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Barley can be sold as either malt or feed. Malt barley is used primarily for beer, while feed barley is fed to animals. (File photo)

Barley: Crop faring well, but prices, exports are worrisome

Much of the region's barley crop is off to a "spectacular start,"an industry official says. But while the outlook for good yields is promising, barley farmers are concerned by low prices and potential lost exports.

"Prices just aren't what we'd like them to be. And the Mexican market is so important to us," says Doyle Lentz, a Rolla, N.D., farmer and a director of the North Dakota Barley Council.

The possibility of selling less barley to Mexican beer makers — sales threatened by disruptions to the North American Free Trade Agreement — is particularly troublesome, he says.

Barley farmers' most pressing consideration is the condition of their 2018 crop — and so far, so good.

"It's been a spectacular start for our crop," reflecting recent and welcome rains, says Steve Becker, communications coordinator for the Montana Wheat and Barley Committee. His state is expected to lead the nation in barley production this year, with Idaho second and North Dakota third.

As of June 10, 83 percent of Montana barley was in good or excellent condition, with 16 percent in fair shape and just 1 percent rated poor, according to the National Agricultural Statistics Service, or NASS, an arm of the U.S. Department of Agriculture.

The North Dakota barley crop is faring almost as well. Seventy-five percent of barley in the state was in good or excellent condition on June 10, with 23 percent rated fair and 2 percent in poor shape, NASS said.

But prices are far less encouraging.

Barley can be sold as either malt or feed. Malt barley is used primarily for beer, while feed barley is fed to animals. Many factors, including protein levels, determine whether barley is sold as malt or feed. Malt usually, though not always, fetches a higher price. Selling barley at the higher malt price gives farmers a better chance of being profitable, but doesn't guarantee it.

Barley generally is sold under contract, which means farmers sell a specified amount at a specified price, well in advance of harvest. The price and amount fluctuate from year to year.

Malt barley generally was selling for $4.75 to $5 per bushel under contract this past winter, too low to get some farmers to plant it. What's more, only a limited number of barley contracts were available, which caused some farmers who might otherwise have planted barley from actually doing so, Lentz says.

At least part of the problem is that sales of mass-produced U.S. beer are declining, reducing domestic demand for barley. Some of the decline is offset by increasing sales of craft beer, or beer made by small, independent breweries that emphasizes quality, taste and brewing technique.

"It would be even worse without the craft beers. Having them helps (boost demand for barley)," Lentz says.

Upper Midwest barley producers are getting what may be an even bigger boost by sales to Mexico, which recently surpassed Germany to become the world's fourth-largest beer producer.

Beer — most made with barley from Montana and North Dakota — is Mexico's top ag export to the United States. In 2016 the United States imported $1.9 billion of Mexican beer, a number that continues to grow.

"It's crucial that we keep the Mexican market," Lentz says.

NAFTA — which allows U.S. barley and malt to enter Mexico duty-free — has been a huge help in securing U.S. barley sales, Lentz and others says.

Now, Pres. Donald Trump's administration is working to make sweeping changes to NAFTA, which went into force in 1994 and progressively eliminated almost all tariff and quota barriers among the United States, Canada and Mexico. Trump has even threatened to withdraw the United States from the agreement.

Fewer acres

Barley officials say Upper Midwest barley farmers — facing unattractive prices and limited sales opportunities — definitely planted fewer acres of the crop this year than a year ago, though how much less is hard to say.

This spring, NASS estimated that North Dakota farmers would plant 400,000 acres of barley in 2018, down from 520,000 acres in 2017 and 740,000 acres in 2016, with Montana barley acreage falling to 720,000 this year from 770,000 in 2017 and 990,000 in 2016.

Combined, Montana and North Dakota farmers planted only about two-thirds as many acres to barley this spring as they did in 2016.

Historically, North Dakota ranked first in barley acreage and Montana second. But Montana has held the top spot in recent years, with North Dakota second. The region's long wet cycle, which made barley riskier to grow, discouraged North Dakota farmers from growing it and led more producers in semi-arid eastern Montana to raise it.

This year with another big acreage drop in North Dakota, Idaho is projected to rank second in barley acreage with 560,000, with North Dakota falling to third.

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