Biofuel brews up higher German beer prices

updated 1:41 p.m. ET May 30, 2007

AYING, Germany - Like most Germans, brewer Helmut Erdmann is all for the fight against global warming. Unless, that is, it drives up the price of his beer.

And that is exactly what is happening to Erdmann and other German brewers as farmers abandon barley — the raw material for the national beverage — to plant other, subsidized crops for sale as environmentally friendly biofuels.

"Beer prices are a very emotional issue in Germany — people expect it to be as inexpensive as other basic staples like eggs, bread and milk," said Erdmann, director of the family-owned Ayinger brewery in Aying, an idyllic village nestled between Bavaria's rolling hills and dark forests with the towering Alps on the far horizon.

"With the current spike in barley prices, we won't be able to avoid a price increase of our beer any longer," Erdmann said, stopping to sample his freshly brewed, golden product right from the steel fermentation kettle.

In the last two years, the price of barley has doubled to $271 per ton as farmers plant more crops such as rapeseed and corn that can be turned into ethanol or biodiesel, a fuel made from vegetable oil.

As a result, the price for the key ingredient in beer — barley malt, or barley that has been allowed to germinate — has soared by more than 40 percent, to around 385 euros or $522 per ton, from around 270 euros a ton two years ago, according to the Bavarian Brewers' Association.

For Germany's beer drinkers that is scary news: Their beloved beverage — often dubbed 'liquid bread' because it is a basic ingredient of many Germans' daily diet — is getting more expensive. While some breweries have already raised prices, many others will follow later this year, brewers say.

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