Hop Market Problems

Posted on 02.02.08 8:00AM under Hops, News

Hops in a BowlAmidst the hops shortage crisis, a new threat is emerging. That is the loss of hop diversity. Farmers are feeling pressure to sell “more profitable” hop crops, primarily driven by high alpha acid crops. The big guys don’t put too much thought into the hop character of their 10 IBU light lager, they just need alpha acids for bittering. Aroma and taste aren’t big on their priority lists, in case you’ve never had their beer. Craft beer, on the other hand, while having huge demand for highly bitter big alpha acids, also needs distinctive aroma and taste from their hops. One single variety of high-yield high-alpha acid hops won’t cut it to keep the craft beer scene as diverse and high-quality as it has been and must continue to be. When everyone’s using the same hops, what will be the difference between the beer?

Problems with the spot market. It seems that one of the reasons for the consolidation of hops varieties being grown is that the hops farmers were being forced to sell their hops at a lower price for the past few years on the spot market. This caused some growers to leave the hop business, and others to reconsider the makeup of their hop crop. Rather than contract hops for a year or more head of time, many craft brewers embrace the spirit of creativity, and order their hops as the mood hits them. I am not saying that buying hops as you need them is a great idea. Given the current situation, prudence dictates contracts for hops are essential to ensure the ability to continue brewing all year. At the same time, if the spot market is cheaper, and supply was always there, what would have made a brewery think it should contract for hops the past few years?

Who sets the prices? Apparently the growers are forced to take a lower price on the spot market, since the supply was high and demand was low for a while. This caused an impression of lower value for some hops that you would think would be highly treasured for their unique flavor and aroma qualities. But who sets the prices on these hops? Shouldn’t the farmer, as a business person growing and selling a product, price their products so that they can stay in business? Who sits down and says, “well it cost us $2 per pound to get this stuff to you, but we’ll sell it to you for $1.50 per pound?” Who would say no to a lower price offered? It is up to the vendor to price their product in such a way as to sustain their business. Selling products for a loss just isn’t a good strategy for long term growth.

Economies of scale? Maybe it’s just that the smaller growers can’t operate as efficiently as the big guys, and the big guys can afford to price hops cheaper. So maybe it’s that little hops growers can’t compete in the marketplace with big hops growers. Maybe there is some sort of pressure from hop dealers on hop growers to reduce prices or to have consistent grower prices across the board. Maybe it’s the brewers groaning about high prices making the rest of the supply chain feel as though they must squeeze out every penny of cost from the hops. If a low price puts a hop grower out of business, then it’s a dumb price. None of us wants a high quality hop producer of any size to go out of business.

Conclusion. If you’re a hop grower, don’t settle for a lower price than you’re worth. Don’t grow nothing but the high alpha high yield varieties. Keep your craft brewing customers alive by providing them the diversity of hops that they need. If you’re a hop dealer, encourage your suppliers to grow great hops of all types for all purposes. Don’t squeeze every last dime out of them. Pass along higher supply prices to your customers. If you’re a brewer or other hop user, quit griping about prices. Accept the prices determined by the market, and be thankful to get the hop variety you wanted. Pass along higher supply prices to the marketplace. Your fans would much rather buy your beer at a premium than not at all. Above all, work to get contracts in place for your anticipated needs for the next year or more. This will tell the growers what you want, and will enable them to cater to your needs. When the suppliers cater to the needs of the end users, everything works. But given the long cycle of hops cultivation, brewers need to be very proactive. Don’t let Bud Miller Coors determine the hops we can have in our beer. Speak up and be heard!

Read Comments

  1. Posted by BobbyO on 02.03.08 9:13 am

    I’ve been eyeing some properties in eastern CT as an investment. Considering how bad the housing market is right now, I’ve been wondering if there’s any money to be made in “boutique” farming. 100 years ago, New England was a leading producer of hops. Hell, they grow wild in my yard along with raspberries and concord grapes. I wonder what kinds of yield per acre can be achieved reasonably, using minimal/sustainable cultivation techniques. How much do you think the microbrew market would be willing to pay for organic locally grown hops?

  2. Posted by Keith Brainard on 02.03.08 9:51 am

    I’ve seen a quoted spot price for a New Zealand non-organic variety of $20 per pound in a 44 pound order size.

    An acre of land can typically hold 900 plants, each climbing an 18-24 foot trelis. I can’t quickly find a reference for the yield of an acre of plants, or per plant. It probably depends on the variety of hops and weather that year. It generally takes two or three years before full yield is achieved.

    I think that if there were a green brewery nearby, they’d be happy to pay more than $20 a pound for local organic hops. Shipping hops from New Zealand is not very ecologically friendly. Even shipping them from the Willamette valley in Oregon isn’t the greatest.

    You should totally do it. Maybe you could even get enough land to grow your own barley and brew right on site. Like a vineyard/winery.

  3. Posted by Cody on 05.19.08 8:34 pm

    What kind of weather do you need to grow Hops. I’m sure we could grow Barley in Kansas as it is similar to wheat. Can we grow hops here?

  4. Posted by Keith Brainard on 05.19.08 9:01 pm

    Cody

    Thanks for stopping by!

    I think that Oregon is the perfect growing region in the country, since that’s where most commercial growing is done here.

    Historically, the Northeast (where I am) was also a hop growing region, and I don’t know why that stopped, but I think we have pretty much the same climate as the Northwest, except maybe not as much sun.

    In Kansas, it might be a bit hot and/or dry, but I know that on the Grow-Hops yahoo group (http://groups.yahoo.com/group/Grow-Hops/), there are people in Texas, Florida, San Diego, and other hostile environments growing successfully on a small homegrow scale. There are some varieties that may have a better chance in your conditions.

    Even just growing barley is a worthwhile venture. So much of the barley that brewers use comes from Germany and England. It would be nice to have more domestic barley. Trucking it from the Midwest is a lot more eco-friendly than shipping it from Europe!

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