Reference no: EM131973866

Assignment

Hop shortage sweet for growers By ASA WAHLQUIST AND KATE HARDIE BUCKLEY

A GLOBAL shortage of hops is playing havoc with the taste buds of boutique beer drinkers but has reinvigor-ated the local hops market.
Small breweries that buy their hops overseas have been priced out of the market by the shortage and have turned to local growers, who are now doubling their plantings.

Peter Meddings, who runs Bintani Australia, supplying hops, yeast and malt to small brewers, said prices had quadrupled for some varieties of hops and others were no longer available.

There are two types of hops: one gives beer a bitter taste while the other is more aromatic. Together they give each beer its unique taste.
The large breweries buy their hops locally, with many of the growers cultivating their hops under contract.

Faced with a shortage, the big breweries bought up what they could in the US, leaving the small beer makers without any hops.

The good news is the Austral-ian hops industry has stepped up, and while growers about 10 years ago were leaving the industry, now gardens are reopening.

Australia's biggest hop com-pany, Hop Products Australia, is doubling its acreage under hops at Rostrevor Hop Gardens, near Myrtleford in northern Victoria.

It has been rather hectic,' Dave Jones, who works in the gardens, said.

Nine years ago, Mr Jones said the industry was quite depressed, and growers were leaving.

But now old hop gardens - they are gardens not farms - are being replanted.

Mr Lord said there were thou-sands of hop varieties, with about 60 commonly grown for beer.

`Hops are like the spice of the beer, and it is also an integral com¬ponent,' he said. A beer must con¬tain hops to be classified as beer.

In the past couple of years, con¬sumers in South America, Russia and China developed a taste for beer and demand for hops rose.

Then in 2006 the biggest hop producer, Germany, had an extremely dry year.

`There was a major shortfall in the market, and the price escalated quite rapidly,' Mr Lord said.

The global financial crisis may be biting, but Mr Lord is optimistic about the future of the hop industry and beer consumption.

1. What type of market do you consider the market for hops to be?

2. Use a supply and demand diagram to explain why the price of hops has increased in Australia, even quadrupling for some varieties, since. What would happen to Australian consumer and producer surplus with the increase in price? (Hint: Australia is an importer of hops with a very small share of the world market.)

3. What has been the short-run impact on the profits and output of Australian hop growers? Use a diagram to illustrate your answer.

4. What has been the long-run impact on the market for Australian hops? Use a diagram to illustrate your answer.

5. How efficient is the market for hops? Explain why.