By Joel Burgess

Jean-François van Boxmeer, the Dutch brewer and chief executive of Heineken, warned last week that the expansion of the biofuel sector was beginning to cause a “structural shift” in European and U.S. agricultural markets.

So, how may this affect you? Beer drinkers take notice.

According to the article, “Blow for Beer as Biofuels Clean out Barley,” the strong demand for biofuel feedstocks such as corn, soybeans, and rapeseed is encouraging farmers to plant these crops instead of grains like barley.

Barley is used for making beer, whiskey, and animal feed. Due to the high demand and diminishing supply of barley, prices have soared over the last 12 months. Therefore, the rapid expansion of biofuel production creates unintended and dire consequences for the world’s beer drinkers. Barley and hops account for about 7-8 percent of brewing costs. Thus, a continual shift upwards in the price of beer is definitely brewing.

However, other factors have attributed to an increase in price, such as: future prices of malting barley (85% increase); barley feed futures (risen by a third); U.S. barley production (lowest level since 1936); world production (10% decrease); the value of the crop (lowest since 1970); land devoted to its production ( lowest since 1866); an Australian drought (cut the country’s crop by two-thirds); and heavy rains in Europe.

At the same time, global demand for barley has risen 2%, the fourth year in the last five in which demand has exceeded supply. As a result, global stockpiles have shrunk by a third in the past two years and left the barley trade vulnerable to further supply problems this year.

“In the U.S., land that was cultivated for growing barley has been given over to corn because of the ethanol demand,” said Levin Flake, a grains trade analyst at the U.S. department of agriculture.

The U.S., which in the 1980s was a leading exporter of barley, is now a net importer as barley acreage has shrunk, said Mr. Flake, and the USDA expects U.S. barley acreage over the next 10 years to follow the same trend.

Not good news for the prices of frosty brews.

Morrison, Kevin. “Blow for Beer as Biofuels Clean Out Barley.” Financial Times. 25 February 2007 .