“We expect AC Metcalfe acreage to decline as new varieties increase,” he added.

“We’re looking for these varieties to be produced in more substantial quantities and become a mainstay in commercial systems in Canada and abroad.”

— Marlo Glass writes for MarketsFarm, a Glacier FarmMedia division specializing in grain and commodity market analysis and reporting.

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