Plummeting beer sales due to the COVID-19 pandemic put a cap on prices, even while those paid for feed barley skyrocket
Farmers and maltsters are not anticipating a dearth of malt barley this year despite sky-high feed barley prices.
“I always find that guys who grow malt barley tend to stick to it,” said Leroy Newman, an Alberta Barley board member.
He will not be switching to growing feed barley on his farm near Blackie, Alta., just because the prices are far better.
“You don’t want to be mixing feed barley and malt barley on your farm very often because you can get cross contamination,” said Newman.
It is a pain to have to clean equipment thoroughly when moving back and forth between feed and malt barley fields, he said.
Kevin Sich, supply chain director with Rahr Malting, said it would be short-sighted for a malt barley grower to abandon the crop after an unusual year like 2020-21 when feed barley prices eclipsed malt barley prices.
There are also crop insurance considerations because farmers can’t get insurance on malt barley if they are growing feed barley on the same farm.
Sich expects there will be plenty of barley for maltsters, the livestock sector and export markets barring drought.
He thinks Canadian barley acres will increase between five and eight percent.
“Our biggest foe at the moment in Western Canada is we’re dry out here,” said Sich.
He expects all of the additional acres will be planted to feed barley. Growers who contracted malt barley with Rahr at $5.50 per bushel last year are upset that feed barley is selling for $6 today.
He reminds them that those contracts were signed in the January through May period when feed barley prices were $4.75.
“It was a good price at that time,” said Sich.
Growers are also wondering why today’s new crop malt barley contracts are not being offered in the $6.50 to $7 range today given that they can sign new crop feed barley contracts for $6.
Sich said the demand isn’t there to justify those types of prices.
“COVID hit the beer industry hard,” he said.
He estimates that it “wiped out” about one-quarter of North America’s draft beer sales due to the loss of sporting events, concerts and reduced restaurant and bar traffic.
Rahr sells to a lot of craft brewers. Some of them don’t even have a bottling line. They dispense beer in tap rooms but many of those have been shut down.
The other big factor is the sudden emergence of White Claw Hard Seltzer beverages, which he estimates have usurped about 10 percent of beer sales.
“It has come out of nowhere and the sad thing is they don’t use any malt,” said Sich.
The low-calorie drinks are popular with young people. He has spoken to craft brewers in the United States who think the seltzer drinks “are evil” but say they may have to start making them as well to remain competitive.
Newman also expressed concern about the emergence of seltzer drinks. His kids sure seem to like them.
But despite slumping beer sales and lacklustre new crop pricing for malt barley, he is going to stick to his rotations, which includes planting 25 percent of his land to malt barley varieties.
And he will likely contract a portion of his crop to keep the maltsters happy.
“You want to always keep your foot in the door with those guys because it’s kind of a relationship,” he said.
In the meantime, he will be selling his existing malt barley stocks into the feed market. A broker is offering him $6.50 per bu. for feed barley.
He can deliver the crop in the next 30 days rather than waiting until summer to ship it as malt barley.
“I’ve got a perfectly beautiful malt barley and I’m selling it for feed because why not?” he said.