August 11, 2008

Barley Growers Get Beer Update From Coors

By Falstad, Jan

Peter "PJ" Coors of the Coors brewing family told Montana barley growers Friday that this has been a record year in what has been a stable business, with rapidly escalating fuel and fertilizer costs, rising grain prices and megamergers among brewers.

"The world's changed from this time last year for all of us," Coors said. "They're going to still be talking about 2008 20 years from now. The number two brewer and the number three brewer merge, and the number one gets bought out."

During a tour of a grain elevator and Montana State University's Southern Ag Research Center near Huntley, Coors said the July 1 merger of Coors Brewing of Golden, Colo., with Miller Brewing Co. of Milwaukee, Wis., will save money. For example, each truckload of beer will travel 300 fewer miles.

Then he shook his head at the latest shake-up announced Monday, plans by Belgium's InBev to pay $52 billion for Anheuser-Busch, creating the world's largest beer-brewing company.

"When MillerCoors announced our merger last October, Auggie Busch (chief executive) sent out an e-mail saying that they (Coors) will be distracted for a while and now is the time to attack," he said. "We're going to return the favor and take advantage of the possible confusion in the Anheuser-Busch ranks."

For the next few years, Anheuser-Busch's merger should help Coors, he said. "Then, they're going to be a tough competitor to work against."

Anheuser-Busch may sell amusement parks to help pay down debt, Coors said. Brewing is a mature industry, meaning companies have to steal customers from each other to increase profits.

Coors, who is the company's business area manager, also is setting up a microbrewery for smaller batches of beer, avoiding the risk and expense of launching new products.

His father, Pete Coors, chairman of the board of MillerCoors and a former Republican U.S. Senate candidate in Colorado, was supposed to fly to Huntley for the tour, but had back trouble, his son said.

This year's base price for malting barley is $11.50 for 100 pounds, a $4 increase over last year's price. Yet all the other costs, especially fertilizer and fuel, of producing a crop have risen even faster.

Alan Ballensky, who used to grow barley in Hardin and now farms at Rock Springs north of Miles City, said the key to success is good crop rotation.

"You have to be diversified. You cannot sit on your laurels and grow one crop," Ballensky said. Among all the risks farmers face today, Ballensky is most concerned about transportation.

"Hauling the barley to Huntley is expensive," he said, adding that he'd like MillerCoors to give growers a fuel subsidy, a move Coors said his company would consider.

Carl Mattson of Chester, a barley grower and a staff member of the Montana Grain Growers Association, was one of about 200 growers and business representatives on the tour.

Like other contract growers, malting barley farmers sign a contract with a brewer such as Coors and are stuck with the price. That was a particular hardship last year when contracts were signed months early and then crop prices increased dramatically.

"Prices for barley blew right past us and the barley growers were stuck with the low prices and higher expenses," Mattson said. Coors came back and increased the payments to growers, which helped, he said.

Rapidly rising crop prices are giving farmers more power, Mattson said.

"They've (brewers) kind of tended in the last few years to take the growers for granted, but now they (growers) have other options, Mattson said.

Each year, Coors buys making barley from 800 growers, including , 165 farmers in Montana and 72 in Wyoming. Farmers in north-central and south-central Montana plant 30,000 acres in- barley for MillerCoors and produce one-fifth of the barley malted in Golden, Colo.

At harvest time, there were traffic jams at the Huntley elevator, so MillerCoors expanded and automated its equipment. Now two trucks can unload at the same time. The elevator can now handle 20,000 bushels of barley each hour, up from 8,500 bushels an hour under the old system.

"We heard from you last year that 4 1/2- or five-hour truck lines were not getting the job done," said Wade Malchow, MillerCoors manager of U.S. barley operations, who is based in Huntley. "It's a big improvement."

Despite the sharp national economic downturn, Coors said his company hasn't seen much effect yet.

"People going out. with their friends for a beer is a luxury you still can afford" he said.

Farmers touring the Southern Ag Research Center heard MillerCoors and MSU crop specialists discuss the different farming methods and crop varieties being developed for Montana farmland.

New strains of barley that will improve yields are being developed for dryland farms. This will become especially important if irrigated land is converted to other crops that bring higher prices.

MSU scientists are researching methods in which soybeans are rotated with barley crops so less fertilizer is needed. And data from the Huntley weather station is being used in tables and graphs to help farmers decide when to irrigate for maximum yield.

With all the mergers, what will happen to one of the icons of American beer: Anheuser-Busch's magnificent Clydesdale horses and, the clever ads?

"They'll downsize to Shetland ponies pulling a child's wagon and a dachshund with sharpie spots on its back," Mattson said, jokingly.

Copyright Billings Gazette Jul 19, 2008

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