Beer prices impacted by worldwide hops shortage
By: Heather Caldwell, Staff Writer
Issue date: 1/15/08 Section: Features
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A worldwide hops shortage and malting barley price increases have forced one of Chapel Hill's renowned breweries to raise its prices.
During the past year, hops prices increased an eye-popping 300 percent, from $5 per pound to $20.
Combined with a 30 percent price increase for malting barley, Carolina Brewery had to up the cost of a pint by 25 cents to break even.
"Increasing the price is the last thing we wanted to do," said Jon Connolly, director of brewery operations at Carolina Brewery.
But the shortage and price hikes have not affected the Brewery's sales or recipes, Connolly said. And Carolina Brewery continues to brew its Flagship India Pale Ale, the most highly hopped beer that they serve.
"I think the hop and malt crisis is highly known, and people understand, just like if there was a gas or milk shortage," Connolly said.
Beer is made from just four ingredients: barley, water, hops and yeast. In 2007 significant price increases for two of the ingredients had an impact on the brewing industry.
John Withey, brewmaster at Top of the Hill restaurant, said that although ingredient prices have increased slightly, the restaurant has not raised its beer prices because it buys supplies years in advance.
"We had contracted forward for these raw materials, which a lot of people have neglected to do in this country, and they've been caught," Withey said.
The hops crop was directly affected by bad weather in Europe, extreme heat in the Pacific Northwest and a drought in Australia, leading to a lower yield than past harvests.
The barley price increase is more modest, but it still can affect the price of your beer.
One of the causes of the price increase is a trend among Midwestern American farmers to replace barley with more profitable biofuels such as ethanol, said Carl Griffey, professor of crop and soil environmental science at Virginia Tech.
Adding to problems with harvests, the methods breweries use to contract for ingredients have also affected hops and barley supplies.
Beer ingredients used to be purchased on a forward contract, said Stephen Kenny, a research scientist at Washington State University.
Under this system, breweries would tell suppliers how much of a certain ingredient, such as hops, they would need for future years, allowing the supply and price to be set ahead of time.
Recently, instead of paying a set price for a number of years, brewers took advantage of lower prices.
Now farmers are taking steps to combat the shortages and cash in on the situation.
"In response to higher prices, more growers are planting hops, but that won't really be able to help the situation until 2008 or 2009," Kenny said.
Although the crisis seems alarming, local brewers said they are optimistic about future harvests.
"The crop outlook for 2008 is not the best," Connolly said. "We think prices may go down for 2009."
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