Global Economics

German Beer Prices Set to Bubble Up?


Thanks to a barley shortage, a tax hike, and biofuels, Germany's brewers say the price of beer—at least for wholesalers—will rise

A barley shortage in 2006 will raise the wholesale price of German beer this May. Lobbyists connected with the brewing industry claim the trend toward biofuels in Europe has also cut into the German barley harvest -- but are they just blowing foam?

A spike in the price of corn tortillas last January drove thousands of poor Mexicans to protest in the streets, and observers said the increase was caused by a huge demand for corn as a biofuel in the United States. Now German brewers have announced that a surge in the price of barley -- in part, they say, because of biofuel crops -- will push up the traditionally low price of German beer.

"On May 1 the prices for wholesalers will rise moderately," said Jörg Schillinger, head of the German arm of the brewing multinational InBev, which owns German mass-market brands like Beck's and Franziskaner. Whether beer drinkers will have to pay more for a pils, though, remains to be seen.

The price of barley has doubled on the German market in the past year, from €200 ($271) to €400 per ton, and both brewers and farmers agree that the reason for the spike is a barley shortage caused by a meager harvest in 2006. A three-percent rise in German value-added or sales tax is also partly to blame -- brewers decided not to pass the tax on to wholesalers when it came into effect on January 1.

But some in the brewing industry also laid blame on biofuels. German government and European Union incentives have started a shift away from barley cultivation on German land and toward biofuel crops like rapeseed. Brewers and beer-industry experts said encroachment of these trendy crops had "dramatically exacerbated" pressure on the price of barley. Some lobby groups in industries related to beer production -- like the German Millers' Association -- want to see a cut in government biofuel subsidies.

But millers in other countries, like the United Kingdom, have also come out against biofuel subsidies -- apparently because grains used for bread and beer need more milling than biofuel crops.

Farmers call the biofuel criticisms "threadbare." The German Farmers' Association estimates that the total amount of barley used for a 24-bottle case of beer accounts for 33 cents of the total price. Brewers, moreover, have traditionally organized to keep the price of barley low, according to Jens Rademacher, the association's grain expert -- which is the reason German barley cultivation had been scaled back in recent years, from 840,000 hectares in 1999 to 540,000 hectares in 2006.

Provided by Spiegel Online—Read the latest from Europe's largest newsmagazine

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