Canada is a leading producer of malting barley and malt, with the US among its key customers. Photo: Canada Malting Co
THE IMPACT of US tariffs are likely to do much to disrupt the free and easy trade of barley, malt, and beer in North America.
In his latest monthly MaltNews publication released last week, Kardinia Group Consulting principal Trevor Perryman looks at what life without the US-Mexico-Canada Agreement and the North American Free Trade Agreement might mean now that Trump’s policies are being rolled out.
Trade figures show the extent of the continent’s beer-related business: 20 percent of all beer consumed in the US is brewed in Mexico; 5pc of beer brewed in Canada goes into the US; Mexico and the US are markets for Canadian malt and barley, and the US can be an important source of malt and barley for Mexican brewers.
“Should the Trump tariffs of 25pc be applied, in a market that is extremely price sensitive, the current brewing industry cross-border trade is likely to completely stop,” Mr Perryman said in MaltNews.
“If that were to happen, then the North American brewing supply chain would fracture into three separate markets that would look starkly different.”
Assuming domestic beer demand in Canada, the US, and Mexico is inelastic, despite inflationary pressures that would follow from tariffs, Mr Perryman can see US brewers as being “the big winners”.
Without Canadian malt, Mr Perryman said US maltsters would have a bigger local market, and an additional 500,000t of malting barley would need to be sourced domestically, or imported from countries favoured by Trump’s policies.
“Maltsters in Canada are likely to be heavily impacted, and there would be an estimated 700,000t plus of malting barley not required in the Canadian supply chain presumably becoming available for export.
“Ironically, the Mexican maltsters could remain unaffected due to a loss of cross-border competition, although northern malthouses are likely to be particularly stressed, and competition from maltsters outside North America is likely to be acute.
“The exact impact will vary but it’s clear: the impact will be substantial.”
China looks locally too
Mr Perryman’s latest MaltNews has also noted Budweiser’s promotion of barley cultivation in China as part of a trend seen in the People’s Republic.
“Brewing and malting companies in China have been promoting the cultivation of barley in China to reduce the reliance on imports for some time.
“The latest announcement comes from Budweiser China, who established a collaboration with the Jiangsu Nongken Group in October 2024.
“Budweiser China will work with the state-owned agricultural company and owner of the Jiangsu Nongken Agricultural Reclamation Malt Co. at its Xinyang farm in Sheyang county.”
Mr Perryman said Budweiser is believed to have introduced American varieties to China, and is working with farmers to eventually produce 100,000t of barley per annum.
He said the JNARMC has a state-of-the-art tower malting plant with adjacent Saladin boxes that together can produce up to 250,000t of malt per annum, around 50,000t more than each of Australia’s two largest malthouses, one in Perth and the other in Geelong.
Under capacity in 2024
MaltNews has stated that the Australian malting industry struggled to operate at capacity throughout 2024 to supply a malt market which is around 20pc domestic and 80pc export.
“While the high growth in Australia’s traditional export markets has benefited the Australian industry for many decades, key markets, such as Vietnam, have struggled post COVID.
“Tougher economic times and the introduction of social reforms have negatively impacted many local beer industries.
“This has restricted demand to make selling for the Australian maltster much harder.”
Mr Perryman said the Australian industry was not the only one supplying traditional markets.
“European, Chinese, Canadian, and Argentine origins have worked into Asia-Pacific and in recent times, European and Chinese maltsters have been aggressive in Asia as their home markets remain flat or decline in size.
“This heightened competition is also making selling difficult.”
Mr Perryman said the Australian malting industry raw material supply chain has not been compromised.
“Local supply and pricing should not have been a brake on Australian malting-capacity utilisation.”
A change in ownership may have had an impact.
“Over the last 15 years, all of the major Australian malting capacities have been purchased by French farmer cooperatives.
“Although new owners will always seek to maximise the utilisation of new assets, each of these new owners have global malting operations that they will look to coordinate.
“Could this be impacting total Australia capacity utilisation?
“We know the global beer market is flat, so it is possible, but only the companies themselves know.”
Mr Perryman said Australia appeared to be buffered from escalating energy costs associated with malting.
“Some regions have been affected more than others, but as Australian malt is still selling, albeit at reduced levels, Australian energy prices don’t appear to be prohibitive.
“Given all this, it appears the key factors affecting demand of Australian malt is market conditions in Asia and the escalation of competition from China and Europe.
“Global management of Australian malting assets by foreign owners will be influencing operational decision-making, but long term, these companies will want their Australian assets fully utilised.
“How enduring these conditions will be is something to watch in 2025.”
Source: MaltNews
