Hop Prices Continue Skyward

January 18, 2008

From beervana.blogspot.com

You know things are bad when an article about the price of hops (and likely rise in beer prices) becomes front-page stuff. (You also know you're in Beervana--where stories about beer prices can help move papers.) So it was in today's Sunday Oregonian, where our trusty beer scribe John Foyston laid out the bad news:

Malted barley and hops are the two most expensive ingredients in Northwest craft beers, and they're becoming more expensive: Oregon- and Washington-grown hops that sold for $2 a pound last year now fetch as much as $18 a pound on the spot market -- if they can be had at all -- and barley is up about 75 percent....

Call it a quadruple whammy: Hops and barley acreage has been declining -- hops because of a 10-year glut and barley because many farmers are planting corn for ethanol instead. Ethanol has also diverted corn from the feed market, often making it more lucrative to sell barley for feed instead of to the malting houses that supply brewers.

But wait, there's more: Two years of failed hop crops in Europe, a 2006 warehouse fire in Yakima that destroyed 4 percent of the U.S. crop and two years of disastrous barley harvests in Europe, Australia and Ukraine. Factor in a weak dollar that has the world clamoring for our hops and barley and you have the makings of a uniquely bad patch for brewers and consumers.

It's not actually new info, just further evidence--as if you needed it--that this crisis is real. There were, however, some scattered facts about which you may be ignorant:

BridgePort uses 55 tons of hops a year; they managed to secure contracts through 2010, so their flagship IPA should still taste the same.
Small brewers try to keep a 30% margin on kegs, which means that tap prices are likely to rise $.25-.50.

Prices are predicted to hit $9* a sixer, and $5* a pint--in pubs where they're not already that steep.
All of this could be very bad news for small breweries. I plan to keep buying the same amount of good beer I always have--and I hope other drinkers will, too. This crisis shall pass; I just don't want any brewers to pass with it.

* Please remember that all of these prices are qoted from Oregon.

Also from Fresh Hops in Oregon:

2007 Hop Crop Update

Much of this update is thanks to Ralph Olson of Hopunion LLC in Yakima WA. Hop union is a major supplier of hops to the brewing industry...

"The hop world is upside down"


For US hops, 2007 is looking like an average crop, but many varieties came in less than expected.

World acreage:
1986: 215,600
1992: 236,000
2006: 123,000

Ralph's best guess is that in 1992 the acreage should have been between 160,000 - 170,000 if it was to match world demand/usage at that time. The 1990's excess hop crop ended up being processed into pellets and extracts, building up substantial excess inventory. Excess production that was many years old was selling on the open market and as a result brought prices down. Hop prices had dropped so low in recent years that in many cases they were lower than what it costs to grow.

High-alpha hops and some aroma hops are going overseas - the high rate of the Euro is a factor.

In the late 1990's and early 2000's the prices were depressed and growers were starting to throw in the towel, to either switch to other crops, or sell out to real estate developers. The ones who stayed in it and managed to survive without going under are pleased to be in this situation which is 180 degrees opposite from where it was about 10 years ago.

The demand of craft beer is up 16% alone this year with many of those beers having high hop requirements.

It takes three years to get full production of a new hop field, however, we don't have the number of growers needed to put new acres in, the total of US growers is about 45 , down from more than 2000 in 1978. About 2000 new acres are going in this year almost all of those are high alpha...

What's the bottom line? Certain varieties are getting more expensive. A few varieties will run out faster than ever. Brewers have to be willing to try other varieties. Brewmasters, brewery owners, and marketing and sales managers must prepare for the potential need to substitute different hops, to replace varieties that currently give your beers their "signature" flavor. That's what we'll have to get used to, the fact that there may be slight flavor variations over the next several years, as the hop industry works to correct this situation.. It's not going to get better soon, but will be likely just as bad, or worse, for the crops from 2008 and 2009, in other words, for beers brewed from now through 2010.

So hops are going to be tight and more expensive for the foreseeable future. Now is the brewers opportunity to brew with many of the other fine herbs that can and do flavor beer. Check out mansgarden.com/brewing.html for a good list of plants that are used in brewing...



Hoppily
Dave Wills
purveyor of fine hops