What Does That Have To Do With the Price of Tea in China?

By on January 7, 2008 @ 7 PM (No Comments)

In what I’m sure will one day be a case study in a graduate economics class, the raw materials that go into making beer (I’m sure you know them by heart) are experiencing extreme price increases, due in part to bad weather in Europe hurting malts and a dramatic decline in domestic hops growers (91% fewer than 57 years ago). This domestic trend is a result of hops and barley stocks being undervalued, which means farmers are turning to crops in higher demand such as corn and soybeans (think ethanol). Do a little root cause analysis and you can figure out that a lot of this has to do with gas prices, which have soared to the point that consumers are more willing to consider things like ethanol.

These trends will impact us, and it will show more with the beer we actually like – smaller craft brews. These smaller producers can’t absorb costs like the large players who make piss water, so they’ll be passed to the consumers – $1 to $4 more per case in the stores.

That’s right: Rising gas prices = Rising beer prices.

So to answer the question in the title – a little international macroeconomic theory related to beer can suddenly make us aware of how those “unrelated” things can affect that price of tea in China.

You can read the full Boston Business Journal story here (requires free registration).


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