Beer-onomics and beyond

BRUSSELS, June 13 (Xinhua) -- When it comes to beer, Belgium is truly world famous.

Steeped in centuries of brewing tradition, the country produces some of the world's finest brews, from blondes and ambers to more exotic cherry and chocolate beers.

But can Belgium's beloved beer be considered a global economic indicator? We put this theory to the test.

Have you felt a pinch in the pocket each time you ordered your favorite pint over the years? Has your favorite brew in the local pub gradually been getting more expensive?

Chances are the answers to these questions are a resounding yes. In the Hairy Canary pub in Brussels' posh European district, the price of a pint of lager has more than doubled over two decades. In 1991, the beverage cost 75 Belgian Francs or 1.80 euros (2.6 U.S. dollars). By 2001, prices rose to 2.20 euros. Today, the same pint costs 3.80 euros.

"That is quite a sharp rise in prices and it certainly does hit the wallet," said Paul Shaw, a British entrepreneur living in Belgium for over 25 years. "But I suppose such a climb is to be expected. After all, so many other items have also gotten expensive."

According to industry experts, even the economic recession in 2008 failed to affect beer sales. "We were pleased to see beer consumption remained strong through the worst of the global downturn. What we saw was people stuck to beer and cut back on champagne and wine," said Theo Vervloet, chairman of the Confederation of Belgian Brewers.

Last year, while much of Europe was struggling with recession, the Belgian beer industry reported a 3.8 percent growth in exports.

"About a decade ago, rise in beer production costs could be countered by taking various cost-saving measures and raising productivity. But in 2011, we will see a rise, even an explosion, of costs," Vervloet added.

While a large proportion of the price rise can be pegged to general inflation, there is no underestimating the effect of events taking place as far away as Germany, Russia, the Middle East and even China.

For example, three years ago, the German state of Bavaria reported a poor harvest of hops due to extreme weather conditions. Germany produces more than a third of the world's supply of hops, one of the chief ingredients of beer.

The bad harvest in Bavaria thus significantly dented global supply, sending beer-makers scrambling to identify alternative sources of hops. "That year, brewers who did not have adequate stocks ended up paying 10 times its regular price," said Vervloet.

The problem was compounded by major heat waves in the grain-producing regions of Ukraine and Russia last year, causing their governments to introduce strict export controls. In the case of China, extreme weather this year, an unusually dry spell followed by deadly flash floods, further disrupted supply.

Grain -- more specifically malted barley, wheat or rice -- is the most important ingredient in beer. When global supply of this key commodity falls and demand remains unchanged, prices rise.

Just how much this affected prices varies from region to region, depending on local market conditions. A spokesperson for AB InBev, the world's largest brewer based in Leuven, Belgium, told Xinhua that the company has adapted the price of its beers in recent years in line with inflation and to offset increases of the cost of business.

"In Belgium, production, logistic and operational costs have risen. This is mainly due to higher prices for energy, certain raw materials, packaging and labor costs," said InBev's Karen Couck.

In today's global economy, tensions in the Middle-East mean costlier fuel due to potential disruptions in supply. Recent political acrimony between Organization of Petroleum Exporting Countries (OPEC) members has further pushed up the price of Brent crude to about 117 dollars a barrel since they failed to agree to boost oil production. Hence transportation costs become higher across the world.

All these factors are ultimately reflected in the price we pay for our beloved pint of barley and hops as manufacturers look to cover additional production costs. However, the problem extends far beyond beer.

The production of several crops such as cereal in England and wheat in France has been hit. Large portions of Europe are reeling from the effects of its worst drought in a century. This is poised to cause a poor yield and hurt efforts to keep a check on skyrocketing food prices.

"Across northern Europe, rainfall has been down 50 percent on normal levels since March," French Agriculture Minister Bruno Le Maire said in a statement to the European Union earlier this month.

He added that the dry spell will also hurt livestock farmers, many of whom are already beginning to sell animals they will not be able to feed in the future.

Countries such as Belgium and France are now discussing steps to protect farmers. In the pipeline are plans to make available as much as 355 million U.S. dollars to help affected farmers tide over until they see better weather conditions.

The challenge of food security vis-a-vis climate change is set to be of the main topics of discussion for world leaders and policy-makers at the upcoming conference of the Food and Agriculture Organization of the United Nations (FAO) in Rome, Italy on June 25. The main goal is to avoid a repeat of the global food emergency of 2008 that sparked violence and widespread unrest in many countries.

For now, however, a parched Europe continues to look to the skies, praying for rain.