The bust and boom of the hop economy

Discussion in 'Homebrewing' started by Push_the_limits, May 12, 2018.

  1. Push_the_limits

    Push_the_limits Initiate (128) Feb 8, 2018 Antarctica

    Any current BA poster may have seen the other thread right now about all sorts of pounds of hops being sold for $4.47 each in a bankruptcy-induced fire sale. Even I cashed in. It's not because the hops were bad. In fact, they might be the best we can get for a while.

    Hops have long played into the manufacture of delicious beer. India Pale Ales are named as such for their high hop content, which was typical of beers being shipped for long periods of time overseas, to countries like India, where the British soldiers were situated in the first half of the 20th century. The hops were added as a preservative to keep the beer fresh, and it worked. Now, we like the taste of the preservative.

    As we can see, hop history runs deep in global trade and brewing tradition. interestingly, the unsteady existence of hops continues today. How badly do we want them in the United Sates? In Europe? And as a flavor-purposed addition? At any rate, the surge of craft brewing and the hop revolution has many winners, and is leaving many losers.

    I invite you to take a look at this graph. It illustrates the increase in the amount of hops in possession of the U.S. brewing industry over the last 10+ years. (Note that the graph is based on new data, from March 1.)

    Some fear that hop production will halt dramatically, and we will be left with very expensive and old hops. In other words, farmers will be forced to cease production, and there will be over-compensation. Some speculate that in the next few years this will significantly affect the beer world. Hop farmers can't make profit when there are too many hops on the market, and not enough demand for them. So they will stop growing. Old stock will be sold.

    Sales of craft beer are still rising, but not enough to consume the amount of contracted hops, Solberg said. “It’s just piling up. It just backs up and piles up.”

    “The farmer will tell you it’s sold. Some merchants will tell you that too,” he said. “And technically, it is, but it’s not moving.”

    “We decided not go broke growing hops for nothing,” said John Annen, the farm’s owner.

    “Nobody wants to admit the severity of the problem today,” he said.


    [​IMG]

    Source
     
    #1 Push_the_limits, May 12, 2018
    Last edited: May 12, 2018
  2. hopfenunmaltz

    hopfenunmaltz Meyvn (1,382) Jun 8, 2005 Michigan

    This has been coming for some time. Boom and bust cycles in hop growing are well documented. You should read the Barth-Hass Hop Atlas sometime, as it covers those historic cycles.

    Your IPA history is incorrect.
     
  3. GormBrewhouse

    GormBrewhouse Disciple (347) Jun 24, 2015 Vermont

    The established hop farmers of the west should be fine. Some are 5-6-7 generation farms so probabaly payed off or low debt. Also old timers teaching their sons and daughters lessons of the past avoid the boom and bust cycles. I have benefited from this.

    Small farmers, middle men and speculators will be the big losers.
    Homebrewers will pay more, but less at first, like currently. But there will be hops for sale, it will just be different than today.
     
    NorCalKid likes this.
  4. MrOH

    MrOH Crusader (795) Jul 5, 2010 Maryland

    The graph is a little misleading without some background: it starts off at the tail end of a global hop shortage, of course hop stocks would be much lower.
     
  5. VikeMan

    VikeMan Meyvn (1,407) Jul 12, 2009 Pennsylvania
    Beer Trader

    Heh. But with plenty of google-able confirmation bias to back it up.
     
    SFACRKnight likes this.
  6. hopfenunmaltz

    hopfenunmaltz Meyvn (1,382) Jun 8, 2005 Michigan

    IPA was shipped earlier than the 20th century, that is easy to find, along with other information.
    http://zythophile.co.uk/2010/03/31/ipa-the-executive-summary/

    Back to hops. I remember Ralph Olson of Hopunion talking about hops heading for a shortage. That was in 2007. The reason then was that acreage had been going from aroma hops to high Alpha, and the brewing industry only needed so much Alpha a year. Then the hop shortage hit, mainly due to poor crops in Europe, and they bought hops here, driving up the demand.

    Shortages can also be caused by disease (molds and mildews), wind and hail damaging the crops (Happened in Germany), drought , even war (there was a shortage right after WWII).

    Surpluses can be caused by bumper crop years, or over planting. The later happened after the 2007/2008 shortage, and many of those acres were ripped out.
     
  7. VikeMan

    VikeMan Meyvn (1,407) Jul 12, 2009 Pennsylvania
    Beer Trader

    I agree. My comment (if it wasn't obvious) was about how just about any misconception about IPAs (or beer and brewing in general for that matter) can be "supported" by something someone has previously written on the internet. Including professional beer/brewing writers.
     
    Prep8611 and hopfenunmaltz like this.
  8. GreenKrusty101

    GreenKrusty101 Crusader (747) Dec 4, 2008 Nevada

    About the only big error I could see in the OP's quick history of hops was the reference to "first half of the 20th Century"...which while not truly incorrect, neglects the previous centuries of (British) East India Company occupation of India.

    https://en.wikipedia.org/wiki/East_India_Company ...unfortunately the internet is where most people (especially those living in Antarctica:slight_smile:) get their info now...some correct...some incorrect...the reader/citer must evaluate sources and frames of reference.
     
  9. minderbender

    minderbender Aspirant (218) Jan 18, 2009 New York

    Well, it's at least questionable that people learned to like hops from IPAs. Mild ales were popular at the time and were often heavily hopped, something that you wouldn't expect if domestic drinkers had not learned to appreciate hop bitterness.
     
    GreenKrusty101 likes this.
  10. billandsuz

    billandsuz Disciple (345) Sep 1, 2004 New York

    This graph is titled "Inventory of Hops held by growers, brewers and dealers". It is only tells us one thing.
    We can see that there is more hops on hand today than there was 10 years ago.
    Can we see the accompanying chart "Hop demand in the futures and open markets"?

    We should not extrapolate that there are too many hops in the US being held by growers, brewers and dealers just because the volume on hand has increased. In fact, hops are not typically held for very long. Growers enter into futures contracts for the very reason of avoiding the boom bust cycle. So, next question, who is going bust?

    As far as I can tell, without any hard evidence to the contrary, the hops industry is really quite healthy at the moment.

    Do we know of any major growers going bust? Is there a worldwide shortage? Or surplus? Are growers and contractors going under at an unusual rate?
    No. No. No. No.

    Past results are no guarantee of future performance of course.

    Cherrs.
     
    GormBrewhouse and MrOH like this.
  11. GreenKrusty101

    GreenKrusty101 Crusader (747) Dec 4, 2008 Nevada

    ...but did the OP say that? I assume hops were/are preferable to gruit or we'd still be drinking the latter in massive quantities. :slight_smile:
     
    JackHorzempa and SFACRKnight like this.
  12. minderbender

    minderbender Aspirant (218) Jan 18, 2009 New York

    Just referring to this:

    The hops were added as a preservative to keep the beer fresh, and it worked. Now, we like the taste of the preservative.

    The implication, I think, is that contemporary British beer drinkers had to learn to like the taste of hops, which I think is probably wrong.

    [Edited to add: Actually, I suspect IPAs were heavily hopped because upper class British beer drinkers liked the taste of hops, not because the hops were needed as a preservative. But I would have to do some reading on that question.]
     
    GreenKrusty101 likes this.
  13. GreenKrusty101

    GreenKrusty101 Crusader (747) Dec 4, 2008 Nevada

    ..or the OP might be referring to modern (21st Century) IPA drinkers
     
    minderbender likes this.
  14. Granitebeard

    Granitebeard Initiate (173) Aug 24, 2016 Maine

    To the hop issues this thread is referring to, I feel there is a lot more to it then what we can see in many of the big blogs or posts out there. Many people here probably have seen me post about starting to be a very small scale hop farmer, so have been looking up as much info as I can, most of which makes the terrified feelings I have about dumping tons of money into this worse. Hop shortages, boom bust cycles, surplus, small farms going out of business, etc. All of this seems to look at "big business".

    Looking at that chart I will point out that it is for pretty much anyone who will make money off of hops. The few small hop farmers I have talked to, say they usually never have extra hops. I didn't push if they have sold them to breweries or to some kind of dealer, but most were able to say "this brewery or that brewery use our hops". So look at it from the angle that many dealers are going to buy hops they think they need and sell them under contract as much as possible. So you look at a year like this last one, where many of the hop growers had a rough year. Low yields and low Alphas on some of the crop world wide will cause a hit to some crops. On top of that, looking at the "popular" hops out there right now, you have to remember that many people can't grow the proprietary hops, so the "less" used hops build up. In on post/blog by the guy from 47hops, he stated that many new breweries ask for the newest hops, and he retorted with "have you tried these "older" varieties?" People look at such a small window of the hop market, that they forget many different varieties are out that that can make really good beer (EDIT: a couple breweries I talked literally said 75% of the hops the use are proprietary ones to the northwest).

    Talking with some local breweries, I am potentially very lucky. A few that I have spoken to as all ears to small local hop farmers and, this part shocked me beyond belief, prefer using whole cone hops. Also, many are looking to make the "local" or "craft" thing more of a selling point. One brewery I talked to, uses 85% local malt, as much yeast as they can from a local yeast company, and is looking for more local hops. This is perhaps part of the cycle or just changing in local economies. I feel that "local" will be the future, even if it is just a cycle. Yes the big popular hops will still be in demand, but people will be looking to buy local.

    All this said, I guess I will put my disclaimer at the end here. I am looking to move forward with growing hops, so I probably look at things in the light that I want to succeed. Also, I realize that even in my focused researching on the topic, I am probably still missing MASSIVE chunks of info, that might come out more, now that I am talking to some people at places like the USDA. I am very much reading between lines and looking at things literally the way they are presented, so may end up being massively wrong on some points.
     
    #14 Granitebeard, May 13, 2018
    Last edited: May 13, 2018
    JackHorzempa likes this.
  15. billandsuz

    billandsuz Disciple (345) Sep 1, 2004 New York

    Who? Who says this?

    Ditto. ???
    This is simply not the case. There is no glut of hops currently. This is false. Where is this huge stockpile?

    This makes no sense. I mean, this makes no fucking sense whatsoever. Apply this logic to any other product. "We sold every item we had to sell, but the product is not moving". Where is the "technically" part?


    Hops are just an extremely marginal agriculture product that are currently enjoying a surge in demand. It is a mature business with mature suppliers and mature buyers. Just because the market is currently seeing demand from many ma and pa brewers does not mean the sky is falling.


    Cheers.
     
    JackHorzempa and Granitebeard like this.
  16. Push_the_limits

    Push_the_limits Initiate (128) Feb 8, 2018 Antarctica

    It makes sense if you think about it in terms of contracts. As you know, hops are sometimes sold under contracts for something like 5 years. So there is an agreement ahead of time that they are sold, but if no one is using them, like when demand falls short of expectations, the hops are not "moving."
    Here is this article, about a beer named after a bad hop contract. Galaxy and El Dorado Hops.

    About who said that, please reference the article I posted below the graph. The whole article is about the issue.


    The stockpile is sitting with the farmers or brewers who get stuck with too many hops. Contracts are getting canceled or payments delayed.
    Here is more info about the hop economy.

    I quote, "There have already been casualties. Yakima hop supplier 47Hops filed for bankruptcy in August, blaming a number of breweries that have not paid for the hops under their contracts. President Douglas MacKinnon had this to say:

    The growth in the craft beer market in the United States has slowed from 18% per year in 2014 to its current level of 5-6% growth per year. Unfortunately, during the past several years, brewers fueled by optimism contracted for more hops than they now need due to that slower rate of growth."


    I don't claim to be an expert, and I don't think the sky is falling. It's just a look at current events.
     
    #16 Push_the_limits, May 13, 2018
    Last edited: May 13, 2018
  17. Push_the_limits

    Push_the_limits Initiate (128) Feb 8, 2018 Antarctica

  18. hopfenunmaltz

    hopfenunmaltz Meyvn (1,382) Jun 8, 2005 Michigan

    There are a lot of hops out there. One can find quantities of the most trendy hops if one wishes to pay the price. Some breweries sell and trade amongst themselves. There are a couple of places they can advertise hops for sale, this is one.

    https://lupulinexchange.com/

    @Push_the_limits I came off a little strong on my reply, sorry. If you don’t follow this blog, you should take a look, as it uses primary sources such a simple brewers logs for its information.

    http://barclayperkins.blogspot.com/
     
    Push_the_limits likes this.
  19. hopfenunmaltz

    hopfenunmaltz Meyvn (1,382) Jun 8, 2005 Michigan

    minderbender likes this.
  20. minderbender

    minderbender Aspirant (218) Jan 18, 2009 New York