As beer loses ground to hard seltzer, U.S. barley farmers struggle By Reuters

By Heather Schlitz

SHARON, North Dakota (Reuters) – Don Nygaard, a third-generation farmer in a remote corner of North Dakota, used to grow malting barley for Rahr Malting Corporation to turn into lagers, pale ales and IPAs .

But this year, he hasn’t received lucrative contracts from Minnesota’s Rahr or any brewer, so his sprawling farm is growing food-grade barley and wheat, both crops whose prices are near four-year lows.

As overall U.S. beer consumption falls to its lowest level since the 1970s, according to data from the Brewers Association, the plains states of the U.S. are facing a glut of barley. Americans are buying less beer and frequenting fewer craft breweries that use even more malt per drink.

The explosive popularity of hard seltzer and lower alcohol consumption in general has led to a decline in demand for barley from brewers. Many years of excellent barley crops have further depressed prices and eliminated a once-high-value option in a year when farmers struggle to achieve any harvest, farmers, agronomists and brewing industry experts said.

“I’m concerned about the trends that are happening,” Nygaard said. “This winter is going to be tough for all of us trying to figure out what payments we can make.”

Rahr, which has a barley procurement facility in Taft, North Dakota, did not respond to a request for comment.

The latest US crop report showed that the number of hectares planted with barley fell 22% compared to a year ago. In North Dakota, the No. 1 producing state. 2 behind Idaho, acres have nearly halved from a year ago. Barley shipments that farmers have in storage on farms are up 51 percent from last year and are the most since 2010, according to the U.S. Department of Agriculture.

Prices for U.S. malting barley, which farmers arrange before planting, were around $7 a bushel last year and below $5 a bushel this year, depending on location, farmers said.

“Losing one of your tools for profit is huge. Farmers are absolutely concerned,” said Frayne Olson, crop economist at North Dakota State University. “The vast majority of what they grow goes into the malting industry, so drinking beer makes a big difference.”

Major brewers, including the world’s biggest brewer Anheuser-Busch InBev, have reduced the number of U.S. barley contracts offered because of an oversupply of the crop, said Mitch Konen, vice president of the National Barley Growers Association.

Asked for comment, a spokesman for AB InBev, the maker of Budweiser and Michelob ULTRA, said the company has been dedicated to American farmers for more than 165 years.

“As the nation’s brewer and America’s producer, we source $700 million of the highest quality ingredients from more than 700 partner brewers each year,” the spokesperson said. AB InBev did not respond to questions about specific acquisitions this year or changing beer consumption trends.

THE BIGGEST LOSER

Strong fruit-flavored seltzers, ready-to-drink cocktails and cannabis-infused drinks have been cutting into beer’s market share for years. From baseball games to booze-fueled college frat parties, White Claw seltzers are almost as ubiquitous as Bud Lights. White Claw is marketed in the US as grain-free, although products may contain grains such as barley in some locations.

Many of the most popular hard seltzer brands, including Truly, High Noon, Bud Light Seltzer, and White Claw are made without barley and use fermented sugar, vodka, or tequila to provide the alcohol. Some seltzers, such as Vizzy, and non-alcoholic beers continue to be based on malted barley.

“Beer is the biggest loser,” said Bart Watson, chief economist at the Brewers Association. “There’s so much competition from products that didn’t exist 50 years ago.”

Unlike major barley exporters in the European Union and Australia, American beer drinkers end up consuming most of the malted barley produced in the US

Even in rural North Dakota, ads for hard seltzer are plastered across billboards and abound in small-town bars. Major malting plants, where barley grains are turned into the keystone for beer, are signing fewer contracts with farmers as demand from breweries falls, farmers and economists said.

High interest rates and inflated costs of pesticides and equipment, in addition to poor crop prices, have farmers worried about their ability to repay the loans that allowed them to plant their crops.

“It’s going to be one of those years where it’s going to be tough to grow a commodity,” said Steve Sheffels, a fourth-generation barley and wheat farmer. “Hopefully I’ll grow enough to cover my costs.”

NERVOUS

A once-booming craft beer industry has declined, with microbrewery closures outpacing openings for the first time in 2023, according to the Brewers Association. Craft beer requires about four to five times as much malt as mass-produced beer, further reducing the demand for barley, Sheffels said.

Kaj Peterson, chief maltster at Maltwerks, said his Minnesota malting plant has nearly halved its barley purchases compared to five years ago as demand from the state’s craft breweries declines.

“It hit our bottom line,” Peterson said. “We’re starting to feel the pushback from the breweries – they’re reducing production. It’s disturbing.”

As the explosive growth of breweries has slowed, the remaining companies have had to diversify their offerings to excite customers, said Mark Bjornstad, owner of Drekker Brewing Company in Fargo, North Dakota.

His airy brewpub is perfumed with a citrusy scent from the bar’s IPA, which the company offers along with alcoholic smoothies and non-alcoholic beers they’ve added to boost business.

“Customers are very demanding,” he said.

In addition to strong competition from alternative drinks, the beer industry faces another challenge: young people are consuming less alcohol than any previous generation.

A growing “sober curious” movement, embraced by millennials and Gen-Zers and fueled by social media, has led drinkers to reevaluate their relationship with alcohol and sometimes choose to abstain.

While healthier choices and more creative drink options have benefited customers, they have shaken the foundations of Farmers’ business.

“I’m 67, so I’ve had my fair share of beer as a kid. Now there are other luxury drinks that don’t need malt,” Nygaard said.