Monday, September 24, 2007

2007 Beer Harvest - News from Around the World

So, it seems that as the internets are focused on the hop harvest and what that might mean for our favorite beers and brewers, there is a much bigger and more real problem facing the brewers today: Barley. Before getting to that, however, let's get a few hop related questions out of the way. Vinnie at Russian River has good news for his beers.
"I’m already contracted for my 2008 hops and have been since early in 2007, so, I am ok for now. Additionally, when I saw this coming earlier in the year, I purchased additional hops. Next year will be interesting though, I’m curious if the hop prices will come back down or if they will stay at their current (high) level."
And how about Tomme, how is Port Brewing fairing in all this?
"We won't really know until we start the new production year. Our contract looks good on most of the hops that we need for Wipeout IPA and Hop 15. The rest of the beers are pretty hop neutral so seemingly good."
See, that ain't so bad now, is it? However, these next quotes are a bit sobering.
"The consumer can expect very real price increases. I'm guessing at least a $1 per bottle or 6 pack. I also should point out that hops while the price went through the roof, it is the barley crop that is worse. You can do all kinds of things to sub on a hop level. Good luck if we run out of barley? We just got hit with a 40% increase in our 2 Row price and that was a "good and fair" increase. Other brewers saw 50%. The Cost of Goods part of the business just got a whole bunch tougher." - Tomme Arthur, Port Brewing/Lost Abbey
Vinnie at Russian River seems to have a similar story.
"The bigger concern from a cost of goods stand point is the price of malt as it is up from 30%-100%. We just did a price increase recently anticipating the rise in ingredient cost, but, it may not have been enough as the malt are much higher than anticipated. We’ll see if we have to do another increase."
Add to this this info I got from Larry over at Deschutes, and it is clear we'll see price hikes across the board in 2008. "There is a three to four-fold price increase on hops... Consumer should expect to pay an additional 25 to 50 cents per six pack of craft beer."

Then, there's the news from farmers around the world. Below are several clippings from around the world, speaking to this years barley crops. Beer lovers, this isn't pretty.

From the Farm and Ranch Guide (USA)
"Barley producers are wrapping up an early harvest, with USDA estimating that harvest is 96 percent complete. This is well ahead of the five year average of 83 percent, and largely aided by the early planting. While acres of barley were higher this year due to rallying feed prices during harvest, there is some disappointment over yields in areas of ND, particularly into the middle to eastern reaches of the state. Additionally, quality is a concern for many with harvest weather at time wet.

For this reason, we expect a tremendous amount of feed grade barley that will struggle to compete with a tremendous corn crop. On the other hand, producers holding malt grade or borderline malt grade are advised to hold on, as premiums should rise sharply in the coming months."
For those who don't know, "Feed Grade" barley isn't what we're looking for as beer enthusiasts, where "Malt Grade" is king. Good news for malt-grade growers, not-so-good news for consumers.

This is out of Finland
"Sharp increases are expected in the price of food already at the beginning of next year. Domestic meat products are likely to go up by ten per cent. Dairy products, especially cheese, could go up by as much as 20 per cent, and bread could rise by about as much. In Central Europe, bread prices have risen by about ten per cent. The trend is attributed to the sharp increase in market prices of grain. In Finland, grain prices already surged in August. A tonne of Finnish malt barley is now going for EUR 110 more than at the beginning of the year, while the price of a tonne of wheat has increased by nearly EUR 90 and rye by more than EUR 60."
From Australia
Prices for wheat and barley are breaking records, fuelling concerns customers could be paying even more for staple foods. Bread, baked goods, beef, chicken, eggs, beer, and a range of other products are all exposed to grain prices. The AWB has this week increased its estimated pool return for its harvest by $30 a ton, making it $300 a ton for the first time. The coming barley harvest is in a similar situation, rising to $325 a ton for feed barley and $336 for malt barley– a jump of nearly $20 in a week, or $70 in three weeks.

This has been blamed on problems in the Ukraine, one of the bigger suppliers to Saudi Arabia, the biggest feed barley imported in the world.

“We have never seen prices like this,” said WA-based grain group CBH’s acting senior trading manager Jason Craig. “This is unknown territory.”
So, clearly something gonna have to give and I suspect we'll see global increases in price for beer, whisky, cereals and breads. There's a lot more out there, seemingly all saying the same thing. Some people are quick to point fingers at the alternative fuel push, but it appears there's a lot more to this story. Bad crops around the world, for more than one year, and this is just where we are.

Who is going to hurt most? Clearly, the smaller and younger brewers, those who haven't established contracts with hop dealers and who aren't able to procure bulk grain (for those picturesque silos we see in front of our favorite breweries). It seems that even the bigger guys will have to adjust pricing with their contracts in place - so I'll just assume now that small/new guys will need to have a higher percentage increase.

What about your favorite double IPA? Relax, I imagine you'll still find it, but you should just expect to pay a bit more.

Will this lead to a nationwide adoption of session beers? I really don't think so. For one, I don't think this will avoid a price increase, and in a 'bang for your buck' market like the US, who really wants a more expensive low ABV beer? Yeah, I suppose if you're STILL reading this, you might, but the vast majority of beer drinkers have other ideas.

Who will fair the best? Big companies, sadly. I'm not just talking about beer either. These large companies are best suited to weather a rough year, it is just the way it is.

Now, of course, I don't want to come across as shallow. If this trend continues, there could be global consequences for poorer countries. I can only hope, as you should, that this is a hiccup and not something that we'll see continue into the extended future. But know that as you're griping about the extra buck for a six pack, there are many facing much harsher realities. If anything, be more thankful you can afford the pleasure of a good beer or whiskey after work and make an effort to waste less - less beer, bread and grains.