As craft beer struggles amid pandemic, so do barley farmers and malthouses

With much of the country under stay-at-home orders, the craft beer sector has seen a steep decline in sales. The consequences of the Covid-19 pandemic could be existential not only for this newly robust market and its thousands of employees but also for the malthouses and barley farmers whose ingredients are the building blocks of beer.

Michelle Jones has grown barley on her farm in south-central Montana for malt production since 2014. But recently, she says, her local malthouse cut her and many of her neighbors’ barley contracts by 50 percent because of declining craft beer sales and the resulting drop in demand for craft malt.

Because Jones hadn’t yet seeded her barley, she was able to quickly change plans and plant spring wheat instead. But the wheat will bring in less revenue. And her future barley crops could be affected if breweries continue to struggle.

“We’re pretty sensitive in our part of this industry to what the craft brewers are doing,” she says.

It’s easy to assume that with many Americans drinking more at home, sales of craft beer would be up. But an analysis by the Brewers Association, a trade group for independent brewers, said that most of its members have seen their sales drop by at least 70 percent, in large part because of bar and restaurant closures. And a survey conducted by the organization found that most of its members estimated their breweries couldn’t last more than three months under current public health regulations.

The size of the craft beer sector has been ticking upward in recent years. In 2019, a record 8,000 breweries were operating around the country. The industry grew 4 percent last year, and now represents more than 13 percent of the overall beer market.

The growing craft beer industry has also presented a new opportunity for barley production in some states, a small boon to a grain whose cultivation has declined significantly in the U.S. over the past few decades. Malted barley is a foundational ingredient of most beer, and a constellation of malthouses around the country contract with farmers for barley and process it into malt for craft alcohol makers.

Those malt producers are also seeing a steep decline in business due to the Covid-19 pandemic. According to a survey by the Craft Maltsters Guild, a nonprofit trade organization for small-scale, independent malt producers, 94 percent of malthouses in the country have been negatively affected by the pandemic.

Jesse Bussard, executive director of the Maltsters Guild, says that there are limited options for malt producers when demand for malt falls among brewers and distillers. There is a small market of home brewers, and some malthouses are also able to mill flour and other grains. But “malt really is first and foremost an ingredient for beer and distilled spirits, so there isn’t another way to receive equal pay for their product,” she says.

Malt can be stored in the short term, so for now some malthouses are hanging on to their product in hopes that the market rebounds. “They’re holding out until this ends, and anticipating that hopefully brewers will want to start brewing again and they’ll have the product ready for them,” Bussard says.

Still, there is little indication that the beer market is heading for an immediate rebound. The Brewers Association itself laid off nearly a quarter of its staff in late April, noting in a blog post announcing the cuts that the organization’s “fortune mirrors that of our craft beer community.”

The association’s members are also struggling to source another key beer ingredient: carbon dioxide. The essential source of bubbles is a byproduct of ethanol production, which has plummeted as demand for gasoline shrinks due to the pandemic. Thirty-four of the country’s 45 ethanol plants that sell carbon dioxide are currently idled or have reduced production.

In the meantime, Jones will focus on growing wheat, alfalfa, sunflowers, and safflower and hope that barley contracts return to normal in 2021. But “depending on how long this lasts and the damage it does permanently to some of those breweries,” she fears the impact on farmers could stretch into next year.