FeedsLike ethanol? It's making the price of beer go up.
Anybody that was a devoted fan of The West Wing probably knows enough to adopt a skeptical face whenever anybody starts talking about ethanol. It's just bad policy to use it and promote it. However, it's great politics - people get a double whammy with it by supporting American farmers and promoting alternative energy. That's probably why the Senate voted 86 to 8 last week to expand ethanol mandates - from 7.5 billion barrels by 2012 to 36 billion by 2022. Oh, and, before you ask, both senators from Oregon voted for it - a rare case in which Gordon Smith didn't cancel out Wyden's vote - and none of the presidential candidates voted on it at all. However, this promotion of ethanol is having a real, immediate effect on all of us - namely, the price of malt barley has risen by 88% in the past year, forcing places like Rogue Brewery to raise prices. Now I'm pissed.
Of course, while ethanol is the easiest thing to blame, and is a factor, it's not the only factor why food prices are going up all over the nation. High fuel costs are also to blame, as well as increasing demand abroad for meat and dairy. No, really. From the Times article:
Experts with no stake in the argument say ethanol has indeed contributed to rising food costs, but that is only one among several factors. Higher fuel costs are driving up the expense of growing and transporting food. And strong economic growth abroad is increasing demand for agricultural commodities, allowing once-destitute people to augment their diets with meat and dairy.
Prices for grocery staples are increasing domestically at a rate that's outstripping inflation. Dairy is up an astonishing 14 percent while meats, poultry, fish and eggs are up 5.4 percent. And it's just going to get worse.
In a study completed in May, researchers at Iowa State University concluded that retail food prices had already increased by $47 per person in the previous year or so as a result of higher corn prices. If corn prices near $4.50 a bushel next year, as many people expect, the research suggests that retail food prices for meat will increase about 7.5 percent and egg prices will go up 13.5 percent.
As farmers more and more decide to plan corn for ethanol rather than, say, delicious hops and malt barley for beer, prices for the consumer are just going to get worse at the grocery store. America is now producing the most corn we have grown since World War II.
Again, though, it's not just ethanol that's increasing the price of beer, though it certainly sounds that way talking to the producers being hit by high prices. Bad weather in Europe also has a role to play. Or maybe it's even China's fault for getting on the hoppy-beer-producing train. One thing that everybody agrees on, however, is that in the coming months we can expect to see beer prices going up.
Hey Jeff, how about a guide to cheap beer? Looks like we're going to need it.
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Comments from site editors have a darker background than comments from everybody else.Hmmm. Are hops used to make ethanol? If not, why has the price jumped? I'm no fan of ethanol (or beer even) but I suspect the price for hops went up for some other reason.
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Competition - why would a farmer grow hops or malt barley when s/he could make a lot more money growing corn for ethanol?
But, like I mentioned, that's not the only reason, it just appears to be the one that most people like to blame.
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Since the economy doesn't operate in a vacuum, there are lots of other reasons the price is going up.
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Every heard of a ryzome - once planted, it takes several years for a hop plant to mature and produce marketable quantities. Its not like you put a few seeds in the ground and harvest a big crop. And there is a reason why Oregon is a major producer of hops - its the climate and soil. Likewise, if the demand for beer - Oregon craft brewed beer in particular - is growing, then isn't the demand for hops also growing? along with the price (ie supply vs. demand or economics 101)
More beer drinkers, more Oregon and NW breweries and mico-breweries and a finite amount of acerage available for and dedicated to growing hops.
It helps to know something about economics and ag economics in particular before you suggest that a hop grower in Aurora Oregon ins going to start producing corn - a completely different commodity that will ALWAYS produce less money per acre than hops. You will never see an Oregon crop grower till under the mature plants that he/she has specialized in for generations to grow corn - which requires a completely different set of labor and capital inputs.
Really, get a grip on reality.
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If you actually read the article, you'll notice I never actually suggested that. In fact, the article is about a lot more than beer.
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The article itself actually talks about malt barley, not hops. Corn and barley can be quickly switched, as it is an annual grain. Moreover, barley is part of a larger feed market, and higher corn costs will drive demand for barley, causing its price to rise.
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Hops take three years to be fully productive, two to begin to produce. This is going to have a big effect on micro prices--far less on macro. Michael's point in the article was that hops enjoy none of the subsidies that corn does, so the incentive to produce is less. This is a better argument than corn displacing hops, as Dallas (Oregon?) notes.
The corn for barley thing is a real deal. As a greenie, I would be willing to chip in for more on my pint if I thought ethanol wasn't such a boondoggle and sop to Iowa farmers--but it is. And as green technology goes, it sucks, requiring a lot of energy to get the energy out.
Hey Jeff, how about a guide to cheap beer?
Options:
Octane. You pay as much for Inversion IPA (6.8%) as Mirror Pond (5%). The ROI advantage is clear.
Brew it yourself! If you buy all the ingredients, a typical 5-gallon batch (40 pints) will set you back $40. You'll get just over 8 six-packs, which works out to about $5 a pop--cheaper than you can buy it. (It will only take a few years before you can brew it as well as an average micro.)
Under no circumstances should you ever buy national brand beer. Worst-case, buy Henry's--it's brewed in Hood River.
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Again - a hop producer isn't going to switch. So while you might be able to construct an economic model in which farm subsidies favor one crop over another, in the real world a hop grower in Oregon continues to grow hops. The production of beer rises with demand and unless you can point to a corresponding increase in the production of hops it would appear the incentive to grow is directly related to price. The barley argument has some merit - but not hops. Government subsidies for corn do not discorage the production of hops.
FYI... Full Sail produces a drop in the bucket for Henry's
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"As farmers more and more decide to plan corn for ethanol rather than, say, delicious hops and malt barley for beer, prices for the consumer are just going to get worse at the grocery store."
Not my words - just responding to the blog - perhaps it was just a bad example to suggest that beer prices will rise due largely to ethanol production. There are other factors to consider, like the availability of water for irrigation - the location of producers relative to bio-fuel plants and the length of the growing season. Not everyone can switch and most are not prepared or able to do so.
Beer prices will rise, however, costs associated with energy (wort must be boiled and then cooled), new taxes and labor are likely higher on the list than the foreseen switch to corn production.
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The Economist disagrees with you.
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There's another post on the same topic over at the Freakanomics blog that suggests the higher price of beer may lower crime, so at least something good may come out of it yet.
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