Posted on 06/11/2007 9:20:03 AM PDT by Incorrigible
By STEPHEN KOFF
WASHINGTON — This just might call for a new Jimmy Buffett song.
The price of drinking could climb as farmers who grow blue agave, the cactuslike plant used for tequila in Mexico, and barley for beer in Germany, switch to corn and other biofuel crops to meet growing demand for ethanol. Prices have already gone up for beer in Germany, and American beer could follow if barley production keeps declining here.
"If the beer companies and malt companies need it to make their products, they're going to have to pay more,'' said Kelly Olson, administrator of the Idaho Barley Commission.
Agriculture, liquor and beer industry officials say the thirst for ethanol to fuel cars and SUVs is not solely to blame, since market forces including an abundance of agave depressed prices and prompted Mexican farmers to turn to more lucrative crops. And wet weather in central Europe last summer led to a poor harvest of high-quality barley, which with poor harvests in Australia and Canada — and demand for barley from China — helped drive up beer prices in Germany and elsewhere.
But ethanol, too, was a factor. In Germany, barley farmers "are now switching in greater numbers,'' said Horst Dornbusch, founder of the German Beer Institute, which promotes German beer in the United States. Crops for biofuels such as corn for ethanol and rapeseed for biodiesel are easier to handle, their prices are high, and growers "no longer have to bother with the exacting specifications of the brewing barley,'' Dornbusch said.
Barley farmers in the United States, primarily in the West, have long had other reasons to cut their production — bad weather, disease afflicting their crops, and government price supports that they say favor corn and soybeans. U.S. barley production has dropped by 65 percent in the last 20 years. But demand for corn for ethanol now adds to the attraction to get out of barley, say agricultural and beer industry officials.
Mexico's Tequila Regulatory Council, meanwhile, told the Reuters wire service that Mexican growers are "going after what pays best now,'' which means setting agave fields afire so they can switch to corn and grow 25 percent to 35 percent less agave this year.
Demand for corn has already led to high tortilla prices in Mexico, and to debates in the United States about possible tradeoffs between ethanol for the fuel tank and corn for the food supply. In Germany, wholesale barley prices have doubled in the last two years, going so high that "several malting plants in Germany have now closed their doors and we don't know if they will reopen,'' Dornbusch said. The plants buy barley to make malt that is sold to breweries.
For beer drinkers, the impact so far depends on their preferred brands.
For example, a 12-pack of Warsteiner beer from Germany sold for $12.99 in a store near Dornbush's home in Massachusetts at the beginning of 2006. By the end of the year, the price was $15.99, he said, in large part because of expensive malt barley.
Brian Wright, Midwest sales manager for Kent-based L.D. Carlson Co., supplier of beer and wine-making supplies, said, "We have seen our prices go up on our foreign products.''
But domestic brewers so far have avoided big price hikes. "Dollar-wise and availability, we haven't seen anything yet,'' said Chris McKim, president of the Brew Kettle in Strongsville, Ohio, a restaurant and bar where customers come to brew their own beer.
Efficiencies in the brewing industry could help stave off dramatic price hikes domestically, since "they can brew more beer today with less barley,'' said Olson. Still, the country's largest brewers acknowledge "some price pressures related to barley,'' in the words of a Coors Brewing Co. spokeswoman.
But Aimee Valdez of Coors added, "Due to Coors Brewing Co.'s historical, long-term contractual arrangements with several hundred farmers of high-altitude barley in the Western U.S., we are less susceptible to swings in U.S. barley prices, since typically we do not purchase barley in the open or spot market.''
Dave Peacock, vice president for business operations for Anheuser-Busch Inc., said the industry's cost increases for raw materials are "just one of many factors that contribute to beer costs.'' But in a statement, he acknowledged that "it is important to offer competitive prices to growers for their barley crops. We will continue to work with growers to make sure we receive the highest-quality barley for the brewing of our beers.''
As for tequila and any looming agave shortage, the biggest companies say they do not expect to be affected by decisions of individual Mexican farmers. A spokesman for London-based Diageo PLC, which distributes the popular Jose Cuervo brand, said Cuervo owns its own agave fields.
Similarly, Sarah Devaney, director of corporate communications for Beam Global Spirits & Wine, which owns the Sauza tequila brand, said "it is highly unlikely that prices will increase any time soon'' for similar reasons.
"We own and manage all of our agave plants ourselves and therefore control the quantities,'' she said.
The ethanol industry, which is subsidized by the U.S. government, chalks this up to markets working as they should.
"Farmers around the world are responding to the market signals and making planting decisions accordingly,'' said Matt Hartwig, spokesman for the Renewable Fuels Association. "It is a sign that the market is responding.''
He is not suggesting that anyone drink and drive, but says there will be plenty of crops available for those separate activities without harsh economic consequences.
"I have every confidence the world's farmers can continue to supply the feedstocks for alcohol production that fuel our cars,'' he said, "as well as our beverages.''
(Stephen Koff is Washington bureau chief for The Plain Dealer of Cleveland. He can be contacted at skoff(at)plaind.com.)
Not for commercial use. For educational and discussion purposes only.
STOP THE MADNESS!
No Food For Fuel!!
I’m all for ecology and all that, but when they start messing with the beer supply....
Haven’t I been warning everyone about this?!!!
Maybe using alcohol to fuel cars will raise drink prices enough so the drunks will only be able to afford to walk to the bars. Best of both worlds.
This wouldn’t be an issue if farming was embraced. We have lots of farmland being loss to development and regulations
No problem there. Now when they start making ethonal out of hops and barley, I’m gonna get PO’d...
Increased prices of tortillas and now tequila...
Unless of course one is used to the Anheuser-Busch swill which is made almost entirely from rice.
Perhaps we can reclaim some of our government mandated affordable housing (i.e. guaranteed gub’mint ghetto) tracts as farmland, now that it makes economic sense.
I tried to find the thread but have failed ... maybe it was an illusion ... ?
Probably because the biggest part of the price of Bud is TV advertising, and that price is dropping. They sure aren't spending it on ingredients or breewing.
“STOP THE MADNESS!”
Yup nothing but hype to get the futures prices to rise since most of the crops have just been plated with some exceptions like in the Far Northern states ND MN which I think just started.
Beef, chicken, pork, lamb, leather goods, and anythis associated, i.e. milk and eggs will ALL GO UP!.....STOP BURNING THE FOOD SUPPLY!..............
70% of their budget is advertising.
plated=planted
duh
Not only alcoholic products, but meats and poultry, eggs and milk, butter, cooking oils, and anything else associated with corn is going up at a much higher rate than “normal”.....
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