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April 23rd, 2007 at 7:14 am

The Beer-Fuel Dilema

Germans will have to dig deeper to indulge in their beloved beer in the next few months as barley is increasingly displaced in the country’s fields by heavily subsidized crops used for biofuels.

Barley ready for harvest

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"Many brewers have no choice but to raise their prices. They decided not to pass on the three-percentage point rise in value-added tax that came into force in Germany on Jan. 1, but in this case they have no alternative," said Kai Schuerholt, a spokesman for the German brewers’ association. The German arm of Belgian brewer InBev, which owns the Beck’s and Franziskaner brands, confirmed it would be implementing "slight" price rises, while Germany’s Radeberger said it was considering a similar move.

It is hard to overstate the importance of beer in Germany — it is drunk in vast quantities and the market is fiercely competitive and extremely price-sensitive.

A half-liter glass currently costs as little as three euros (US$4) in a bar or restaurant, a price to leave drinkers in most other western European countries green with envy.

Average daily consumption of beer in Germany last year was 111.6 liters per head, equivalent to every one of the country’s 82 million people drinking a 0.31-liter glass every day, according to figures released Friday.

But the price of barley, which is used to make malt, an essential ingredient in brewing, has doubled in the space of a year from 200 to 400 euros per ton on the German market.

Brewers and farmers say an extremely poor barley harvest in 2006 has exacerbated an emerging trend of converting barley fields to growing the plants used in biofuels, such as rape seed. The amount of land used for growing barley in Germany is receding by five percent a year.

The march of biofuels is inexorable. Of the 12 million hectares farmed in Germany, two million are already being used for plants which can be turned into biofuel.

"Biofuels are monopolizing the land," said Manfred Weizbauer, the head of the German millers’ federation, which is calling for a cut in the subsidies granted to biofuel crops.

"The German government has got to be reasonable and not give more importance to energy security than to food security," he said.

The impact of the biofuels is not restricted to beer, with the price of bread likely to rise by 10 percent as a result of reduced grain production, the German bakers’ federation has warned.

Germany is not alone in experiencing the effects of converting arable land to new uses and although it is not suffering the potentially catastrophic consequences felt by Mexico, where the phenomenon has caused maize prices to climb sharply, German millers fear the effects of steadily rising cereal prices.

The biofuels policy is encouraged by the European Union, which wants vehicle fuel to contain at least 10 percent of the ‘green’ fuel by 2020.

But Jens Redemacher, the head of the cereals division of the federation of German farmers, said the brewers also had themselves to blame.

"They have demanded lower and lower prices for barley which has caused farmers to abandon growing it because it was no longer profitable. So biofuels are not the only culprits," he said.

The food industry is "just going to have to get used to having a competitor for the purchase of cereals, especially those used for biofuels," Redemacher said.

Via the China Post

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