Beer fears as biofuels crowdout barley.
Uh oh!
By KEVIN MORRISON
26 February, 2007
Financial Times
The rapid expansion of biofuel production is welcome news for environmentalists but for beer drinkers it is a different story.
Strong demand for biofuel feedstocks such as corn, soyabeans and rapeseed is encouraging farmers to plant these crops instead of grains such as barley.
Jean-Francois van Boxmeer, chief executive of Heineken, the Dutch brewer, warned last week that the expansion of the biofuel sector was causing a "structural shift" in agricultural markets.
One consequence could be a long-term rise in the price of beer. Barley and hops account for 7-8 per cent of brewing costs.
The price of barley, which is used for beer, whisky and animal feed, has soared in the past year. Futures prices for European malting barley have risen 85 per cent to more than Euros 230 (Pounds 154) a tonne since last May.
Barley feed futures have risen by a third to CDollars 180 (Pounds 79) a tonne on the Winnipeg Commodity Exchange over the same period.
Barley production in the US fell to 180.05m bushels in 2006, the lowest since 1936. The value of the crop was the lowest since 1970 - at Dollars 498m. The area of land used for growing barley 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 and heavy rains in Europe.
In the US, the department of agriculture estimates that global barley production will reach 138m tonnes, level with 2006 but down 10 per cent on 2005. Global demand has risen 2 per cent to 145.5m tonnes, the fourth year in the last five in which demand has exceeded supply.
Global stockpiles have shrunk by a third in two years.
"In the US, land that was cultivated for growing barley has been given over to corn because of ethanol demand," said Levin Flake, grains trade analyst at the US department of agriculture.
The US, which in the 1980s was a leading exporter of barley, was now a net importer, he said.
The USDA expects US barley acreage in the next 10 years to remain flat. That might not be the case for the price of beer. |
