The price of beer as a crude economic indicator, revisited

A few posts back, I mentioned how the first truly shocking price increase from ongoing inflation was seeing a 6-pack of beer for $16 at our local South Florida grocery store. Well, yesterday, my brother in Denver sent me a picture of a 6-pack of Voodoo Ranger for $19 in Sam’s Club. This was an interesting data point, because Voodoo Ranger is made in Colorado, which means you cannot attribute the newly inflated cost to rising transportation costs.

Then it hit me – this is likely about the cost of wheat. I had naively assumed that any inflation associated with the war in Ukraine and the fertilizer crisis (which is really an extension of the energy prices – the biggest input in fertilizer manufacturing is natural gas; but there are also geopolitical issues with where nutrients come from and hoarding) had already been priced in.

Since World War II, most “domestic” American beers (think Coors, Budweiser, and Michelob) are made from rice. But all of the cool other varieties involve wheat. Is it possible that the cost of a 6-pack has more than doubled overnight because that’s what is happening to wheat prices around the world?

As I mentioned in my posts from when the Ukraine war broke out, Ukraine produces enough wheat to feed nearly a billion people worldwide. That harvest is now kaput. Sure, the US has the prairie. But if the cost of wheat is going up that high around the world, there is a market for selling wheat at a much higher price and our agricultural conglomerates are going to take it. In all fairness, though, the batshit increases in gas and diesel are probably hurting our ag companies severely too.

I have no idea what breweries do or don’t do to hedge against volatility in the prices of their ingredients. Maybe massive brewers have some system, but microbreweries surely do not. So their costs are going to reflect the spot price of wheat.

I don’t know, this is just a theory. But if it’s true, we might be on the lookout for catastrophic price increases in other products that involve wheat (flour, bread, pasta). I have been meaning to check it out, but I would be interested in any feedback readers might have from around the country/globe. Our grocery stores here in Florida still cannot keep pasta on the shelves for some supply chain reason, so that one at least is a bit of a moot point.

5 thoughts on “The price of beer as a crude economic indicator, revisited

  1. No problem with pasta here in Quebec, but some products that we buy are hard to get. One example is kraft swiss cheese slices. As for beer, there is a strike at one of the brewers.

    Liked by 1 person

    1. Yeah, I put videos of them in my post on the commodities markets. It’s getting ugly in a lot of places. In Sri Lanka, whenever a politician (or wealthy person) goes outside, they have a mob that chases them down and physically attacks them. The police are just mowing people down. It’s getting so bad and things have just started.


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