Easy on the tip­ple, Trevor

Finweek English Edition - - Economic trends & analysis - HOWARD PREECE

THE ON­GO­ING GLOBAL DRIVE TO FIND en­ergy al­ter­na­tives to oil (nu­clear power and coal aside) is lead­ing, in­evitably, to some curious out­comes.

One such con­se­quence is in­creas­ing up­ward pres­sure on the price of beer.

No, this isn’t sim­ply an­other vari­a­tion of the familiar theme of push­ing up taxes on drinkers to fi­nance other so­cial ob­jec­tives.

It’s the work­ings of good old sup­ply and de­mand eco­nomics.

Kevin Mor­ri­son of Bri­tain’s Fi­nan­cial Times notes: “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.”

He ex­plains: “Strong de­mand for bio­fuel feed­stocks such as corn, soya beans and rape­seed is en­cour­ag­ing farm­ers to plant th­ese crops in­stead of grains like bar­ley, driv­ing up prices.’’

Jean-Fran­cois van Boxmeer, CEO of Dutch brew­ing gi­ant Heineken, warned in Fe­bru­ary this year that a ma­jor growth in the bio­fuel sec­tor was start­ing to cause a “struc­tural shift” in the Euro­pean and Amer­i­can agri­cul­tural mar­kets.

Van Boxmeer said this could lead to a longterm up­ward move in beer prices. Bar­ley and hops make up some 7%-8% of brew­ing costs.

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

In the Eight­ies the US was a lead­ing ex­porter of bar­ley. Now it’s a big im­porter. Bar­ley acreage has shrunk from 13m to only about 4m.

And bar­ley is not the only prob­lem for beer­drinkers.

Brew­ers also face surg­ing price rises for trans­port, en­ergy, alu­minium and glass bot­tles.

So here’s an early tip for Trevor for the 2008 Bud­get: go easy on the ale, for once.

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