those crazy economics

Go figure. That ol’ supply and demand curve is still right after all these years. As you may have heard, the price of hops has skyrocketed over the past year, increasing about five or six-fold. This has really caused a stir in the beer world, as breweries and homebrew shops have been stockpiling supply due to shortages and super-high prices. (I think this has exacerbated the problem, but that’s for another post…)

An article on the Wall Street Journal website today illustrates that economics do work, and not all is lost for hops. For years, a hops surplus brought prices down to around $5/pound. These low prices forced a lot of hop farmers out of the market because they could not grow hops profitably. Well, it shouldn’t take an economics wizard to predict that with hops now at around $20 to $30/pound, it is going to get the attention of more farmers and will bring more back into the hops market.

Now, as the article also points out, it isn’t quite that simple. Because of risks from insects, disease, weather, and the equipment needed to harvest and store the hops, it is a complicated crop to grow. However, as we’re beginning to see, economic forces will take over. Supply is going to increase due to the high prices and prices will begin to come back down and eventually an equilibrium will be reached. Since I’m no economic wizard, I won’t pretend to be able to predict where that equilibrium will lie, but I do predict we’ll still be able to enjoy wonderfully hoppy beer for decades to come.

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About Brian

I like beer.
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