By: Jim Offner
Brewers across North America anticipate plenty of hops, as growers continue a years-long trend of increased production.
Last year, hop production across the U.S. totaled around 104 million pounds, over 55,000 acres.
The Pacific Northwest is the runaway production leader for hops in the U.S., with Washington alone accounting for 53,000 acres.
“Currently, the Pacific Northwest crop looks very good,” said Ann George, executive director of the Yakima, Washington-based Hop Growers of America (HGA).
Irrigation water supplies are adequate this year, and mild temperatures have contributed to good growing conditions, George said.
Roy Johnson, national sales manager with John I. Haas Inc., which is based in Washington, D.C. but grows hops in Yakima, as well as other regions worldwide, agrees.
“I think we’re going to look at an all-time high, as far as yield,” he said. “Right now, the industry is full of hops, depending on variety.”
Johnson estimates hop acreage in the Pacific Northwest region that includes Idaho and Oregon, as well as Washington, will reach about 59,000 this year, which should produce over 110 million pounds. If such is those predictions hold, he adds, they would be record highs.
However, Johnson also cautions that some varieties likely “will be pretty tight.” He did not specify.
Overall, it looks like 2018 will be productive for hop growers, Johnson said. He also notes that some areas could see earlier-than-usual starts to their harvest activities.
“It looks like they’re coming on real strong in Oregon,” Johnson said. He adds that Washington’s Yakima Valley typically gets underway in September.
“They may be processing hops in Oregon really early in August this year; they look really good now,” Johnson said. “The weather has been really good.”
Indeed, there may be an overabundance of hops on the market this year – a description that also applied to 2017, indicates Brian Tennis, president of the Traverse City-based Michigan Hop Alliance (MHA).
“Same,” he said when asked about the upcoming fall hop market. “There are too many hops in the ground already.”
Supplies, acreage trending up
Brewers sometimes have a different take on supply forecasts, said Jaki Brophy, spokeswoman for the Hop Growers of America. “Brewers tend to say there is a shortage, often when they have not contracted for that variety,” she said. “Since that is the only formalized way for brewers to communicate their needs – in addition to guaranteeing a certain amount of supply – there may not always be enough acreage of a particular variety if too many people have counted on being supplied through the spot market.”
Thanks to continued, increased demand for hop-forward beers, hop acreage continues to climb worldwide – U.S. acreage has nearly doubled in five years, according to Brophy’s organization. However, that’s a two-sided issue, HGA points out.
If anticipated acreage is actualized, then in five years’ time, hop acreage in the U.S. will have practically doubled, the organization said. “Thanks to increased contracts with breweries and the rapid efficiency of U.S. growers who can respond so quickly to customer demand, hop acreage has risen 95.8 percent in five years,” HGA reports.
The U.S. Department of Agriculture said hop acreage continues to trend upward. According to USDA, total U.S. acreage for hops was 55,339 in 2018, compared to 53,282 a year earlier. Washington continues to dominate production, with 39,273 acres in 2018 – up from 38,438 in 2017. Idaho came in with 8,217 acres in 2018, compared to 6,993 in 2017 – and vaulted past Oregon as the No. 2-producer. Oregon had 7,851 acres this year, just over 7,849 in 2017.
Organic hop acreage in the U.S. is still a tiny part of the business, but it, too, is showing some growth, USDA said, reporting a jump from 315 in 2017 to 431 in 2018.
Since 2012, the U.S. has added 28,465 acres, including the estimated acreage as reported by International Hop Growers’ Convention, and has more than 50 varieties in the ground.
“To put it into perspective, the U.S. acres added in the last five years is larger than the total acreage of any other hop-growing country in the world, outside of our own and Germany, the two largest hop-producing countries,” HGA’s George said. “Further, our estimated 2017 acreage increase (5,185 acres – a 9.8 percent growth) by itself is larger than other individual countries’ total acreage outside of the U.S., Germany, and the Czech Republic.”
A wave of new microbreweries that have sprouted in recent years is a significant driver of that acreage expansion, George notes. “Since about 2012 the acreage increase has been driven largely by the craft sector’s requests for additional aroma hop acreage,” she said.
MHA’s Tennis agrees. “Craft brewers are on the cutting edge and are looking for the next big or interesting hop, so we are constantly looking for new and exciting varieties to plant, or older varieties that brewers may have forgotten about,” he said.
There should be no hop shortfall for the immediate future, Haas Inc.’s Johnson said. “What you’ll see in 2019, you’ll see a decline in acreage. Contracts will come off the books. They’ve got higher inventories and will be using some older hops.”
That’s OK, too, Johnson said. “To be perfectly honest, there’s nothing wrong with a 2- to 5-year-old hop; those are fine. They can use them with confidence. The big thing is the supply has not met demand up to this last year.”
Where is the market predicted to go?
Hops are one of only a few ingredients necessary to make beer. They ignite flavor and aroma and corral runaway sweetness.
Experts point to Cascade as the top variety in 2017, followed by Centennial, although there are more than 60 other varieties available to brewers.
“We use Cascade and Citra; Columbus is the finishing hop, but it’s fairly expensive,” said Tom Williams, owner of St. Pete Brewing Co. in St. Petersburg, Florida. “Grains and hops are an expensive part, but it makes a huge difference on the beer.”
Choosing the right varieties for one’s beer is a crucial step in the process, Williams said. “I think it’s tremendous, the aroma, the bitterness. It’s pretty amazing how the varietals can change. If you need a beer with different varieties, you’d taste a drastic difference in terms of the aroma and the taste. That’s why people are so finicky about which ones they use and when they put them into that beer process.”
The demand for new hop varieties is growing, and brewers likely are moving on from some established varietals, experts say. However, change doesn’t necessarily lead to instability in the hop market, they say.
“We should see some varieties being replaced,” MHA’s Tennis said. “Cascade, Centennial, and Crystal among others are overplanted.”
The market seems poised to accommodate any such changes, HGA’s George said.
“With beer sector growth flattening, most varieties of hops are now adequately supplied,” she said. “While a small increase in Pacific Northwest hop acreage is anticipated this year due to contracting arrangements that were previously in place, acreage is expected to stabilize, with continued ‘rebalancing’ of varieties to reflect changes in contracting.”
Changing varietal preferences could ultimately impact costs, though, said St. Pete Brewing Co.’s Williams.
“For hops, I think it’s going to get more expensive, just because of supply-demand, especially when people try to get into some of these hop profiles,” he said. Even Citra was tough to get a couple of years ago. All it takes is a medium-sized brewery, and they obliterate a crop.”
The varietal choices are part of the fun of the brewing business, but sometimes it’s tough to get ahold of certain hops, Williams said. “I love the different hops,” he said.
For hops that are supply-challenged, costs can escalate in a hurry. “In a 10-barrel batch, we have to pay a premium, but we can go out and get it,” Williams said. “There’s a couple we can’t get, but we can always get them from other breweries.”
The inventory of hops held by growers, dealers, and brewers on March 1, 2018, totaled 169 million pounds, 21 percent more than March 1, 2017, stocks inventory of 140 million pounds, according to USDA. Stocks held at dealer and grower locations on March 1, 2018, totaled 132 million pounds. Hops held by brewers totaled 37 million pounds.
Stocks held by brewers on March 1, 2018, totaled 37 million pounds – which was virtually even with 2015. Inventories held by growers/dealers totaled 142 million March 1, 2018, compared to 46 million in 2015.
While the volume of hop stocks has been increasing every year – the USDA’s 2017 report showed a 9 percent increase – following a 7.5% increase the year prior – the overall production has grown as acreage increases, so the percentage relative to the total U.S. crop has gone down, HGA reports.
In addition to volumes of stocks increasing, there are also developing trends with the stock reports showing a rise in the amount of stocks being held with merchants, and less with brewers. As a perennial plant in which one harvest needs to last a full year of brewing demands, it is typical to have stocks larger than 100% of any given year’s production at this time of year.
“It is important to note that the amount of hop stocks which dealers are holding has increased,” George said. “Merchants are taking on increased risk as the proportion of stocks held in their possession has risen over 10% in the past three years. The stock report is another key signal to the market, and we will continue to monitor these data trends.”
Craft brewers seem to be instigating a wave of new varieties and plantings in general. “While growth in local small brewers has provided opportunities for new hop production across the U.S., this acreage remains small and focused on local brewery use,” George said.
The increase in acreage has generated concern in some corners of the industry about a possible imbalance between “alpha” and “aroma” hop production. Such worry appears to needless, George said.
“While the continued and rapid growth of acreage has some concerned about an imbalance in variety acreage as tastes change and growth in the craft segment begins to slow, growers will be looking to rebalance that over the coming years,” she said. “To note, alpha acreage is projected to be increasing as well in the U.S. after many years of predominate aroma increases.”
More than 60 varieties of hops
HGA’s George points out that there are more than 60 hop varieties grown in the U.S. – “each providing different brewing characteristics.” Each is noted for meandering in a certain aromatic direction. Some are “fruity”; others, “earthy”; others lean “spicy.” The list goes on.
“Every brewery is going to be different, based on their beers,” St. Pete Brewing Co.’s Williams said, discussing variety preference. “Centennial is a big one. Citra is one we like to play around with. There are so many strands of hops, you just never know.”
“What” is one issue where varieties are concerned, but there’s also a question of “when.”
“The timing of when [brewers add the hops to the boil] can make the beer taste completely different,” he said. “We may put a hop in at the last five minutes of the boil and turn it off. They lose their taste and smell quickly on the boil.”
“Each brewery has its own ways. Recipes are specific for this amount of pounds at what time. It’s very specific,” said Williams
West Coast Indian Pale Ales (IPAs) are “higher-hopped” than their New England IPA brethren.
“New England IPA styles use very little bittering hops; they charge it up big-time in the whirlpool,” Haas Inc.’s Johnson said. “They’re using a lot of Citra and Mosaic hops—those are very tight.”
Shelf life comes into play with some brews more than others, Johnson notes. “With New England IPAs, you’re lucky to get 60 days out of them; they’re just not set up to hold as long as other styles of beers,” he said. That’s another reason like the Tree Houses and Alchemists are doing well, because they sell right out of their taprooms. It’s kind of an interesting market being developed. The consumers are equating that cloudy beer with flavor.”
Hops are natural preservatives, Johnson notes. “You’re hopping; you’re put aroma hops into the whirlpool. Most craft beers are stored cold, anyway.”
Securing supplies ahead of time
Brewers typically contract at least a year ahead of time to ensure their hop supplies meet their anticipated demand, MHA’s Tennis said. However, he notes times have changed.
“Contracts aren’t critical as they were in years past because there is so much supply out there, but there some varieties that are still scarce,” Tennis said. He also notes brewers should try to lock down contracts for new Neomexicanus varieties, as well as most varieties coming out of Australia and New Zealand.
Brewers looking for tight-volume hops should secure their supply “as soon as possible,” he said.
Craft brewers should look one to three years ahead concerning contracting hop supplies, Tennis said, noting that more massive operations likely should contract for five years.
The reason is security, but contracts also involve a kind of gamble. “Less risk of price hikes, but you can also get locked into some bad contracts, so be careful,” he said.
In general, Tennis said brewers should sign contracts for each variety they need. “Depends on the variety,” he said. “Some are easy, others you have to be on a waiting list.”
Varieties can dictate how far in advance a brewer needs to contract for supplies. “It’s variety-specific,” Tennis said. “Sometimes, years before harvest, while other more common varieties, it’s not uncommon to sign a few months or weeks before harvest.”
There are no “hard deadlines” for signing contracts to secure hops, George notes. “However, if a customer wants to ensure delivery, getting contracts signed in time for new acreage to be planted – or varieties to be changed – would be necessary,” she said. “In that case, contracting no later than January or February would be recommended. Customers need to keep in mind that first year plantings (babies) are likely to yield only 50 to 75% of a mature crop.”
George also recommends five years for contracts. “Five years is preferred, as it will provide the grower additional years to amortize the cost of establishing a new planting.”
Contracts are good for growers as well as brewers, but contract length is probably variable, St. Pete Brewing Co.’s Williams said. The bottom line is don’t run out of hops. “I’m sure the growers would like to have as much runway in forecasting, but I don’t even know when that would be,” he said. “I don’t think there’s a set [deadline for signing a contract]. If we were bringing a bigger beer to market, I’m sure John (St Pete’s brewmaster) would say, ‘I want to make sure we can get that hop for the year.'”
Williams notes the “bigger-volume brewers” likely will sign longer contracts as “a hedge” against possible supply shortfalls or higher prices.
Haas Inc.’s Johnson said it’s probably best to have contacts finalized “by March or April – before they’re starting to move rootstock and changing portfolios, so they grow the appropriate mixture of hops.”
Some brewers contract directly with growers, Johnson said. “By the end of this year by before the first quarter, before farmer decides what to grow – late February and March. They start twining them in April and May.”
Some brewers also will procure hops on the spot market, to “keep it loosey-goosey.” That can be advantageous, Johnson said.
“See where they are, making sure they’re pulling what they have contracted,” he said. “Another brewer may have what you need available. It’s never stagnant, never solid. It’s always moving around, which is interesting. It can be challenging.”
HGA recommends planning whenever possible, Brophy said. “We try to focus on communicating that if something is integral to your brewery, you should lock it in with a contract. If you are willing to make possible substitutions and aren’t willing to honor your agreement if your growth projection turns out to be inaccurate, then spots may be for you.”
St. Pete’s procurement practices have worked well, Williams said. “We haven’t had any issue that wasn’t our problem for planning and forecasting. That’s the challenge for us; we don’t want to commit to overbuying. Some guys are sitting on 500 pounds of hops at the end of their contract, and they try to unload it.”