The Mounting Roadblocks To Brewing Beer In Europe

The European beer industry seems to be jinxed this summer. A month back, the industry was hit by a shortage of carbon dioxide - the clear, odorless gas that is equally responsible for global warming and the fizz in your beer and soda. Unlike supply chain issues that were responsible for the chicken shortage in KFC outlets across the UK earlier this year, this was more of an ill-timed coincidence than a logistical glitch.

The problem lay in the collective closure of major ammonia plants across mainland Europe during the summer for planned maintenance. Ammonia plants have been perennial suppliers to a lot of breweries and fizz drink manufacturers in Europe, with their alternatives being bio-ethanol plants. But as luck would have it, a major chunk of the latter went down for repair work as well, hitting the brewery business hard.

What made matters worse was that the carbon dioxide shortfall came at the time of the FIFA World Cup - a sport that is followed religiously by millions of people in Europe and beyond. As with all popularly followed sports, beer and fizz drinks were in heavy demand and breweries could not keep up with the demand due to gas shortage.

The carbon dioxide shortage also affected a market that would look like an unlikely candidate in this regard - poultry farms. Poultry farms use CO2 gas all along the lifecycle of a chicken, from it being used as a blanket gas while vaccinating eggs and for helping them to hatch, for assisting higher metabolism in hens, and in the slaughterhouses where CO2 is used as a humane alternative to killing hens by gassing them rather than electrically stunning them.

Moving back to the beer industry - just when the ammonia plants are getting back online, the breweries seem to have hit another roadblock. Europe is now in the middle of a sweltering summer, with heat waves disrupting life and farming in northern and western Europe. Temperatures have soared over the last month, with many places recording a steady 90 degrees over the course of the day.

This unusually hot summer has taken its toll on the crops, with barley wilting in the sun. The price of malting barley, the primary ingredient in the beer brewing process has now escalated over the last three months by over 60 percent to hit a five-year high of $270 per tonne. Germany and countries from the Scandinavian and Baltic region are amongst the biggest producers of barley in Europe, and they would witness their produce dip by nearly 50 percent in some regions - which would lead to a near-paralysis in the industry.

Malting barley is sourced from premium quality barley, priced nearly $65 higher per tonne compared to feed barley used as livestock fodder. The droughts and dryness this summer has made it hard for breweries to procure supplies to meet rising demand.

The saving grace is France, which is expected to bail out the beer industry with it about to harvest a good crop this season. The French farm ministry has forecasted a total barley crop of 12.1 million tonnes, same as last year which is starkly in contrast to Germany, that has forecasted an 18.8 percent year-on-year fall in production standing at 7.3 million tonnes.

"There are painful crop losses in Germany, Poland, Britain, and Scandinavia. The volume of animal feed barley will be cut and I think there could be an EU shortage of about 500,000 tonnes of malting barley," said a German trader. "But it looks like France will ride to the rescue with an overall good crop. Malt may have to be produced using lower quality winter barley and more EU imports are also likely from South America."

The potential use of lower quality barley has raised eyebrows, leading to increased screenings this season. Screenings are essentially the by-products produced while cleaning the seeds, like husk, hull, and damaged produce. The current limit for screenings stand at 8 percent, but some farmers have reported that the number has gone up to double digits in some screening results. This could be the result of the excessive usage of winter barley, which would have ripened prematurely, thereby affecting its quality.

All this aside, Germany is also facing another headache - a supply crunch in beer bottles, as its usually trustworthy recycling process is now staring at a shortage. This is because a lot of Germans are not tossing the empty bottles into the recycling chain, but then this could be a topic of discussion for another day.

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