Blow for beer as biofuels clean out barley

Financial Times ^ | February 25 2007 20:56 | By Kevin Morrison in London

[DeaconBenjamin2]

The rapid expansion of biofuel production may be welcome news for environmentalists but for the world’s beer drinkers it could be a different story.

Strong demand for biofuel feedstocks such as corn, soyabeans and rapeseed is encouraging farmers to plant these crops instead of grains like barley, driving up prices.

Jean-François van Boxmeer, chief executive of Heineken the Dutch brewer, warned last week that the expansion of the biofuel sector was beginning to cause a “structural shift” in European and US agricultural markets.

One consequence, he said, could be a long-term shift upwards in the price of beer. Barley and hops account for about 7-8 per cent of brewing costs.

Barley, which is used for making beer, whisky and animal feed, has seen prices prices soar over the last 12 months.

Futures prices for European malting barley, which is used for brewing and distilling, have risen 85 per cent to more than €230 ($320) a tonne since last May.

Barley feed futures have risen by a third to C$180 ($155) a tonne on the Winnipeg Commodity Exchange over the same period.

Meanwhile, barley production in America fell to 180.05m bushels in 2006, the lowest level since 1936. The value of the crop was the lowest since 1970 – at $498m.

This decline is partly due to the fall in the land area used for growing barley, which dropped to about 2.95m acres – the lowest since records began in 1866.

The rise in barley prices has also been driven by the Australian drought, which cut the country’s crop by two-thirds, and heavy rains in Europe last summer which reduced the quality and yield of the harvest.

The US department of agriculture estimates global barley production will reach 138m tonnes in the year to August, level with 2006 but down 10 per cent on 2005. Global demand for barley has risen 2 per cent to an estimated 145.5m tonnes this year, the fourth year in the last five in which demand has exceeded supply.

As a result, global stockpiles have shrunk by a third in the past two years and left the barley trade vulnerable to further supply problems this year.

“In the US, land that was cultivated for growing barley has been given over to corn because of the ethanol demand,” said Levin Flake, a grains trade analyst at the US department of agriculture.

The US, which in the 1980s was a leading exporter of barley, is now a net importer as barley acreage has shrunk from more than 13m acres in 1985 to 4m this year, said Mr Flake.

The USDA expects US barley acreage over the next 10 years to remain flat. That might not be the case for the price of beer.

[mylife]

Apparently early Americam brewers went through a similar crisis due to the price of english barley. resourcful American brewers used pumkpin as a substitute. The result was pumpkin beer.

Having recently tasted a pumpkin beer, I have to say...

"we must do what ever it takes to get the barley!"

[knews_hound]

I recently tasted Pumpkin Beer for the first time.

I could not spit it out fast enough.

Ohhhh was that nasty.

Give me Stout or give me death.

Or at least a Pilsner.

Cheers,

knewshound

[mylife]

L0L its just aweful!

[Last Dakotan]

The article is false. The nation's number one producer of malting barley is North Dakota, which is too far above the corn belt to grow much corn. The main reason North Dakota farmers have stopped growing barley is that prices for it have dropped steadily year to year. Of course you won't hear any brewing CEO crying about paying too little for grain.

Using food to make fuel is stupid and uneconomical in the long run. Look for new ethanol technologies that use non-food grasses soon.

[doodad]

Can't they use kudzu? We need barley for more important things.

[SunkenCiv]

I think we'd better all put our heads together.