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Farmers brace for tariffs that could spike costs, reduce

demand

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Slipping U.S. beer consumption has already hurt barley

farmers

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Tariffs could hurt U.S. barley exports to Mexico, Canada

By Heather Schlitz

CHICAGO, March 18 (Reuters) - Overdue loans and mounting

interest payments often weigh on Montana barley grower Mitch

Konen as he bales hay and loads trailers at his remote farm

overlooking the snow-capped Rocky Mountains.

As spring sunshine warms the fields, Konen, 65, and other

barley farmers worry tariffs will take away crucial export

markets and increase the cost to grow the grains, even as

sinking U.S. beer consumption has slashed demand for barley.

"Down here on the farm we're already stretched pretty thin

financially," said Konen, who is also vice president of the

National Barley Growers Association. "It makes us wonder whether

or not we can even stay in business."

Roughly half of Konen's barley is destined for Mexico, where

it will be turned into beer. Some will be shipped back to the

U.S. in bottles of Modelo, Corona and Pacifico.

Mexico is the third largest importer of U.S. barley and the

biggest importer of U.S. malt, made from germinating kernels of

barley and a key ingredient in beer. If Mexico issues tariffs in

retaliation or switches to buying barley from other trading

partners, experts say it could deal another economic blow to

American farmers as U.S. consumers increasingly ditch beer.

Canada, the largest importer of U.S. malt barley, issued

tariffs against U.S. barley and other agricultural goods that

went into effect on March 4. Frayne Olson, crop economist at

North Dakota State University, said farmers are worried that

tariffs could decimate U.S. barley exports to Canada.

U.S. President Donald Trump has said his back-and-forth

tariffs against major trading partners are intended to curb the

flow of illegal drugs and migrants into the U.S., and has

downplayed the market impacts for U.S. companies and consumers.

"The people who pay for tariffs are the farmers," said

barley farmer Steve Sheffels, vice president of the Montana

Grain Growers Association. "We grow way more barley than we can

possibly consume, so if those markets go away, then farmers are

going to be competing for a much more limited number of

buyers."

Costs for fertilizer, which is mostly sourced from Canada,

will rise with tariffs. Prices for imported crop chemicals from

China have already risen because of tariffs that took effect on

February 4.

"There's a sinking feeling and a feeling of dread that

things are bad, and things are going to stay bad for a while,"

Sheffels said. "We are scared almost to death about tariffs."

A SLOW DECLINE

Beer consumption in the U.S. has been sliding and in 2024 it

hit its lowest level in over 40 years as more Americans chose

other alcoholic beverages, said Bart Watson, chief economist at

the Brewers Association. Recently, hard seltzer drinks and

canned cocktails have posed particularly bruising competition to

beer.

Others are giving up alcohol altogether. Gen Z-ers and

millennials are drinking less than most previous generations,

according to a 2024 Gallup poll. In January, former U.S. Surgeon

General Vivek Murthy called for cancer warnings on alcoholic

drinks. Multiple high-profile studies have stated no amount of

alcohol is safe to drink.

Watson believes major beer companies such as Anheuser-Busch,

maker of Bud Light and Michelob Ultra, may keep prices steady to

preserve market share and maintain sales volume. Craft breweries

may be less able to absorb higher costs and are likely to raise

prices, he said.

The 25% tariffs the White House has slapped on metals will

likely hike the costs brewers pay for kegs and cans, which are

often made from steel and aluminum imported from Canada.

The price of a bottle of Corona or Modelo, both produced in

Mexico, may be more likely to spike if U.S. malt is subject to

tariffs by Mexico as it heads south and the finished beer is

slapped with tariffs again as it is shipped north.

"Breweries are going to have to choose to pass this along or

choose to eat it," Watson said. "It will have an impact."