Saturday, November 3, 2007

Beer lovers face higher prices as hops shortage looms

Here are some clips from an article about something that is near and dear to my readers' hearts: how a shift in the supply curve to the left will increase the price (demand held constant). Let the herding begin!

The Story: A worldwide shortage of hops — a key beer-making ingredient — could have a big effect on the taste of specialty brews and force smaller microbreweries to hike the price of their products. Brian Titus, president of Halifax's Garrison Brewing Company, said his brewmaster isn't sure he'll be able to make some of his beers in the new year because he hasn't been able to find some varieties of hops at all. "It's bordering on disastrous actually. If you don't have hops then you don't have beer," said Titus.

The shortage can be blamed on a perfect storm of events — bad weather in hop-growing areas of the United States, Europe and Australia and a depressed U.S. dollar. A worldwide shortage of hops could see some beer prices rise by up to 10 per cent.(CBC) Prices for the remaining supply of hops have doubled in recent weeks. With the low American dollar, European and Asian brewers are snapping up the remaining worldwide supply of hops.

Is there anything we can do? Can we substitute away from hops? (my questions)
The shortage has some breweries rethinking their brews and possibly changing beer recipes to cut down on the use of hops.
"So maybe you find something that smells similar but doesn't have the same taste profile and it doesn't have the same bitterness," said Titus.

Larger breweries are less likely to have to raise prices because they buy in bulk with long-term contracts. Craft brewers don't have the means to hedge against rising prices, like their industrial rivals.


Anonymous said...

Is the hops shortage related to the wheat shortage in Australia? There is a huge wheat shortage worldwide as well.

Canadian Economist said...

Yes! This is my understanding. According to BBC news, "World wheat prices have risen to a 10-year high following a dramatic fall in harvests sparked by a severe drought in Australia and crop diseases across parts of Europe and the Americas." More on this issue, including 3 reasons for the wheat shortage, can be found here