While food prices for basics such as milk, eggs and bread have been increasing, another beverage that many Americans would also argue is a basic is in double trouble with key ingredient shortages and rising oil costs: beer.
Beer retail prices had remained constant for the last several years, but began to increase in the second half of last year and continue to do so. Even worse news is that you will probably continue to pay more for your Budweiser (BUD) (or any other beer of choice) even if prices ease on other foods.
The two main grains used to make beer have risen dramatically in price over the last year. Malted barley, which is the second biggest ingredient used in making beer after water, is the grain used to create alcohol during beer fermentation. Barley prices have risen by double-digit percentages over the last year due to worldwide demand of all grains.
The other main ingredient in beer is hops. Some hop varieties give beer its bitter taste while other varieties give beer its aroma. Hops have had even more dramatic triple-digit percentage price increases over the last year and continue to be in short supply.
While poor weather conditions have something to do with the hop shortage, the main problem actually began in the 1990s when there was a large surplus of hops. The surplus resulted in huge price drops that extended through the 1990s since the beer ingredients derived from hops can easily be stored for long periods of time.
The low hop prices drove hop growers to plant more profitable crops. Many switched to corn and soy due to the rising demands of ethanol. Then in late 2006, there was a fire at a large hop storage facility that took even more of the grain out of the market.
