US Hop Production Reaches Saturation Point, Says Hop Growers

Credit: Hop Growers of America

After the Pacific Northwest’s hop production reached a record 104 million pounds in 2017, the Hop Growers of America, a Yakima-based non-profit trade association, warned hop farmers that the industry has reached a saturation point and warned brewers to contract “cautiously and pragmatically.”

According to the Hop Growers of America’s annual report, which was released in late January, overall U.S. hop acreage and production since 2012 have increased nearly 80 percent and 77 percent, respectively. Last year, more than 55,785 acres of land were dedicated to hops, and due to maturing plants and more favorable weather conditions, hop yields increased 14 percent over the previous year.

Nevertheless, the Hop Growers of America cautioned U.S. farmers to avoid adding additional acreage in 2018. The trade group added that brewers should carefully contract for hops due to the “unpredictability of craft consumer demand and the recent slow down of craft volume growth.”

Those issues came to a head last August for one Yakima-based hop broker when 47 Hops LLC filed for Chapter 11 bankruptcy protection. In a series of blog posts, 47 Hops president Douglas MacKinnon wrote that the company was struggling due to a a combination of brewery clients who delayed payments and delivery of contracted hops coupled with growers who were unwilling to renegotiate contracts.

To avoid those issues, many merchants are working with brewers to properly contract for hops, Hop Growers of America communications director Jaki Brophy told Brewbound.

“A lot of merchants are getting very involved even more than before with their customers and getting more familiar with their particular business and their size to work with them on making something that looks more realistic for what they’re able to handle,” she said.

Blake Crosby, CEO of Oregon-based Crosby Hop Farm, told Brewbound that the hop business has become “more challenging” since many craft brewers forecasted with accelerated growth in mind, “which, we know, didn’t happen.” Meanwhile, he said “the new normal” is a shortage of a couple of hop varieties such as Citra and Amarillo while other popular hop varieties such as Cascade and Centennial are saturating the market.

“Overall, yes, things are a bit out of balance,” he said, noting that craft brewers “overestimated” their needs for aroma hops, leading farmers to plan more acres than needed. “But now the signal is coming through pretty loud and clear that we all need to pump the brakes a bit.”

Part of taking a step back has meant “a lot of restructuring and a lot of renegotiating” of hop contracts, Crosby said. For Crosby Hop Farm, it’s meant working out long-term payment plans with clients who over contracted.

“We just try to stretch that out as much as reasonably as possible,” he said. “It’s something that fits the needs and the cash flow of the brewery without totally overwhelming them.”

In other situations, Crosby said he’s worked with brewers to push some of their contracted hop volumes off into the future. In some cases, he’s also worked out “cancellation fees where we’ll figure out what our potential damages might be to cancel a contract and find a happy medium.”

“That’s the less common approach but we’ve done that a few times in more severe situations where things are just so out of balance there’s no good option,” he said.

International demand has helped fill some of the gaps for Crosby Hop Farm, which has about 1,500 active brewery clients, Crosby said. However, he called the more than 104 million pounds of hops available after the 2017 harvest, coupled with slowing craft growth, “disconcerting.”

“It’s a big number,” he said. “And I think it’s probably a few too many hops, and I think the industry agrees on that. But we’re fortunate that there’s a bit of a deficit globally for alpha. So it’s pulling on a lot of those pounds to help balance it quicker than it would have.”

Other points from the Hop Growers of America’s annual report:

  • Demand for aroma hops continued rise, and while acreage of the varieties increased, the overall growth rate slowed in 2017 to 4.77 percent.
  • Alpha hop demand, which had been depressed since 2009 due to a decade-long surplus, is expected to be met in the near term as aroma acreages are transitioned to alpha in the U.S. and Germany.
  • Idaho became the second-highest hop producing state, surpassing Oregon in production for the first time. Still, Washington accounted for 75.4 percent of hop production in the Pacific Northwest.
  • Cascade continued its 5-year streak as the most in-demand Pacific Northwest hop variety, followed by Centennial, Citra, Simcoe, Zeus and Mosaic.

A press release with more details is included below.

HOP GROWERS OF AMERICA RELEASES ANNUAL STAT PACK

Data and opinions of industry leaders indicate the U.S. has hit a saturation point with hop production coming in at 104 million pounds for the Pacific Northwest – a new record.

YAKIMA, WA – February 6, 2018 – The annual Statistical Report from Hop Growers of America has been released, revealing data compiled on 2017 harvest for all U.S. acres. Data focuses on the three main Pacific Northwest producing states – Washington, Oregon, and Idaho – and 26 additional states outside of the PNW (approximately 2% of the U.S. production).

In addition to featuring USDA National Agricultural Statistics Service (NASS) data reports on acreage; production; yields; average season price and other key stats like the stocks report; the 2017 Stat Pack also tracks trends in aroma and alpha acreage and their corresponding yields; world alpha production and demand; craft and overall favorite varieties; and other industry trends are also highlighted.

Notable findings of the data include:

  • U.S. hop acreage has increased 79.5% since 2012; production by 77%
  • For the first time, Idaho has surpassed Oregon in production to become the second-highest hop producing state at 13.2%. Washington and Oregon were at 75.4% and 11.4%, respectively
  • The alpha to aroma/dual purpose hops ratio has shifted from approximately 50/50 in 2012 to 80/20 in 2017
  • Increase in customer demand for aromas has meant an increase in production costs for farms, increasing infrastructure and capacities
  • The yields for 2017 jumped up 14% from 2016 thanks to maturing “baby” (newly planted) hops, and more favorable weather conditions

While global hop demand appears to be on the rise thanks to burgeoning international craft beer cultures, many industry leaders cautioned against additional acreage being added in the U.S. for the 2018 crop. All key indicators suggest current aroma hop demand has largely been satisfied by the unprecedented expansion of U.S. acreage in recent years.

Conversely, many reports also indicate current global alpha inventories are insufficient for market demands as the global brewing industry has finally worked through decade-long surpluses, which had perpetually depressed the alpha market since 2009. However, the alpha deficit is expected to be satisfied in the near term with the impending transition of certain excess aroma acres back to alpha in the U.S. as well as the recent additions of significant alpha acreage in Germany of the Herkules variety.

Industry leaders also encouraged brewers to continue contracting for forecasted hop needs but advised to do so cautiously and pragmatically given the unpredictability of craft consumer demand and the recent slow down of craft volume growth.

The Stat Pack consists of data from USDA-NASS, HGA, the International Hop Growers Convention, and other industry and government sources. To view the 2017 Stat Pack, visit: usahops.org/enthusiasts/stats.html.

Hop Growers of America (HGA) promotes American-grown hops to brewers and industry both domestically and internationally. HGA facilitates conversations between growers, merchants, and brewers, providing statistical reports to the industry and education on the quality, variety, and tradition of U.S. grown hops. For more information, visit: www.usahops.org/