Wednesday, July 11, 2007

Drinking a few cold ones this summer may leave you with more than a pain in your head the next day — your pocketbook is feeling the pinch, too.

The retail price of beer rose 3 percent from May 2006 to May 2007, according to the latest Department of Labor figures. The overall inflation rate was 2.7 percent.

The price of barley, a main ingredient of beer, has risen because of the increased demand for the alternative fuel ethanol.

Farmers are growing less barley and more corn, a main ingredient in the biofuel, to keep up with the demand.

U.S. farmers planted the largest corn crop in 63 years in 2007, 92.9 million acres, up 19 percent from 2006, according to the U.S. Department of Agriculture.

“A lot of that is being caused by the demand for corn because of ethanol, and that’s actually pushing farmers to grow more corn,” said Ray Klimovitz, technical director for Master Brewers Association of the Americas.

Mr. Klimovitz said corn typically is grown in the Midwest and the Dakotas, but even parts of Canada are growing corn to meet the demand.

“In parts of the country and even into the Canadian provinces, corn is now being grown further and further north, putting a squeeze on barley acreage,” Mr. Klimovitz said. “It’s just an example of supply and demand; if it’s hard to get, the price goes up.”

Mr. Klimovitz said the price of beer is rising because other raw goods and commodities are also rising.

“It’s exacerbated by the fact that metals are going up [such as] aluminum cans, steel kegs,” Mr. Klimovitz said. “So you put all that together, and you can see a push for price increases.”

Some small brewers say they’re feeling the impact.

“We haven’t really been raising prices dramatically, if you factor in the prices of raw goods and gas, it’s all just a direct effect of freight cost,” said Neil Stewart, director for marketing for Flying Dog Brewery.

Mr. Stewart said Flying Dog, based in Denver, was able to keep costs low by buying brewers in other parts of the country.

“We bought Wild Goose Brewery in Frederick, Maryland, about a year ago and that was our way to combat a lot of the freight costs,” Mr. Stewart said. “That’s the main way we’ve combated raising our prices.”

Jim Broten, who owns a farm in North Dakota, said that barley prices have gone up, but that more is being planted this year than in 2006.

“There’s a concern in the industry that they won’t have enough quality barley, the acres are up this year, but last year it was a big concern.”

According to the National Agriculture Statistics Service, barley growers seeded 3.5 million acres for 2006, the lowest since barley planted acreage estimates began in 1926.

Growers seeded 17 percent more in 2007, but the number is still low.

Mr. Broten said the rising price of barley will not dramatically increase the retail price of beer.

“With the barley increase, our prices have gone up, but that has a minimal effect on the price of a can of beer,” he said. “It’s less than the price of a penny” per can or bottle.

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