Will barley play a role in NAFTA re-negotiations? It’s a question being asked more as there is high demand for U.S. malt barley in Mexico from the increasing number of microbreweries.
Barley mainly dominates cropland in the Western United States and Western Canada, but a processing facility recently opened up in the mid-Atlantic states. This could help farmers on the east coast start planting more barley as their cereal crop rotation option, instead of wheat.
As we know, there has been an increase of investment in breweries, especially those of the craft nature! In 2009, there were 1,596 craft breweries in the U.S., and in 2016 there were 5,234!
Now to be fair, the facility will require about 10,000 – 15,000 acres of malt barley to support their intended output of 25,000 metric tonnes of malt each year. Farmers in the east have been mainly double-cropping wheat with soybeans, but it is an easy shift from winter wheat to winter barley and with increasing demand, malt barley could be a profitable choice moving forward.
The bigger question is if there is an increase in demand across North America, is malt barley becoming a more important line item in the NAFTA renegotiations?
As we reported back in November, Mexico is the 4th largest producer of beer and the top exporter. AB InBev will be opening a new plant in within the next year in March 2019, that will produce 320 million gallons of beer per year. This requires a demand for 300,000 metric tonnes of malt barley. AB InBev will be looking to U.S. producers for that demand.
Looking back to January, 80% of Mexico’s craft breweries import malt from the U.S. But before NAFTA was signed in 1993, Mexico’s import taxes on malt barley were as high as 175%!
Thus, as re-negotiations continue to drag on, the possibility of these taxes returning could hurt the brewery industry in Mexico, but also US malt barley producers. The trickle-down is that there is more US malt barley supplies, which means less Canadian malt barley gets shipped into the US.
Another scenario might be that Mexico start to import malt barley from somewhere else. Canada is the most logical option (but that’s entirely speculative). With heightened trade risk though because NAFTA and another trade spats (i.e. China and the US), supply chain risk for these large beer companies is becoming a real concern.