In 1636, Dutch investors went wild over tulips, investing the value of entire homes into the flower bulbs. Will the drive for biofuels make barley the 21st Century's tulip--and render beer a wild extravagance? DTN's Darin Newsom says that "could take a while."
Newsom, senior commodity analyst at DTN, spoke on "Street Signs" about the "explosion" in corn prices, following President George W. Bush's verbal push for biofuel development. He noted that the sudden investor fascination with maize pulled up prices of other grains, including soybeans, canola and barley.
So CNBC's Erin Burnett begged the question: Should devotees of "Michelob Ultra" and other brews brace themselves for a shocking ingredient-related price hike? Perhaps--but not just yet. The analyst conceded that prices for European malting barley--yes, the kind used to make the suds that cheer--climbed 85% since May. And barley has risen 30% on the Winnepeg Commodities Exchange.
But Newsom notes that pressures on barley will remain second-hand, e.g., demand for replacement feeds as corn is siphoned away from livestock, and fewer barley plantings as more land is devoted to corn-growing. The analyst predicts that compared to corn, barley will be used "not as much" for ethanol--so don't despair for affordable beer.