US brewers are losing fizz. (And not just metaphorically.)

Not only are they, like other food and beverage groups, facing up to the prospect of customer belt-tightening, in the face of rising interest rates and the cost of living crisis.

They are facing some particular supply and cost challenges too, relating to factors ranging from an extinct volcano to spring weather.

Rising costs

Contamination of carbon dioxide reserves at Mississippi’s Jackson Dome – a well of the gas left over from a volcano which last erupted at least 66m years ago – is challenging all kinds of US food groups, in intensifying a squeeze on supplies.

Prices of CO2, which brewers use carbon dioxide for cleaning equipment as well adding fizz, have reportedly doubled over the past year.

They face a jump in values of malt too, with farmgate prices of US barley (including that used for feed) expected to rocket by 37% to a record $7.25 per bushel ($333 per tonne) in 2022-23, after another disappointing domestic harvest.

“Producers in the northern Plains struggled with delayed planting conditions early in the season that pared yield potential,” the US Department of Agriculture says.

That has added to the support for prices from “strong domestic demand and higher overall prices in the global grains complex”.

Record price rise

So barley is, unusually, more expensive than corn or sorghum in the US.

And malting barley of course has a premium on top.

Already malting barley prices have recorded a record monthly rise – by 14.4% to $7.54 per bushel ($346 per tonne) in August, latest USDA price data show.

Year on year, malting barley values were up by 48%.

Lowest in 55 years

At these prices, it is not so surprising that the USDA believes consumption will suffer.

The USDA is for 2022-23 as started in June factoring in a 5.0% dip to 2.83m tonnes in US industrial use of barley, a category it says is “driven primarily by the malting industry”.

That would be the lowest such use of barley since 1967-68.

So it looks like a dip in US beer production – which fell by 5.5% year on year in the first five months of 2022, latest official data show – will continue for some months yet.

Hope for brewers?

At least 2023 could hold some better news.

Barley could, assuming prices stay high, be in vogue among farmers, given its scant appetite for inputs at a time of elevated costs of the likes of fuel and fertilizer.

Operating costs for growing barley are less than half those for corn, on USDA estimates.

Then it could be down more to the likes of transport and aluminium prices and the Jackson Dome to ensure the US beer sector doesn’t go flat.