Hop Prices - The next big hurdle for craft beer?

The undeniable rise in quality and availability of craft beer has led a spike in demand and more breweries than ever:

It has seemingly also had an effect on hop prices, as demonstrated in this article:

Which goes on to expound:

To understand how important hops are to American craft beer, travel back to 1975 when Anchor Steam Brewing – at the time the country’s only craft brewery – introduced Liberty Ale, right around the same time Miller Lite was introduced. This was the first time Cascade hops were used in an American commercial beer. As Tom Acitelli, author of “The Audacity of Hops,” noted in The Wall Street Journal, Liberty Ale had four times the hop levels found in Miller Lite. Flash-forward almost 40 years, and hoppy IPA beers are the most popular craft beers in America, while sales of light beer is in decline. With craft beer sales growing by double-digits every year for the past five years and total market share approaching 10%, the demand for hops is intense – > 7% of American craft beer is currently using 52% of the overall domestic hops supply> , according to Esquire. In classic market style, brewers are seeing prices rise and supplies pressured. According to stats from the Hops Growers of America, as reported by BusinessWeek, hop prices from 2012-2013 increased 13%, to $3.59 a pound. Acitelli cites sources that predict prices for some popular brands of hops could rise to more than $10 a pound by the end of 2014… Acitelli, considering the worst-case scenario, speculates that craft brewers who produce fewer than 15,000 barrels annually could be at risk of going out of business due to the current trend in hops pricing and supply.

Luckily, in 2008, Boston Beer stepped in and sold some of their hops to craft breweries at cost: Boston Beer's Jim Koch Sharing Hop Supply | Brewbound

They have been helping again recently, but it’s doubtful they can help every one of the 1,500+ breweries that has popped up since 2008.

While super high IBU beer isn’t my go-to, it certainly looks like it will cost more to consume one going forward at best, and at worst thin out the craft beer makers.

Hopefully craft brewers will respond by diversifying their portfolio somewhat — Saisons appear to be on the cusp of great popularity, for example.

Mmmmm, I love a good Saison! I recently had a good one from Boulevard Brewing (Tank 7) that packed a punch!

It’s good to see hop prices up where farmers can make some money on the product. Hops farming is very capital intensive, and most hop farmers were getting killed a decade ago.

Most rational breweries contract forward for some to all of their hop needs. Usually at least two years out. I have contracts in place for all my hop needs for 2015 and 2016. The other thing I’ll mention is that in spite of all the talk about hop prices, malt prices can make a much larger impact on a brewery’s bottom line and they have been volatile as well.

Some hop varieties are hard to get right now, particularly Citra, which is a very new hop and it isn’t widely planted yet. Most new hop fields take a year or so to be productive, which is part of the reason that you always want to have hop contracts two years out.

+1. I like Hoppy beers to a degree, but would love to see diversification in the NW away from the traditional IPA, DIPA, 3IPA, CDA, pale ale, stout and porter lineup. More saisons, sours & lagers would be fantastic. A soon to open brewery here in a Seattle -Holy Mountain - is set to focus on these types of beers. I can’t wait to try them.

A big movement in VA (hop country back in Colonial days) are for breweries to grow their own. Not sure which varieties are/are not viable here, but farm breweries are setting up with a little bit of land to run a few lines. Most have nothing more than a few batches worth, but each year they’re able to develop it just a little further. Some are even looking to convince farmers to lease space to expand the projects faster.

I just saw USDA’s crop forecast for 2014. They are expecting a ~4.5% increase in the hop harvest, and this includes a bigger increase in aroma hops and a decline in bittering hops. The big boys basically use bittering hops only, so this means that hop farmers are doing their damnedest to keep up with Craft demand.

When visiting NG last summer I noticed they had started growing their own. I have no idea what kind of yields you can get from an acre of hops but they seem like a royal PITA to grow. I doubt they are growing even close to what they need and they probably can’t physically grow all the types of hops they want.

Hop prices follow the trends. Hop varietals fall in and out of favor year to year. New Zealand and Australian varietals are through the roof recently as are some of the UK hops. We direct import those hops that are hard to find here in the states. It’s a constant game dealing with today’s larger distributors. Ugh!

I find that they are fairly easy to grow, almost weed like. I end up chopping mine down each Fall. I use some, give some away, freeze some and burn the rest in the fire pit.

I just got a bunch of information on the 2014 hop harvest. Hop acreage was up 11.5% over the previous year in the U.S., and up 32% since 2011. Acreage increases of note were Cascade (up around 20%, and the most heavily planted variety), Citra (up 30% and now one of the top ten varieties planted), Centennial (up 50%), and Simcoe (up 36%). Hops that lost ground were for the most part legacy bittering hops - Nugget, Columbus (aka CTZ), Chinook, and Galena.

Worldwide hop production was up 15.7%, with Germany bouncing back from a terrible 2013 (+33%). Germany was the leading hop producer this year, with the US right behind. These two countries account for roughly 70% of world hop production.

I think that part of the concern on hop prices was due to the disastrous harvest in Germany last year. While the new “in vogue” hops will continue to be in hard to find over the short term, hop farmers appear to be pretty quick to follow market trends.

Great note Rick!

Great news - I can keep drinking my adequately hopped beers without guilt!

Good news!

Is it just me, or has the El Dorado hop come into great popularity within the past year?

Hops may be easy to grow, but the harvest comes at about the same time as fruit harvest. Finding enough pickers is an issue. Apples are much more lucrative for the workers, which are in short supply anyway.

P Hickner

Brian,
There were 164 acres of El Dorado hop in 2014, about double the acreage the previous year. For comparison sake, total hop acreage was 39,272, and Cascade (the most widely planted hop) was around 6,700.

Hop growing is incredibly capital intensive. The cost of the picking, separating, and drying equipment is substantial, and is only used for 3-4 weeks during the year. During the hop picking season, the equipment is running 24 hours a day. Finding pickers is harder in Washington than Oregon, where hops don’t really compete with berry or grape picking seasons. Of course, roughly 75% of US hop acreage is in Washington (Oregon is about 15% and Idaho is about 10%).

Cool. Thanks for that, Rick. :slight_smile: