Mexican Brewery Expands Contracting with U.S. Farmers

Utilizing Market Access Program (MAP) funds, the Council helped expand U.S. barley exports to Mexico by facilitating the direct contracting of barley for export by the Mexican brewery, Constellation Brands with U.S. barley  producers in Idaho, resulting in barley sales valued at $541,000.

Mexico is now the world’s largest beer exporter in terms of both value and volume – and that growth is good news for U.S. barley farmers and malt producers who supply their main ingredient. All of the major breweries are making substantial investments in new brewing, malting, and bottle manufacturing plants. This growth and investment represent additional demand for U.S. malted barley.

To capture this demand growth, the U.S. Grains Council (USGC) is strengthening existing supply-chain relationships by hosting major breweries to make direct connections with barley producers in the United States. Constellation has expanded its contractual relationships for the past eight years with barley farmers in Montana and North Dakota. The forward contracting relationship between farmers and Constellation came to fruition due to the work of the U.S. Grains Council and our partners at Northern Crops Institute, North Dakota Barley Council, and Montana Wheat and Barley. There have been many missions both to the U.S. and Mexico, with Constellation’s purchasing teams and producers meeting face to face in order to build the trust and confidence needed to make this program successful. The Council contributes to this relationship building by hosting Constellation on trade missions to barley producing states to learn about crop production, upcoming barley varieties and to coordinate logistics with malt houses and rail so that the program continues to run smoothly for the long term.

This contracting model has been successful for the beer division of Constellation Brands, as their profits have steadily increased, exceeding 9% revenue growth over the past ten years (Research, 2021). Due to this growth, Constellation Brands approached the Council with plans to expand relationships further into new barley-producing areas. Constellation wanted to explore Idaho as a production site due to market conditions and the strategic location of their breweries in Obregon and Mexicali. In September 2019, the Council hosted Constellation Brands in Pocatello and Idaho Falls on a trade mission where the contracting program kicked off initially with five farmers. The intention of Constellation is to continue expanding their contract program
in Idaho and continue with these existing farmers.

By early 2020, Constellation officially contracted 500 MT of barley per producer with two producers that they met during 2019’s travel. These two contracts have an export value of $541,000. Although plans to revisit Idaho in 2020 were canceled due to the pandemic, the Council improvised and helped organize virtual sessions so that the relationship and personal contact with producers were not lost. As a result, the relationship with barley producers
intensified through planting and crop updates, variety seminars, and research sharing via Zoom.

Mexican breweries rely on U.S. barley producers to be their main suppliers for imported malted barley. Mexico imported 349,000 metric tons of U.S. malted barley in the 2019/2020 marketing year, representing the single largest market and one that continues to grow. The Council invested roughly $19,000 MAP funds to conduct this company’s trade team travels to the United States, which resulted in a net return of investment (ROI) of $27 per $1 dollar of MAP funds invested.