Story on MN Malting/malting...

Posted on Wed, Nov. 19, 2003 Barley changes brewing Consolidation in the beer industry affect the way malting barley is traded BY LEE EGERSTROM Pioneer Press A solitary sample of malting barley sat in a pan on a long trading table at the Minneapolis Grain Exchange on Tuesday. There was no trading. An era is passing for one of the Upper Midwest's venerable grains, in large part because of relentless consolidation in the ages-old beer industry. That consolidation is changing the way farmers market their barley, how malt is made from barley, and who buys the malt to make beer. One victim of the trend is the Minneapolis Grain Exchange. Another is Minnesota Malting Co. of Cannon Falls, one of the area's historic barley processors. The company is shut down and its assets are on the auction block. "You can say this is sad, but I tell the farmers that nothing is the same in the food and agriculture industries," said Marv Zutz, director of the Minnesota Barley Growers Association. BARLEY, BREW MATCH Minnesota farmers this year had their best barley-growing season since 1992, tying a record of 75 bushels per acre and producing 98 percent more barley than they did a year ago, with a crop estimated at 12.8 million bushels. The problem is not production, but rather that the traditional way of selling barley through the Minneapolis exchange is fading. The Minneapolis cash market has long been the central trading point where America's barley processors — called maltsters — and brewers would meet to buy and sell supplies of malting barley. These buyers would connect the right type and color of barley to a brewer's special beer recipe. The grand trading floor of the Minneapolis Grain Exchange was partly designed to aid the barley trading business, with two-story high windows on the north side of the building to let in unrefracted light. The light allows barley buyers to check the pigment in the barley kernels to match supplies to the malt needs of different brewers. But the consolidation in the food and agriculture industries is forcing change on the maltsters. Buyers are bypassing the exchange. "Everything has changed over the past 10 years; and in the past five years we've seen maltsters bypass the grain elevators and the Grain Exchange to come out in the country and contract with the farmers for their barley," said Zutz. Two brewing companies, Anheuser-Busch Inc. and Miller Brewing Co., now have more than 70 percent of the U.S. beer market. A-B has its own malting plants and makes about 30 percent of its malt supplies, while Miller, which was purchased by South African Brewing a year ago to form SABMiller, still buys nearly all of its malt from malting companies. The list of members of the Milwaukee-based American Malting Barley Association shows how consolidation has shrunk the number of players in this ancient processing industry. A-B and Miller are members, and are joined by a third brewer, the California-based regional Sierra Nevada Brewing Co. Malting company members include the Cargill Malt unit of Minnetonka's Cargill Inc., Shakopee-based Rahr Malting Co., Briess Malting Co. of Chilton, Wis., Milwaukee-based Froedtert Malt, and Great Western Malting Co. of Vancouver, Wash. Froedtert was a malting unit of Harvest States until the mid-1980s. It was sold to Lesaffre et Compangnie, of Lille, France, which has since combined Froedtert into the International Malting Co. joint venture it operates with Archer Daniels Midland. Cargill, meanwhile, has combined its malting operations with acquisitions of two historic regional maltsters, while Great Western has been purchased and consolidated with Canadian malting companies twice in the past decade. BUYER NEEDED Minnesota Malting's only salvation may be consolidation. Insolvency Strategies Inc., of Henderson, Nev., is seeking sealed bids for the assets of Minnesota Malting. It hopes to open bids on Jan. 4 for the malting company, which filed a Chapter 7 liquidation petition in bankruptcy court in July. Minnesota Malting remained family-owned since its founding by the Mensing family in 1939. Rahr Malting and Briess Malting have also bucked industry trends and have remained private. In a statement announcing the Minnesota Malting asset sale, Wayne Basore of Insolvency Strategies said the malting company was generating $45 million in annual sales and has capacity to make 5 million bushels of malt, or 80,000 tons of malt annually. That equates to 7.4 million barrels of beer after the brewing process. Zutz said farmers on the northern plains are hopeful the liquidators find a buyer to reopen the Cannon Falls plant. "It's sad, because Minnesota Malting has been a great company and asset for the industry," said Zutz. "But it's clearly a sign of the times."