Beer Prices Barrel Higher
As today is fourth of July many will be paying more for their beer this year than in 2006. The price for beer has risen 3% in May then last year. With the most vital reasoning being the booming ethanol market. The increase is due to the fact that more farmers are using less land to harvest the malting barley, which is one of the main ingredients in beer, and more land to harvest corn. Farmers are growing more corn because there is more demand right now for corn to produce a fuel alternative blended with gasoline, which is known as ethanol. Also, the potential profits for corn and soybeans are higher then the barley.
The increase in price is not only due to decrease in barley but also there has been an increase in glass, cardboard, other grains, energy, transportation, and also labor. The malt, which is made from the barley, has increased 9% in the past year. Barley is becoming more expensive due to the fact that more of the corn being produced is being sold for ethanol rather then to feed the livestock. Therefore, more grains are being grown to simply feed the farm animals. A statistic shows that corn plantings have increased 19% in the last year.
So how much barley is used in a barrels of beer? This question is dependent on the type of beer, weather it is a light beer or a German dark beer. From the department of plant pathology website it says that on average 24-25lbs of barley is used in one barrel of beer. Company's such as Coors say that "the higher prices are not fully covering their increased cost", but "the competition is too fierce to raise the price too much." A statistic shows that U.S. age 21 and older on an average drank 30 gallons of beer in 2006. Also the statistic, according to the Beer Institute, says that Americans drink more beer on July 4th than any other day in the year.
After reading this article i wonder if the price of the home brewing kits are going to start increasing and if they are going to be used more. Also, the question of if the brewers who use a excess amount of barley will cut back on the barley, or boost the price. These questions can only be answered in the future.
2 comments:
Jordan (and others), what do you think the price elasticity of demand for beer is? Is it elastic or inelastic? According to this study, the elasticity of demand for regular beer is estimated to be E = -1.14 (making it elastic). This means that a 10% increase in price will reduce quantity demanded by 11.4%. Do you think this estimate makes sense? Remember, one key determinant of elasticity is the number of available substitutes. What substitutes are there for beer?
The elasticity of beer is estimated to be E = -1.14 (making it elastic), I don't think it makes sense. There are a large number of sustitutes for beer,includng wine and other "hard" liquor; however, a beer drinker is a beer drinker is a beer drinker! I think people, for the most part, are loyal to a particular brand and that only large increases in price would make them switch to a cheaper beer or a substitute.
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