Biofuel vs. Beer

We are hearing more and more these days about energy efficiency and global warming and the quest to discover alternative fuel sources.  In my mind, there is no doubt that we need to explore new options but the sudden rush to biofuels is starting to have an impact on how farmers are running their businesses.  The other day I read an article about how German farmers are choosing to move away from barley to rapeseed and corn which can be made into ethanol and biodiesel.  As a result, the price of barley has doubled over the last two years leading to a 40% increase in malt prices.  So far, German brewers have absorbed much of this cost increase but it appears that increase in cost is beginning to make its way to the consumer.  The article also mentions that Germany is the largest European consumer of bioenergy while also a leader in producing wind energy and recycling refuse.  I remember the heavy emphasis on returnable bottles and recycling on my trips to and through Germany so it comes as no surprise to me that the Germans have embraced this new energy source.  The question is how will an increase in beer prices affect their dedication?  Will the government step in to help ensure that enough barley is also planted to stabilize barley/beer prices?  An increase in barley prices should help keep some farmers from switching or maybe even attract farmers from other non-biofuel crops without any government intervention.  Its an interesting problem that Germany and the rest of the world, including the US, will face as they adopt biofuels.   

Comments

[Tim]

Very interesting.

We've seen similar effects here in North America, where the demand for corn for ethanol has led to an increase in the price of corn. But in Mexico, because of NAFTA, the prior low price of corn led to farmers switching away from corn. Now that corn demand in the US is up due to ethanol, corn isn't crossing the southern border, and the increase in the price made tortilla prices jump 50%.

I'm sure there will be a quick supply response in both cases, but like you say, it sure will make it tough in the short run to support something renewable energy when you see the cost in your staple food products. I saw a number of negative articles on ethanol relating to the tortilla price increase.