Brewskie Bulls

If you are a Beer Connoisseur, you could be in for a surprise this year… brewers from Australia to the United States are having to decide between tweaking existing recipes or experimenting less with new brews because of a worldwide shortage of a key ingredient - Hops - plus higher prices for other elements in their formulas.

And just like other essential fluids in life, like oil and gasoline, Beer prices are likely to climb. Educated guesses are at a minimum of at least a 10 percent jump in beer prices for the average consumer before the end of the year…

The International Herald Tribune noted in an article this week that beer sales “have been relatively flat in recent years among major brewers - including Anheuser-Busch, Molson Coors and Miller, a SABMiller unit - while small, independent brewers in the United States have experienced tremendous growth.

"The craft brewing industry experienced a 12% increase by volume in 2006, with 6.7 million barrels of beer. Sales among microbreweries, which produce less than 15,000 barrels per year, grew 16% last year."

Do you remember the conversation we had last week with Hillary Cramer (“Ahead of the Curve”)? Her whole premise is figuring out the six-degrees of making bacon, or in this case, making beer (no pun intended): There are plenty of connections there.

According to the Herald Tribune, “everyone in the brewing industry is facing cost hikes in every step of production: Fuel, aluminum and glass prices have been going up quickly over a period of several years. Barley and wheat prices have skyrocketed as more farmers plant corn to meet increasing demand for ethanol, while others plant feed crops to replace fields lost to corn.”

For the past ten years, there’s been a glut of hops. That resulted in farmers refraining for producing more until the supply was diminished.

A quarter of the world's hops are grown in the US, where acreage shrunk by 30% between 1995 and 2006. Add to that dynamic the usual weather variables, like Australia's worst drought on record, and hail storms decimating crops across Europe, plus the extreme heat in the Western United States affecting both yields and quality. Not a pretty picture.

The result: a certain degree of "frothiness" in the prices for brewskies.
So far, price increases have been pretty modest - less than a dollar a 12-pack at retail, but analysts have identified the trend, and it’s towards $10 six-packs.

There could be a positive by-product of higher gasoline and beer prices: Fewer incidents of drinking and driving fatalities. That remains to be seen.