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Soggy Barley and Why It Is a Problem

barleyOn Wednesday I got a couple of media calls asking me about the problem of “soggy barley”. (You can watch the CBC-Edmonton interview here – it starts at 18:59). At first I wasn’t sure what they were referring to, but once they explained it was the issue of a poor malting barley crop due to heavy rains (get it? Soggy barley?), I knew what they were talking about.

I have been following this a little bit over the past few weeks. The issue is this: heavy rains in western Canada (as well as Europe) have undermined the quality of the malting barley crop this year, leading to speculation that malt prices will increase, leading inevitably to increased beer prices.

It is all true. The wet conditions have been hard on the barley. Moist conditions lead to a breakdown of key starches and sugars found in barley. This is not a huge problem for feed barley but for higher quality malting barley, it can make it unusable by the maltsters. In short, it means a smaller crop, which leads to a tighter supply of malt for brewers.

Which, ultimately, leads to price increases. Malt is the largest ingredient in beer (except for water), meaning there is no avoiding the cost increase. We don’t know how bad the increase will be, but a couple of brewers have told me it could be as much as 25 to 50 cents per six-pack (although I kind of think that might be high).

As these things inevitably play out, the big boys will be less affected than your favourite local craft brewer. Not only do corporate breweries arrange contracts years in advance to guarantee supply and price stability, they also use up to 40% corn or rice as adjuncts, which reduces their exposure to barley price increases.

For your neighbourhood craft brewery, however, there is no buffer. They generally work on the spot market – taking whatever price is on offer – and their all-barley beer depend heavily on the righteous grain.

That said, we shouldn’t overreact. It is just one cost input. There are lots of things that shape the price of beer – taxes, the value of the dollar, wages, energy costs – the list goes on and on. It seems clear there will be a price increase as a result. We don’t yet know how much, and it will be a fairly equal hit across all craft brewers, meaning it won’t distort the market. But there will be an increase in beer, at least in the short term.

So brace yourselves, dear beer drinker. That barley always comes at a price and this year it will be a bit higher.

7 comments to Soggy Barley and Why It Is a Problem

  • dave

    Correct me if I’m wrong, but pretty sure wet grain also leads to a higher risk of DON (Deoxynivalenol or Vomitoxin as it is more commonly known).

    Crops infected with Vomitoxin and used in brewing will also lead to gushing beer, as the bi-products survive the malting and brewing process.

  • IF the farmers got to the barley fast enough then there may not be as bad as a issue. Yes Sask and Alberta did get a lot of rain, but Manitoba didn’t from what I have seen, so there is still a good crop there that they can use.

    No matter what it feels like people are TRYING to make excuses to up the prices of beer “The barley is too wet” “To many tornados took out our crops” etc.

    I know we have some pretty nasty weather, but we also had a bumper crop this year meaning that we do have ways of keeping it ok and safe and actually drying it out so that it isnt too “soggy”.

    The Farmers out there dont want their crops to be bad either so they push themselves to see that it doesnt lead to soggy anything… lets hope they did salvage a bunch before all of this.

    • beerguy

      I agree, let’s hope much of it got harvested in time, but I have spoken with a couple of barley farmers who said the rain really screwed up their timing – at least in Alberta. So, I think it is a real issue, at least to some degree.

  • I turned this over to my trusty spreadsheet and see that a 50% increase in the cost of two row pale malt (I only took the time to change that one malt, since it is the backbone of most craft beers) results in a drop in gross margin of 11 cents per litre, or about 23 cents a six pack (for a typical one of our brands). A 50% increase in malt prices sounds pretty darn large to me, and I realize that everybody’s costs may be different – but this is a bit of concrete perspective.

    Of course, a 23 cent increase in wholesale pricing of a six pack (to cover the lost margin) will get marked up by GST and by a retailer markup, so could quite easily be 25 to 30% higher than that, or in the 30 cent per six pack area.

    So, depending on the amount of grain in a recipe, and the magnitude of any increase in malted barley costs, I would say that the 25 to 50 cent per six pack figure is probably pretty accurate.

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