News You Really Need To See: “African Farmers Put Hope in Beer”

“African Farmers Put Hope in Beer”

The Wall Street Journal, March 12, 2015, p.B1

http://www.wsj.com/articles/african-farmers-put-hope-in-beer-1426120282

“Ugandan farmer Ephraim Opusi had managed to make ends meet growing corn on his 5-acre plot in the hilly Kumi district in eastern Uganda.  But now that he cultivates white sorghum, a grain used in beer brewing, Mr. Opusi has struggled to feed his six children. … During his first season in 2010, Mr. Opusi harvested three tons of sorghum.  It earned him $750, one of his best seasons.  An average Ugandan makes $510 a year, according to World Bank data.  Encouraged by the earnings, Mr. Opusi ditched other profitable crops to concentrate growing sorghum.  But he didn’t count on many other farmers doing the same, leading to a 20% increase in the price of corn and beans in his district.  Brewing giants such as SABMiller and Diageo PLC have invested millions of dollars into African farms, providing a guaranteed market—and better returns—to smallholder farmers as they look for more locally sourced materials such as sorghum.  Food staples cassava and yams are also being supplied to brewers.  Farmers are also growing less food, preferring to cultivate sorghum varieties specifically developed for brewing.  The result: Shrinking food supplies have led to higher prices, putting staples out of reach to many families. … The brewers’ investment in Africa farmland reflects a strategic shift in the pursuit of cost-conscious consumers who favor cheaper beer brands made from homegrown crops.  Beer from local ingredients usually costs around 40% less than brands brewed with imported barley. African beer sales are climbing fast. Sub-Saharan Africa will make up 40% of global profit growth—or about $5 billion—for beer companies over the next decade, according to Deutsche Bank, overtaking China as the industry’s main engine for growth.”

Quickie analysis:  A good example of how everyone acting in their individual self-interest can collectively make themselves worse off.  

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