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Price Increase Brewing for Your Favorite Craft Beer

The artisanal movement in the United States has swept up even the most plebian of drinks.

Craft beer and microbrews are now wildly popular. In fact, craft brews make up 10% of the $100-billion U.S. beer market.

But your favorite local brew is set to get more expensive soon, and may even disappear.

You see, there’s a looming shortage of barley – a key ingredient in beer – in North America. The amount of barley used varies depending on the type of beer, but, on average, about 21 spikes of barley are used in a 12-ounce bottle.

Shortages mean the price of barley is going to rise, and craft brewers may have no choice but to raise the price of your favorite six-pack.

And some of the smaller breweries may not be able to weather the hike…

Blame It on the Rain

The barley shortage is two-fold: low acreage and weather.

Despite barley being easier to grow than some other crops – because it requires less water – farmers in the United States have planted less acreage with barley every year.

Acreage planted has gone from a high of 17 million acres in 1942 to barely over three million acres this year, according to the U.S. Department of Agriculture.

Farmers are growing less barley these days because they make more money growing other grains, such as corn and wheat.

Add to that a dash of bad weather in the United States and Canada, and we have a sour-tasting brew for beer drinkers.

The three states that grow the most barley are Montana, North Dakota, and Idaho. But too much late summer rain in Montana and Idaho has caused much of the barley crop to sprout in the field, making it useless for beer making.

On top of that, Canada, the world’s second-biggest exporter of malting barley, has been frigid lately… cold enough, in fact, to freeze some of the barley crop.

That’s not good news, especially when you consider that the country was already harvesting its smallest barley crop – 7.2 million metric tons – since 1968 before the freezing temperatures hit.

Anheuser-Busch InBev’s (BUD) Pat Rowan told Reuters, “In North America, it’s probably the worst year I’ve ever seen [for barley].”

Add to that the fact that the amount of barley held in inventory is near historic lows, and you have a major shortage.

Time to Stock Up

Companies such as BUD are unlikely to see the effects of the resulting higher barley prices. Instead, craft beer makers are more likely to feel the pinch, because smaller brewers don’t have the long-term supply deals for barley that the global brewing giants do.

The iconic Boston Beer (SAM) is a large operation and Craft Brew Alliance (BREW) is partially owned (32%) by BUD, meaning both their brews are probably safe from price hikes.

However, the very small craft brewers will suffer. From under 50 microbreweries in the 1970s, our country now has more than 3,000 such breweries. And there’s another 1,500 microbreweries on the drawing board, too.

Higher barley prices may put some plans on hold, and could force a few existing brewers out of business.

As they say in the industry, “No barley, no beer.”

And “the chase” continues,

Tim Maverick

Tim Maverick

, Senior Correspondent

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