Thoughts, essays, and writings on Liberty. Written by the heirs of Patrick Henry.

“You have put your finger on the dilemma of all government, and the reason I am an anarchist. The power to tax, once conceded, has no limits; it contains until it destroys.”     Robert A. Heinlein,    The Moon is a Harsh Mistress

December 18, 2007

The Price Of Government Comes Home

by Brad Warbiany

The government believes you should use ethanol as a fuel. They have enacted policies to incentivize ethanol production. Those policies, as I pointed out here, have unintended consequences:

But let’s look at what’s happened. First, we started hurting poor Mexicans by threatening their access to affordable corn tortillas, a staple of the diet for the impoverished in that country. Then, it was found that the high cost of feed corn for animals will end up resulting in high costs and lower supply of meat. And now, it’s spreading to milk. You know, full of calcium, the stuff we tell children will give them strong bones? Great work, Congress!

And now it’s hit me square in the gut, in my beer supply:

I’ll explain what’s happened to the price of Malt and Hops and why, what can be done about it, and why you are going to see prices jump likely between 15 and 25% on the retail end for Craft brews in a matter of weeks.

In late September I was told by another brewery that malt was going up about 40% and hops 30 to 40%. I started calling suppliers and they confirmed this was true, and also that they have no prices locked in yet. Additionally, I was informed that many farmers are not honoring their contracts to the fullest extent (don’t blame the farmers please) due to the crazy price situation that’s evolving in crop farming, with corn being twice the price it was last year.

What does corn have to do with it? Our supplier tells us that with Uncle Sam’s push and financial support for ethanol the price of corn has doubled and many farmers grew corn instead of barley this year. In the UK, where the EU has also required ethanol production, rape seed is the crop of choice and again, a lot more profitable than growing barley and wheat. Couple this with bad weather and growing conditions this year and in Europe and you have a crisis in barley supply. We were told this was coming in early summer, but we assumed our malt company might have meant a 10 to 15% increase in price, not this. When we finally got nailed down pricing last week, one malt price was up 45% and the other up 56%.

As a homebrewer, I just felt this pinch. I knew it was coming eventually, but wasn’t sure how soon or how drastic it would be. I needed to buy some malt for this weekend’s brew session, and went to my usual supplier, who usually has the best prices on just about everything. I was shocked to see that malt prices had jumped 30-50% (depending on variety) since my last order in November.

I’ve been further dealing with the effects of a worldwide shortage of hops, as supply has become inconsistent and prices have shot up, but I can at least blame that on the market. There are some very natural supply-and-demand forces that have affected that market over the last decade, and the market will respond to increase supply. And, to be fair, there are weather-related reasons that the barley crop was not as plentiful as past years. But when government steals my tax dollars and uses them to further exacerbate shortages in the things I want to buy, it’s a double-whammy, and it makes me resent them even further. Instead of having natural supply-and-demand, there is entirely unnatural and inefficient government-created demand that is taking away the incentive to supply malt.

The last thing I need is government policies creating additional cause for shortages. It may be rather “unimportant” that I homebrew beer. And after all, as a hobbyist, I’m willing to spend plenty of money on my hobby, as my constant equipment purchases show. But I look at brewing as a potential future career, and watch as struggling breweries are now forced to deal with this shortage and hope that their consumers are willing and able to afford price increases.

For me, this is an annoyance. For some craft brewers, this might be the difference between being able to stay afloat in business and shutting their doors. It may just be beer, but as I pointed out when discussing the milk, tortilla, and meat price increases:

Simply put, look at how the cost of government is affecting your food. In addition to all the farm subsidies, price supports, and all the other nonsense, they decided to make a completely separate mandate regarding ethanol in the energy supply. What happens? Your cost of living goes up, and your standard of living goes down.

They’ve made some lobbyists and farmers very rich with these policies. And being politicians, they’ve been using your money– not theirs– to do it. They take your taxes, use them to create incentives which make what you want to buy more expensive, and then (especially in the example of beer) tax the hell out of the end product anyway.

I realize some of our readers are in favor of government. So please, can you even attempt to justify this? Why should I be paying three different ways for the government to make some farmers very rich?

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3 Comments

  1. If you’re serious about homebrewing as a source of income, my advice would be to sell off the books. By avoiding taxation and regulation, your profits will MORE THAN OFFSET the cost of higher raw materials.

    Comment by FSK — December 18, 2007 @ 3:19 pm
  2. FSK,

    I’m not serious about homebrewing as a source of income, moreso in brewing as a source of income. I use homebrewing as a hobby, if I had to brew to generate income, while egregiously flouting laws, I just don’t think the risk/reward is where I want it to be.

    If that day comes, it will involve opening a brewery or brewpub, within the law. Although, I’ll probably have to hire one employee just to deal with stupid regulations, because if I have to do it myself, I’ll go insane!

    Comment by Brad Warbiany — December 18, 2007 @ 8:37 pm
  3. Yeah do something more illegal and more profitable, Brad.

    Comment by TanGeng — December 18, 2007 @ 8:56 pm

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