Comparing hops and malt price transmission in the beer value chain: evidence from Germany

Abstract

The German beer value chain has received limited attention so far, despite the country’s central role in global beer production. This study investigates the price dynamics of its two key inputs—hops and malt—using monthly price data from 2015 to 2024 based on a unique dataset from a German hops cooperative. While contract farming is common for both raw materials, malt is traded via private firms, whereas hops are marketed almost exclusively through farmer-owned cooperatives. A vector error correction model (VECM) is estimated, incorporating structural break dummies identified through Bai–Perron tests, followed by forecast error variance decomposition (FEVD) and impulse response function (IRF) analysis. The results show that hop prices are largely self-driven and adjust more quickly to deviations from equilibrium than malt or beer prices. While malt and beer exhibit stronger interdependencies, the hop sector displays greater price stability. The findings further reveal that the malting sector responded significantly to the recent energy price crisis in Germany, whereas the hop sector did not.