North American farmers top up rye plantings as whiskey sales soar

WINNIPEG, Manitoba, July 26 (Reuters) - North American farmers are turning back to a neglected crop, sowing fields with the largest rye crop in years partly as consumers satisfy a growing thirst for whiskey.

Rye, planted in autumn and harvested in mid-summer, fell out of favor during the past decade as other crops produced bigger profits. But whiskey demand as well as new varieties of rye that offer greater yields have renewed interest.

U.S. farmers planted 1.76 million acres (712,250 hectares) for the 2016/17 season, the biggest area since 1989 and a 12-percent year-over-year increase, according to U.S. Department of Agriculture.

In Canada, a major rye exporter along with the European Union and Russia, farmers sowed 405,900 acres, the biggest rye area in seven years, Statistics Canada reported.

"In our area, no one would have even considered rye," said Manitoba farmer David Hamblin, citing its unprofitability compared to other crops. "I think it'll be a fixture for years to come."

Rye is also used in animal feed and as a "cover crop" to prevent soil erosion.

Demand from bread millers and distillers has been a main driver of the crop's resurgence, said coarse grains analyst John Pauch at Agriculture and Agri-Food Canada, who expects Canadian exports to nearly double in 2016-17.

U.S. whiskey sales rose 9 percent on the year to June 18, to $4.1 billion, topping the 6 percent demand growth for total spirits, according to Nielsen data provided by Beam Suntory Inc , distiller of Jim Beam whiskeys.

Rye whiskey's 33 percent growth outpaced both categories, albeit at a more modest $94 million.

Consumer demand for whiskey has left distillers such as Brown-Forman Corp's Jack Daniel's hustling to keep up, given whiskey maturation can take four to seven years.

"Years ago, we probably underestimated the market," said Jeff Arnett, master distiller at Jack Daniel's.

Distiller Jim Beam has added several new rye whiskey brands recently, including a 100 percent Canadian Club rye whiskey.

The pick up in supplies has already diminished prices and may limit farmers' enthusiasm for planting rye this autumn, said Blake Gamroth, a Canadian rye merchant at Scoular.

The average U.S. farm price of rye has declined two years in a row, although the $6.52 per bushel farmers earned in 2015-16 was still 26 percent higher than five years earlier, according to USDA.