More Competition for Rice Supplies

Interbrew’s Latrobe Brewing Co. is spending more for the rice it uses to make Rolling Rock beer because increasing competition from pet food makers has cut U.S. supplies of the grain in half.

Latrobe, Anheuser-Busch Cos., Adolph Coors Co. and other brewers rely on rice to produce a lighter taste and color in beer.

The price of brewer’s rice has risen as much as 45% in the last year, boosting ingredient costs for companies that make $60 billion of beer a year.

Brewers say they must absorb the higher cost of rice because using other grains would alter the taste of their beer.

Although the expense is small compared with other ingredients, brewers compete with Ralston Purina Co. and other pet food makers who are using more rice because it is easier for cats and dogs to digest than corn or wheat.

The rice that U.S. brewers have been using since World War II is the powdery remains of grain damaged in the milling process.

Mills remove the hull and bran to produce the rice known to most consumers. About 12% of the U.S. rice crop ends up in beer.

U.S. pet food makers, who had $11 billion in sales last year, have been buying increasing amounts of brewer’s rice to replace corn, wheat and other grains.

“Rice has been used in the pet food industry for about 20 years now, though the use has been increasing dramatically over the last five to 10 years,” said Dale Hill, manager of nutrition at Brentwood, Tenn.-based Doane Pet Care Co., which makes private-label pet foods for Wal-Mart Stores Inc. and other retailers.

“Rice is getting to be more expensive than corn, but the starch in it is considered to have better digestibility and less allergens than corn or wheat,” Hill said.

U.S. inventories of brewer’s rice fell 49% this summer, a time of year when stockpiles usually swell, government figures showed.

The price of broken rice kernels in the Mississippi River delta, the biggest U.S. rice-growing region, reached 6.63 cents a pound last week, up 30% from 5.1 cents a year earlier, according to the Department of Agriculture.

Prices reached a 21-month high of 7.38 cents on Aug. 3.

Unsold supplies of brewer’s rice fell to 11.7 million pounds as of Aug. 1 from 22.8 million pounds on March 1, Agriculture Department figures showed.

During the previous four years, stockpiles rose an average 20% from March to August.

That means rising expenses for Latrobe, Anheuser-Busch and Coors, which add rice to the malted barley, hops and water used in brewing to lighten the taste and color of the beer without diminishing alcohol content, analysts said.

Philip Morris Cos.’ Miller Brewing, Pabst Brewing Co. and many regional brewers prefer corn to rice because of the golden color it imparts to beer, said Bill Radtke, vice president of operations for Pabst in Milwaukee.

U.S. brewers used $320 million in rice and corn last year, compared with $560 million in malt and $73 million in hops, according to the Beer Institute, a Washington-based brewing industry trade group.

The group doesn’t keep records of the cost of rice alone, or for water and other ingredients.

Arkansas was the top rice-producing state this year, followed by Louisiana, California, Mississippi, Texas and Missouri, government figures showed.