I don't know if this is nuts. I'd have to see the full arguments on both sides, and so far what we have to go on is a one-sided summary.
If the *only* effect of the proposed regulation would be to increase beer prices, then sure, I agree with you 100%: government is being stupid. But if there's a good reason for the regulation, then I'd disagree with you.
Reading the article, it seems like the idea that this regulation will cause beer prices to spike dramatically seems a bit alarmist. The regulations would require brewers who send waste to farmers as animal feed to keep records. It seems hard to believe that this would significantly raise the price of beer or whiskey given that alcohol production is already highly regulated. On the other hand, it seems like there is no specific concern related to breweries. They were just caught up in a law that was meant to address animal feed.
If you want an example of a regulation free utopia, look no further than China, where adulteration of the food chain is a common problem. If the choice were a regulatory regime that slightly complicates brewers lives, and a regime that allows melamine and cyanuric acid into human food, I'd live with higher beer prices.
Fortunately, we don't have to live with either extreme. We can regulate food adulteration and write exceptions into the regulations for situations that pose little risk. Since presumably the ingredients used in brewing are regulated to be safe for human consumption, the byproducts of brewing are likely to pose no risk in the human food chain.