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JB64
07-20-2012, 00:30
I have read a few articles lately regarding how the drought has caused the price of corn to raise to record highs. I know what bourbons I like to drink but I don't know much about the business side of making whiskey. How will the higher cost of the corn affect the bourbon distillers? Do the distillers have contracts with grain suppliers with fixed prices so they won't feel the impact of the price increases during the contract period? If not will the cost of the bourbon be higher when the whiskey produced this year is bottled or will the cost be passed on to the current bottlings. I am assuming the cost of corn is going up because the harvested amount will be lower than normal. Will this mean that bourbon production will decrease this year due to lack of corn availability? I am still seeing good deals on bourbon in the stores in my locale so as of yet the corn prices don't seem to be affecting the cost of bourbon.

SmoothAmbler
07-20-2012, 05:19
I don't know about the big boys. My guess, like you mentioned, is that they have a contract for a limited amount of time. But the higher prices are certainly affecting us. We take all of the grain our farmer grows. We buy it at market price. As much as he loves us, it wouldn't make sense, or be fair, for him to sell it to us for a whole lot less (we get a small price break) than he could get on the market.

darylld911
07-20-2012, 05:48
My dad and I were discussing this as well. What impact it has on the prices of the end product (since the cost paid today for the corn is for the whiskey sold years from now) may be tricky. They might start raising prices now or soon on their finished products, which might make more sense in terms of consumers understanding the price increase, versus trying to increase the prices years from now and hoping consumers recall why. I'm not as familiar as I'd like to be on the business model, so not sure what all options they have. The demand side could also drive prices (if people THINK their favorites are about to shoot up in price and demand surges, that would start to drive up prices right now as well). I've thought about whether I need to try to grab some of my favorites at today's prices, although lack of room is a factor there as well! :lol:

Enoch
07-20-2012, 05:57
They may price like the auto gasoline industry....price is based on replacement cost.

callmeox
07-20-2012, 06:19
The time from grain to bottle for the majors is so long that any immediate cost increases would be seen as gouging.

With millions of barrels aging, one bad corn year shouldn't harm the pipeline.

Rutherford
07-20-2012, 07:44
Bottling, distribution/marketing, aging (barrels+warehouses), personnel and equipment, markup, and tax costs help keep the actual cost of the corn in a bottle a fairly low proportion of what you pay.

JayMonster
07-20-2012, 12:41
Remember (this was a hot button topic some time ago), many distillers price based on a LIFO (Last In First Out) accounting model. So, what they base their "cost" on, for what they are selling now is based on what it is costing them to "replace" the stock. So, yes, it could affect pricing NOW and not 4 years (or more) from now.

OscarV
07-20-2012, 13:20
Corn futures are 52% up from mid June.
The last time I saw corn look so bad out in the feilds was the drought of 1988.
MI, OH, IN & KY are the hardest hit with this drought, followed by IL and other mid-western states.
Everything has corn syrup in it much to the dismay of people that want to eat healthy.
Maybe this would be a good time to kick the corn syrup habit and cut down on diabetes.
It's at record levels now.

Leopold
07-20-2012, 14:52
Corn prices are pretty much irrelevant to the cost of goods equation for distillers. Especially when we're talking about the older, pricier bottles that you folks prefer. The glass bottle is more of a cost than the corn for many whiskey distillers.

CoMobourbon
07-20-2012, 15:31
Corn prices are pretty much irrelevant to the cost of goods equation for distillers. Especially when we're talking about the older, pricier bottles that you folks prefer. The glass bottle is more of a cost than the corn for many whiskey distillers.

That's what I would have guessed. Basic raw materials often account for a tiny fraction of what 1st world consumers pay for a product, especially when that product has some kind of luxury value / function. Increased food commodity prices kill people in 3rd world countries who are pretty much only paying for the commodity, but when Americans buy food, we are mostly paying for packaging and marketing and convenience and other indirect services. So the price is (or at least should be) only marginally affected at most. This is why, for example, the cost of a box of Kellogs Frosted Flakes doesn't really go up when, as Oscar noted, corn futures go up 52%.

Not that there aren't huge differences between making-selling Frosted Flakes and making-selling bourbon. But the same principle applies; when the basic raw material cost represents an almost negligible fraction of the final sticker price of the product, it takes truly huge increases in the cost of that material to affect the sticker price.

Special Reserve
07-20-2012, 15:35
Corn prices are pretty much irrelevant to the cost of goods equation for distillers. Especially when we're talking about the older, pricier bottles that you folks prefer. The glass bottle is more of a cost than the corn for many whiskey distillers.

Yes, but it does provide an opportunity to raise prices and blame it on the increase in the price of corn.

cowdery
07-20-2012, 17:31
As Tom says, the bottle costs more than the corn, to which I would add that the taxes are more than the corn and bottle and every other production expense combined.

I would also point out that except for commodities, price has nothing to do with cost. One of the biggest myths people have about business is that businesses calculate their costs, add a profit factor, and that's their price. Very few businesses price their products or services that way. Pricing is based almost solely on what the market will bear. If the price the market offers you is less than your costs, then you have a problem, but that's different than using cost to set prices.

Of course, yes, companies do say they're raising prices because their costs went up but that is...what's that term again?...oh yeah, that's a lie. Companies raise their prices because they believe they can, period.

bllygthrd
07-20-2012, 19:07
Of course, yes, companies do say they're raising prices because their costs went up but that is...what's that term again?...oh yeah, that's a lie. Companies raise their prices because they believe they can, period.
According to my "learning" at the Simon School of Business [at the U of R :)] ... a very true statement ... consumer's pay what they feel the product is worth and producers price their product based on what maximizes their profit ... nothing more.

Bourbon Boiler
07-20-2012, 20:04
Most major food companies have their input costs hedged in the futures market, and I assume the alcohol producers do the same. This can be done effectively out about 18 months, so there shouldn't be a shock to the bourbon marketplace anytime soon. If you like cheap beef, that's another story.

KYPayne
07-21-2012, 00:02
We also can't forget that the federal subsidy on corn grown for ethanol has expired, so farmers who reaped some profit from that now must make their dough from the vegetable consumer.

tmckenzie
07-21-2012, 04:39
I agree with what Leopold and Chuck said. We are seing increases. We run bourbon one month and rye the next. I have seen about a 10 percent increase in the cost of the corn each load I have got this month, 3 so far. Another interesting thing around here is, as we are buying barley to have malted right now, barley price are shooting up due to some of the farmers are going to use it to feed cows wth instead of corn. We pay a premium for good grain to start with. We make a pile of fruit based liqors and fruit prices are through the roof. Cider is expected to double in price. Stuff like that will increase prices.

Special Reserve
07-21-2012, 06:19
Of course, yes, companies do say they're raising prices because their costs went up but that is...what's that term again?...oh yeah, that's a lie. Companies raise their prices because they believe they can, period.

Exactly! Particularly true with luxury items such expensive bourbon.

OscarV
07-21-2012, 08:34
Of course, yes, companies do say they're raising prices because their costs went up but that is...what's that term again?...oh yeah, that's a lie. Companies raise their prices because they believe they can, period.

The only reason a hamburger at McDonalds is 89 cents is because they think that's all they can get for it.
If they could sell them at $100.00 each they would.
Also us consumers bear a good amount of blame for high prices and poor service.
Everytime we buy something we are saying to the company that produces it, "it's a fair price and a good product."

CoMobourbon
07-21-2012, 09:45
Also us consumers bear a good amount of blame for high prices and poor service.
Everytime we buy something we are saying to the company that produces it, "it's a fair price and a good product."

Totally agree. No consumer is ever a passive victim of unilateral business practices; consumerism is a two way street.


The only reason a hamburger at McDonalds is 89 cents is because they think that's all they can get for it.
If they could sell them at $100.00 each they would.

This case actually, I think, shows a key limitation of Chuck's very good and necessary point. McDonald's could charge more than 89 cents for a hamburger (not $100, but statistically much more). Actually, I have it on good information that McDonalds LOSES money on their 99 cent McDoubles. That damn fake cheese is actually kind of expensive (hence, 1 slice of cheese for a double!). People would pay 10-15 cents more, and McDonalds would make A LOT of money in the short term (billions served, remember?). But they have calculated that keeping prices low on certain items actually increases their market share and, therefore, allows them to make more money over the long term (on other products - think Chicken Selects and the slushie of the year). More people walk in, more money is ultimately made. Advertising, presentation, and 99 cent burgers all cost McDonalds a lot of money up front, but if they win the company more market share, it's all worth it in the end.

So. It is completely true that commodity prices account for a fraction of the cost of business in the 1st world (especially for luxury products), and it is completely true that the market, not the costs, determine the sticker price of products in such business. But in 1st world markets which can bear prices that have almost no relationship to commodity costs, there is always TONS of competition for market share, and competing for market share does cost a lot of money / energy. In many ways, then, when we pick one whiskey over another, we are subsidizing an increased market share for the company that produced it. It's kind of annoying to think that some of what we pay does not go into the production itself, but increasing the market share for companies that we think make better whiskey is pretty decent consolation.

CoMobourbon
07-21-2012, 10:02
Yes, but it does provide an opportunity to raise prices and blame it on the increase in the price of corn.


The only reason a hamburger at McDonalds is 89 cents is because they think that's all they can get for it.
If they could sell them at $100.00 each they would.
Also us consumers bear a good amount of blame for high prices and poor service.
Everytime we buy something we are saying to the company that produces it, "it's a fair price and a good product."


Pricing is based almost solely on what the market will bear.

Of course, yes, companies do say they're raising prices because their costs went up but that is...what's that term again?...oh yeah, that's a lie. Companies raise their prices because they believe they can, period.

I think that these three posts need to be read in conjunction with each other.

Even if there is really no correlation between any cost and final sticker price, not to mention sticker price and commodity cost, companies get away with increasing prices along with increasing commodity costs because they know that we THINK that they have to. If all consumers were educated, and everyone knew that there was little-to-no relationship, then they couldn't get away with raising prices for BS reasons. But if a luxury market consists of uneducated consumers who sympathize with rising corn costs, then the market can bear increased prices for no good reason. (Today's Moral: Education Is Important!)

So for the OP, my opinion is 'it shouldn't affect bourbon prices, but if producers think enough bourbon consumers are stupid, then it will.'

*I realize that I sound much angrier than I am. I am completely OK with pretty much all of this. My own cheapness/interests aside, I have no problem with bourbon producers charging what they can get for their product. I will add a few smiles to demonstrate my attitude. :grin: :cool: :grin: :lol: :grin:

sutton
07-22-2012, 06:48
Many things go into pricing - cost, competition/scarcity, market efficiency, and price elasticity of the good or service.

They could charge "anything they want" for the bourbon if there was little competition (hence, McDonald's cannot charge $100 when Burger King will sell it for $1 across the street - if they are the only restaurant within a 500 mile radius, they can charge more).

They have to consider the consumer's willingness to substitute - your favorite straight bourbon too much? Drink it less and buy your second favorite that is cheaper. Go to blended scotch, or something else altogether. If McD's charged $100 for a hamburger, wouldn't you be willing to substitute a prime cut porterhouse?

Not crying the blues for a producer here, but you can just look to the boards here for plenty of posts about price elasticity - how many are willing to buy THH at $55 but not $75? And for the bourbons lower on the shelf, the more resistant you are to price changes - OWA at $20 but not $27 ... etc.

All of these factors will then play into the price/volume to maximize total revenue - sell 5000 bottles at $100/bottle, or sell 10000 bottles at $55 ....

I'd guess that the margin on a low- mid- shelf bourbon isn't high - it is more of a high volume/low margin game. You are looking for asset turnover as another lever to profitability. So sometimes what appears to be a relatively modest increase in pricing can eat into profits if it is sustained. Add to that the general rise in all commodities due to oil prices, and it can have a substantial impact, esp. when the same price increases are influencing your customer's disposable income - too much at the gas pump and the grocery store, less spent on bourbon and other luxuries...

CoMobourbon
07-22-2012, 08:59
Many things go into pricing - cost, competition/scarcity, market efficiency, and price elasticity of the good or service.

They could charge "anything they want" for the bourbon if there was little competition (hence, McDonald's cannot charge $100 when Burger King will sell it for $1 across the street - if they are the only restaurant within a 500 mile radius, they can charge more)....

I'd guess that the margin on a low- mid- shelf bourbon isn't high - it is more of a high volume/low margin game. You are looking for asset turnover as another lever to profitability. So sometimes what appears to be a relatively modest increase in pricing can eat into profits if it is sustained. Add to that the general rise in all commodities due to oil prices, and it can have a substantial impact, esp. when the same price increases are influencing your customer's disposable income - too much at the gas pump and the grocery store, less spent on bourbon and other luxuries...

All good and well-articulated formulations, but I am not sure what your point is here. Is this an argument for why rising corn prices will indirectly cause rising bourbon prices? (What is the "substantial impact" on: sales? profit? costs? prices?...)

If it is, then I am not sure that it works like that. Even if the margins are relatively small for low-mid shelf bourbons due to market factors like competition (and for something like bourbon, it's never that small), commodity costs constitute such a small fraction of the production cost, not to mention the total cost, (not to mention taxes) for these guys that an increase in corn prices should have negligible impact on that profit margin. All of the other market factors you described - scarcity, competition, market efficiency - that is to say, all of the factors stemming from the consumer's perception of value or factors which the consumer otherwise brings to the table - have so much greater impact on the bottom line that a bourbon seller would be crazy to change his prices based on commodity costs, especially a fairly minor commodity cost like corn.

Think of it this way. You are willing to spend a certain amount of money and time to support your capacity to own and use your own complete set of dishes. Between the dishes themselves, the dishwasher, the cupboards, the water, the time and energy spend washing them (even the table and chairs and napkins if you want to widen the scope even more),the total cost is substantial. Detergent represents a tiny percentage of that total cost. If detergent prices soared (50% - 100% -300%), you might be a little unhappy about it, but your dishwashing and dish-using system wouldn't change at all. You wouldn't use less dishes per meal, for example, just to save money on detergent.

(Oil prices are a little unique in that a.) gas costs relatively a lot (more than many other commodities like corn) and b.) oil prices do have a small but radical effect on the price of just about everything else. But still, in a luxury market like bourbon, we are pretty much talking about peanuts here.)

cowdery
07-22-2012, 12:41
I think the message of this thread is that it is wrong to assume that rising corn prices will mean rising bourbon prices. The cost of raw materials is but one of many factors that determine the price of the finished product.

I know that some of the producers have long term contracts directly with farmers, while others buy from silos. I'm not sure if MGPI obtained Rushville when it bought LDI. Rushville was a silo that provided all of the corn for LDI and Four Roses, which Four Roses continued to use after the sale to Kirin. The biggest part of MGPI's business is corn processing of various kinds, so they may have other arrangements. I know Beam deals primarily with one silo in Indiana. I think the directly-with-farmers deals are mostly with farmers close to the distilleries.

You can be confident that all of the producers have very sophisticated ways of mitigating the effects of price fluctuations.

sutton
07-22-2012, 18:45
All good and well-articulated formulations, but I am not sure what your point is here. Is this an argument for why rising corn prices will indirectly cause rising bourbon prices? (What is the "substantial impact" on: sales? profit? costs? prices?...)



I was merely responding to the thought expressed earlier that producers can charge whatever they want - or use any excuse, no matter how minimal (i.e., corn prices going up but being a very small portion of total cost) to raise prices. While I'm sure some producers may try, it isn't without possible impact to their market share...

CoMobourbon
07-22-2012, 20:22
I was merely responding to the thought expressed earlier that producers can charge whatever they want - or use any excuse, no matter how minimal (i.e., corn prices going up but being a very small portion of total cost) to raise prices. While I'm sure some producers may try, it isn't without possible impact to their market share...

That makes a lot of sense. I think we actually may have the same premise: market factors like competition and price elasticity are powerful determiners of price - much more powerful than say commodity costs like corn. Thanks for clearing that up.


I think the message of this thread is that it is wrong to assume that rising corn prices will mean rising bourbon prices. The cost of raw materials is but one of many factors that determine the price of the finished product.

You can be confident that all of the producers have very sophisticated ways of mitigating the effects of price fluctuations.

Sounds about right to me.

Restaurant man
07-22-2012, 21:14
You can be confident that all of the producers have very sophisticated ways of mitigating the effects of price fluctuations.

Bingo! I buy $30,000 worth of cornfed beef every week for the restaurant and my beef costs are already at all time highs. We can't raise prices anymore than we have so we will be getting creative to try and protect margins. There is more than one way to skin a mule

cowdery
07-23-2012, 12:02
Bingo! I buy $30,000 worth of cornfed beef every week for the restaurant and my beef costs are already at all time highs. We can't raise prices anymore than we have so we will be getting creative to try and protect margins. There is more than one way to skin a mule

Mix in some horse?

LostBottle
07-24-2012, 20:02
What is this corn stuff you speak of? I though whiskey was made from rye!;)

darylld911
07-25-2012, 05:59
Mix in some horse?

Hey - you could charge more for horse (that there's a delicacy in France!)

JayMonster
07-25-2012, 06:19
I think the message of this thread is that it is wrong to assume that rising corn prices will mean rising bourbon prices...

You can be confident that all of the producers have very sophisticated ways of mitigating the effects of price fluctuations.

I don't disagree that producers have ways of dealing with short term issues like this... BUT (you knew that was coming), many producers are not above using such short term "reasons" to explain away raising their prices. Heck, didn't Beam use "rising price of corn" in their justification of raising prices before this drought began?

Bourbon Boiler
07-25-2012, 16:46
I saw an article today that many Indiana farmers are plowing over the corn crop now to use as feed, but if there are some late July or early August rains, they might plant a fall crop of winter wheat or rye. Oats was another possibility.

JB64
07-25-2012, 23:09
Thanks for all of the responses to my original questions. I had assumed that since corn is one of the primary components of bourbon that an increase in corn costs would cause an increase in the cost of the whiskey. Television shows I have watched on bourbon production show trucks lined up to drop their corn loads but have not shown the trucks delivering bottles or the spinning of the gas and electricity meters serving the production area. After reading all of the responses to this thread it makes sense that the corn price is a small percentage of the overall cost of the production. I don't know why I didn't come to that conclusion myself.

tmckenzie
07-26-2012, 04:36
For some reason, glass cost is rising faster than the price of corn.

cowdery
07-27-2012, 14:41
Just guessing, but I imagine glass prices are very sensitive to energy prices. I don't think the price of sand has gone up. Then again, natural gas prices are low right now, so it could just be a response to demand. That's the best time to raise prices, periods of high demand.

As for corn prices, what we've said is general and applies most to brand marketers. Corn prices affect Brown-Forman's or Beam's business much less than they do Heaven Hill's or Buffalo Trace's, because the former's business is based on efficient, high-volume production of a few strong brands, while the later is much more dependent on commodity-type products. The former's business is less price-competitive while the latter's is more. different business models are affected differently.

One thing I haven't followed but probably should is the co-products (aka by-products) business. Distillers, both for beverages and fuel, are producing more, which means more animal feed products based on spent grain. The energy cost of drying the grain tends to keep that price high, but with natural gas prices low, corn prices high, and distiller's spent grain plentiful, that business may improve.

darylld911
08-01-2012, 14:41
David Driscoll just posted a piece on this topic, with a quote from BT setting the expectations to higher prices (I think based on our discussion - because people are talking about it and they CAN). Quick -destroy this thread!!! :shocked: Interested to hear what he comes back with in talking to some others.

http://spiritsjournal.klwines.com/klwinescom-spirits-blog/2012/8/1/how-will-the-midwest-drought-affect-bourbon.html

MyOldKyDram
08-01-2012, 15:00
Grrr...

Still though, I just can't see it being any kind of substantial increase. Waiting, seeing.

MyOldKyDram
08-02-2012, 18:05
And a follow up...

http://spiritsjournal.klwines.com/klwinescom-spirits-blog/2012/8/2/more-on-the-midwest-corn-shortage.html

OscarV
08-03-2012, 11:12
After reading that article my question is, high corn prices aside will the distilleries get all the corn they want and not cut back on production?
Let's hope so because the world wide demand for bourbon goes up every year.

darylld911
08-03-2012, 12:20
After reading that article my question is, high corn prices aside will the distilleries get all the corn they want and not cut back on production?
Let's hope so because the world wide demand for bourbon goes up every year.

And if not, diminished production will impact the prices way more than the price of corn. Fingers crossed!!

cowdery
08-03-2012, 12:42
Rutledge's point bears repeating. Higher prices aren't really the concern. Availability and quality are the concern. Bourbon makers use so much corn, their on-site storage holds, at most, a one or two day supply. If they don't get deliveries every day, they're shut down. Happily for us, producers won't hesitate to pay however much they have to pay to get what they need (#2 dent) when they need it. But what we don't know is how bad the drought is ultimately going to be and how long it's going to last.

CoMobourbon
08-03-2012, 18:10
Totally agree with the two previous posts. Diminished production and availability will affect supply and scarcity dynamics, which could have a serious impact on prices. Higher corn costs will be peanuts compared to the impact of having less bottles to sell. If production goes down, they will want the same total profit from the lower number of bottles, so they will want to sell the same whiskeys for more money. As long as demand remains high - and, for the foreseeable future, it will - they can and will do this to compensate for lower production.

Now, is the drought bad enough that it really will systemically impact production / availability for the bigger boys (even Four Roses, Heaven Hill, or BT, not to mention Beam?) That's hard for me to believe, but who knows / we'll see.

sutton
08-04-2012, 07:28
Have distillers ever sourced grain from the southern hemisphere to produce at some level during the winter months? Or are the large producers already doing this?

OscarV
08-04-2012, 08:10
That's a good question.

sutton
08-04-2012, 10:14
That's a good question. Just wondering - I think Argentina is a net exporter of grains - and I think they grow all four (corn, wheat, barley, rye).

JB64
08-04-2012, 20:27
Is corn just corn or is there some specific variety the bourbon producers require?

tmckenzie
08-05-2012, 06:47
Just number 2 dent corn. Preferably with a high bushel weight. We use some that is close to 60 pounds to a bushel. That mean high starch content. I would imagine they could bring corn in from another country, I think four roses and wild turkey bring in rye from Germany already. Thing is, there is terroir in corn, if you will. This I think is due to how long it takes it to make a crop. In the south and misdwest you have what is reffered to 100 day corn and even some 110 days corn. Here in Ny, we get all 90 day corn. This year we could have had 110 day corn easy though. (0 day corn does not tastes the same in my book. Took a while to find the right farmer. In talking with Steve Nally in Wyoming, that was a challenge for him too. So it could be a problem for the big boys too. But, I am sure in the southern hemisphere there are place to get corn close to what they normally use. We got some polish rye seed from out in Kansas last year to plant here. The supplier called the other day to see how the crop turned out. The rye crop where they are and a lot of other places out there where a lot of rye is grow, was wiped out too. So rye could be an issue. I am hearing 12 dollar a bushel corn and malt is already going up, and I hear will go higher.

BFerguson
08-05-2012, 07:03
I am hearing 12 dollar a bushel corn and malt is already going up, and I hear will go higher.

OUt of curiosity, what is corn for you looking at now? I've been following the corn market pretty closely for the past year due to a christmas gift last year, my FIL gave the kids in the family a amount to sell on their own, and it has been a competition amongst us to see who can get the high price. It's been been fun and nerve racking watching the market run up to it peaks within the last two months.

But $12, wow, that would be shocking.

B

tmckenzie
08-05-2012, 11:25
8 bucks right now. The farmer we deal with is fairly certain it will go that high. Most corn around here is looking better with recent rain, but it is way behind.

cowdery
08-05-2012, 21:22
American producers sometimes get rye from Canada. There would be no reason they couldn't use grain from other countries, it's just never been necessary. Remember that distillers mostly get their corn from Kentucky and adjacent states so if they have to go further, they can go to Iowa, Nebraska, Kansas, Missouri, etc., before they have to consider Argentina. Corn is a heavy, bulky commodity, so shipping costs can kill you. You don't go any further away than you absolutely have to and there can be a substantial offset between shipping costs and the grain cost itself, i.e., you'll gladly pay more for corn from Iowa than pay a much lower price for Argentine corn.

It bears repeating that whiskey makers are near the top of the food chain. That's because they can and will pay higher prices, and can't use substitutes. Feed lots, for example, have other options, including spent mash from distilleries. I predict this crisis will be like the drought that plagued Jack Daniel's and George Dickel for so long. It will get very close to affecting production without actually doing so. (That affected water availability, not corn.)

The real problems will come if something like this is repeated next year, and the year after that, and the year after that.

tmckenzie
08-06-2012, 04:49
You arer more than likely right. They also deal with farmers on a long time basis, so they will look out for them. I know our farmer keeps us a steady supply as he knows we will pay top dollar for good corn. On another note, I talked to an organoc farmer and corn is that high without the drought. Just cannot justify organic. Mostly hype, and lower yeild.

sutton
08-06-2012, 04:53
I was thinking if distiller's lost production capacity due to grain shortages during the normal distilling season, they could make up for it in the winter by sourcing corn from the southern hemisphere - or does a large distiller like Jack Daniels or Heaven Hill already distill year round?

p_elliott
08-06-2012, 08:50
I don't really think there is going to be a corn shortage. I think the food producers would like to have you think that. There is so much corn in storage it's not funny like chuck said one bad year is not going to have that much effect.

cowdery
08-07-2012, 14:59
I was thinking if distiller's lost production capacity due to grain shortages during the normal distilling season, they could make up for it in the winter by sourcing corn from the southern hemisphere - or does a large distiller like Jack Daniels or Heaven Hill already distill year round?

They all distill year round and corn is available year round. If all corn production suddenly stopped, there is quite a bit in storage. Maybe enough to last a year or more. That's the nature of a staple, the production of surpluses, that allows a steady supply. Sure, prices usually change at harvest, and some farmers have storage so they can hold out for better prices, but corn (and the other cereals) is not in any real sense a seasonal product.

sutton
08-07-2012, 16:23
They all distill year round and corn is available year round. If all corn production suddenly stopped, there is quite a bit in storage. Maybe enough to last a year or more. That's the nature of a staple, the production of surpluses, that allows a steady supply. Sure, prices usually change at harvest, and some farmers have storage so they can hold out for better prices, but corn (and the other cereals) is not in any real sense a seasonal product.

Thanks for the explanation, Chuck.

p_elliott
08-08-2012, 09:30
They all distill year round and corn is available year round.

They don't distill bourbon in the summer months. I have been to the distilleries at the KBF and most are not back up and distilling yet.

cowdery
08-08-2012, 14:47
There's usually a summer shut down. How long it is depends on the distillery and its production needs. HH typically shuts down for just a couple of weeks. Four Roses is usually down for all of August. BT shuts down for August and September, usually. It's different for each distillery and changes from year to year, although right now just about everybody is making as much as they can. I don't think Jack Daniel's has a shut down, per se. It is certainly incorrect to say "they don't distill bourbon in the summer months" because they most certainly do.

Historically, distilleries didn't operate during the hotest months because they couldn't control the fermentation, but now with chillers they can go year round. Like many factories, they shut down because it's easier for everyone to take vacation at the same time, and sometimes they need to shut down for major maintenance, but otherwise they only shut down based on capacity and production requirements. So BT, because it has so much capacity, has relatively long shut downs, and they're even longer at Barton. HH may have longer ones down that they have their capacity up, same with Beam, but I'd be surprised if Maker's shuts down for more than two weeks, if that.

An emerging issue is tourism. With tourism growing in importance, distilleries may have to look at deliberately operating during the prime tourism months and shutting down at other times.

Re corn, they're now trying to get a waiver on the fuel additive mandate so they can cut down on fuel ethanol production when prices are so high and availability is getting tight. About 40% of the corn crop goes to ethanol. They can use the lowest quality stuff no one else wants, but it doesn't make much sense to subsidize fuel ethanol under these circumstances.

Bourbon Boiler
08-09-2012, 18:33
For reference, the cost of 195 proof bulk GNS is up $.75 / gallon. As the same efficency, an 80 proof bourbon would be $.31 / gal more expensive. Thus a 750 mL bottle would cost $.061 more to produce. The bourbon distillers are probably not as efficient as the GNS prodcuers on an ethanol gallon per corn bushel basis, but I can't imagine that the discrepancy is that great.