Mexican Beer Depends On U.S. Barley Under NAFTA

Cuauhtémoc-Moctezuma-Heineken (CCM/Heineken ) cannot brew beer favorites like Dos Equis without high-quality barley. And thanks to the favorable trading terms under the North American Free Trade Agreement (NAFTA), CCM/Heineken sourced 100 percent of their barley needs from Montana in 2017.

Decision makers from the company traveled north to Montana in October on a U.S. Grains Council team arranged so they could see firsthand how this top ingredient is grown and malted.

“These meetings help both our members and our teams to interact and talk about common ground that unites them – barley, in this case,” said Javier Chávez, USGC Mexico marketing specialist who traveled with the team. “All farmers sent the message they needed more buyers for U.S. barley, and CCM/Heineken sent the message they are happy procuring their needs from U.S. farmers.”

The team witnessed how barley is grown and processed specifically for their company by visiting the University of Montana’s barley research program, the Northern Seed research center, the Malteurop malting facility, and with local barley farmers. Montana Secretary of Agriculture Ben Thomas also met with the group to thank CCM/Heineken representatives for their business and discuss concerns related to NAFTA.

CCM/Heineken is closely integrated with Montana barley. Thanks to a partnership that started three years ago, 40 percent of the Malteurop malting facility in Great Falls is dedicated to malting barley for CCM/Heineken. As part of that arrangement, Malteurop works directly with farmers, including through specific varietal selections, to grow, procure and malt barley to meet CCM/Heineken quality specifications.

“The team was very impressed with the productivity and resource management of Montana barley farmers,” Chavez said. “Team members and farmers had a lot of good interaction on both farming practices and the importance of trade.”

As a result of this investment, CCM/Heinken sourced all of their malting barley needs from Montana in 2017, totaling 100,000 metric tons (4.6 million bushels) – an arrangement that couldn’t happen without the benefits for U.S. barley exports to Mexico outlined in NAFTA.

Prior to NAFTA, Mexico set base tariffs for barley and malt at 128 percent and 175 percent, respectively. When it came into force, the agreement provided immediate duty-free access for 120,000 tons of U.S. barley into Mexico, with remaining tariffs eliminated over the first 10 years of the agreement. Now, U.S. barley and malt enter Mexico duty-free, making them an attractive option for beer makers who depend on malt and malted barley imports due to the lack of malting capacity in Mexico.

However, this successful partnership is under threat. Competing supplies from Europe that have still been subject to this quota and tariff system will gain duty-free access this year, making NAFTA’s duty-free access not only a selling point, but a necessity for U.S. barley and malt to remain competitive. CCM/Heineken confirmed the company will need to look elsewhere for their malting barley needs should NAFTA be terminated and tariffs on U.S. barley be re-imposed.

“Ending NAFTA could mean a lose-lose situation between CCM/Heineken and U.S. barley farmers,” Chavez said. “This team helped emphasize that U.S. farmers are supportive of the importance of this agreement to business on both sides of the border.”

Learn more about the Council’s work in Mexico here.