Malt, one of beer’s four main ingredients, is made from dried, germinated cereal grains. Barley, the most common grain used for malt, must be of high quality and able to germinate evenly and rapidly. Malt barley is grown across the world, however the bulk of production lies in Europe
Barley production has fluctuated around 59,900,000 metric tons, with occasional outliers. It can be hard to forecast each year’s production, as it depends on the weather conditions. Production has been increasing the past three years.
In the U.S., many craft breweries struggle with barley supply shortages. Europe remains the largest exporter of barley, however it can be difficult to access. Most of the barley is already under contract for a set price, and there isn’t much extra supply. Most U.S. malts are developed for American lagers, so craft breweries are looking to increase barley production in America. A new high-yielding barley variety has been developed and brought in from Europe to the U.S. that should benefit the craft brewing industry. The new variety, “Genie,” has already performed well in Pacific Northwest trials and 120 acres have been planted. Limagrain, the company who bred the variety, hopes to move up to several thousand acres of malt production in the next year. It will be interesting to see if this new variety of barley allows craft breweries to further increase their scale.
Sources:
http://www.capitalpress.com/Profit/20150702/european-barley-variety-shows-promise-for-craft-beers
http://www.indexmundi.com/agriculture/?country=eu&commodity=barley&graph=production
http://www.euromalt.be
4 Comments
If the United State can begin to produce barley on a large scale it would give the craft brewers the ability to purchase at a lower price. The higher the global supply grows and the harder it is for demand to reach equilibrium will lead to a correction in market price and will certainly give breweries a higher profit margin, in the case that they are not directly invested in the production of this barley.
What kinds of geographic areas in the U.S. can grow this barley? Is only the Northwest a suitable climate for barley, or can we expand the areas in which we can plant it. This would definitely help alleviate the problems of Europe having a majority share of the barley if we could expand agricultural operations of this new strand called “Genie”.
We read in the Ogle book about 19th century R&D that led to the varieties produced in the US, specific as noted to lagers. What then is the strategic issue? Do you as a barley farmer (or farmer who could grow barley) want to switch from a mainstream variety to a niche one that may be much more volatile in price. To spell that out more carefully, a few more farms planting it, or a shift in lager vs other beer sales, could make a big percentage difference in supply/demand, respectively, and if the elasticities aren’t favorable, you could face very low or very high prices. So if you’re risk averse, and farmers tend to be for good reason, then you might want multiyear contracts to switch from one barley cultivar to another.
There have been recent discussions that the merger of SAB Miller and AB InBev will do damage to the developing beer market in America. Lawmakers fear that the merger will form a monopoly that will further centralize the industry, and hinder the growth of craft breweries. Their fear is that economies of scale will allow for the largest beer company in America to obtain wheat, barley, and aluminum at unfair prices. What are your thoughts on this issue?
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