The brewing industry in Germany is undergoing fundamental structural changes. Beer sales have been steadily declining for years. In the first quarter of 2024, the decrease was 7.3% compared to the same period the previous year, and as high as 9.5% in March alone. This development affects not only the breweries’ sales markets but also has a tangible impact on upstream stages of the value chain – particularly malt houses and their need for high-quality brewing barley. Less beer being brewed inevitably means lower demand for raw materials. Nevertheless, the current market situation presents an opportunity to adopt sustainable, predictable, and partnership-based sourcing models. Contract farming of malting barley represents a viable model for the future – economically, qualitatively, and ecologically.
Contract Farming as a strategic response to volatile markets
In recent years, it has become clear how much the quality of malting barley depends on external factors such as weather and market behavior. The 2023 harvest revealed serious quality problems: in many areas, germination capacity was insufficient, rendering the harvested barley unsuitable for brewing purposes by definition. At the same time, demand for the 2024 harvest was noticeably low – due to the weak sales situation in the beer industry. There is more optimism for the 2025 harvest, with slowly rising demand for raw materials. Current field stocks look generally good, although rainfall has been insufficient. In this phase, contract farming plays a particularly important role as it allows for early determination of volumes and prices – thus minimizing uncertainties for both farmers and processors.
In Germany, where spring malting barley occupies around 350,000 hectares (approx. 10,000 ha less than the previous year), contract farming holds significant potential. Not every plot is suitable for brewing purposes, but targeted selection, consulting, and contract design can significantly increase the share of marketable goods. Contract farming opens up new perspectives – for farmers seeking secure income and agronomic support, and for industry players who rely on consistent raw material quality.
Mutual Benefits for agriculture and industry
For farms, contract farming offers numerous advantages that go far beyond price security. Economic predictability is a central concern in times of volatile markets and rising input costs. Contracts with guaranteed purchase prices not only provide a secure income perspective but also improve financing and investment planning opportunities. In practice, spring malting barley is competitive – it requires relatively little nitrogen and currently offers attractive producer prices when quality requirements are met.
Access to consulting is also a crucial factor. Since spring barley has specific requirements in terms of protein content, germination capacity, and variety, cultivation without agronomic support is risky for many farms. This is where partnership-based contract farming projects show their value, with consulting – often provided by seed manufacturers – being an integral component. Moreover, malting barley cultivation contributes to crop rotation diversification. As a spring crop, it is particularly attractive for farms dealing with arable issues like blackgrass, as it helps reduce weed pressure compared to typical winter crops.
For malt houses and breweries, contract farming also provides significant strategic benefits. It ensures a continuous supply of high-quality raw materials – a key aspect since malting barley can only be processed within very narrow parameters. Agreements on stable prices and defined qualities reduce procurement uncertainties and facilitate long-term production and cost planning. Direct contact with growers also allows targeted variety selection and influence over cultivation practices – factors that are increasingly important with regard to sustainability, regionality, and product quality.
Additionally, contract farming opens up marketing opportunities. Close cooperation with farmers can be communicated as part of origin campaigns, contributing to a transparent and traceable production process. Some breweries have already successfully implemented this, for example through branded farm machinery or involving partner farms in brand communication. Integrating regional value chains not only enhances corporate image but also supports environmental and social sustainability goals.
Challenges and Limitations: Between nature and structure
As promising as the concept of contract farming is, it is important to acknowledge its challenges and limitations. The unpredictability of climate influences is a factor that is always present in the process of malting barley, which remains a natural product. Particularly critical is the narrow protein range required for brewing, between 9.5% and 11.5%. Even slight deviations can result in a batch being downgraded to feed barley – with significant financial losses for the farmer. Germination capacity is another critical parameter. The 2023 harvest clearly showed that climatic stress during grain ripening can lead to substantial quality losses.
Furthermore, such projects require certain operational and infrastructural conditions. Not every farm has sufficient facilities for drying, cleaning, or storing malting barley. The region’s agricultural structure must also be suitable to reliably provide large batches in contractually agreed quality. For smaller farms, transport, logistics, and compliance with specifications often entail a disproportionately high effort – an aspect frequently underestimated in practice.
The Role of Trade: Mediator, Financier, and Logistics Partner
Trade plays a central role in the contract farming system – often underestimated but essential for the success of such partnerships. Trading companies act as operational links between agriculture and the processing industry, taking on many structural tasks crucial to the model’s success. They coordinate the needs of malt houses and breweries with agricultural production capacities, reconcile requirements with reality, and ensure transparent communication among stakeholders.
Moreover, trading companies significantly contribute to the financial stabilization of supply chains. They often act as pre-financiers, offering farmers early liquidity through down payments or advance purchases. This not only increases operational planning security but also reduces capital commitment for producers – an often crucial factor, especially for smaller farms.
Trade is also typically responsible for organizing logistics – from harvest to intermediate storage and delivery to the malt house. The associated demands for quality assurance, batch separation, and traceability are becoming increasingly complex. Trade assumes a coordinating role, covering both physical and digital infrastructure.
Various pricing models are available in contract farming, depending on market conditions, risk tolerance, and contract duration. The “fixed-price contract” secures a fixed purchase price for the farmer at sowing time. This model offers maximum planning security but little flexibility in a rising market. Alternatively, variable price models base compensation on external indicators like stock market or regional feed barley prices. These models offer flexibility to market developments but carry the risk of declining revenues.
For long-term partnerships, multi-year framework agreements are increasingly used. These combine elements of both systems, defining price ranges or incorporating hybrid models of fixed and reference prices. They provide reliable conditions for both farmers and buyers while maintaining some market flexibility. Trade not only designs these contracts but also ensures continuous market assessment and adaptation to changing conditions.
Best Practice “Küstengerste” by Grainli®
A successful project is run by Grainli®, which has been operating contract farming in Schleswig-Holstein for over five years. The “Küstengerste” (coastal barley) project established close cooperation with Flensburger Brewery, seed producer KWS, and British malting company Crisp Malt. The goal was to directly integrate high-quality, regionally produced malting barley into the processing chain. Grainli® acts as the link between agriculture and industry – especially for smaller farms often overlooked by large buyers. The response has been positive: there is interest from neighboring European countries in similar concepts, and expansion within Germany is already planned.
Conclusion: From Field to Glass – Taking responsibility together
Contract farming of malting barley is more than just an agricultural business model. It offers the opportunity to rethink quality, sustainability, and economic viability along the entire value chain. At a time when consumers are becoming more conscious and raw material markets more uncertain, stable partnerships between agriculture, malt houses, and breweries are a key success factor. Those who invest early in long-term relationships ensure not only supply security but also trust – on the field and in the market.
Jan Pit Winter
