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Worldwide Hop Shortage – Will Homebrewer’s Get Hopping Mad Or Smile Over The Brew Kettle?
In October of this year, news of an impending hop shortage claimed that prices would skyrocket for their favorite craft beer and the price of hops in general would reach all-time highs. If you are a micro/craft brewer, the situation in the global hops market should be taken very seriously. If you are a home brewer, how will this affect you?
Supply shortages are estimated at between 700 and 1,300 alpha tons, or about 8.6% to 15.5% of annual global demand due to the poor European harvest in 2006. The main contributing factors are that the 2006 European harvest was ruined by heavy rains; while Australia was cut off by a severe drought and Canada’s was “just average”. Slovenia (producer of Styrians) lost at least 1/3 and possibly up to half of its harvest due to a hailstorm. . Their area of 2,400 in 2006 (against 17,000 in 1976) represents only 2% of the world area. The Czech crop is down 25% and the estimated alphas on Czech Saaz compared to the 2007 crop are 2.7 to 2.9. The German crop is average at best with below normal prior aroma hops (such as Hallertau Mittelfruh). The New Zealand and Australian crops this year (which arrived in the US in June and July) were normal .
Even though the US hops for 2007 were an average crop, a warehouse fire in the US destroyed 110 metric tons of alpha. And acreage reductions due to low prices in recent years and the tendency of most global brewers to rely heavily on the spot market and not on futures contracts have prevented producers from investing in their hop fields and equipment. For 10 years, farmers in the Northwest have grown too many hops. Prices have fallen. Farmers cultivated less. Local farmers were encouraged to plant more lucrative crops, such as cherries, apples and grapes, or to sell their land to build on. Now, with the increase in beer production, brewers need hops and many hop farmers have disappeared.
The long-term average growth in beer production has fluctuated between 1 and 2%. However, annual growth has increased over the past 10 years (1995-2005) to around 3%, coinciding with the fall of communism and the establishment of capitalist market economies in Eastern Europe and China. Over the same 10-year period, the global area devoted to hops has decreased by 35%. The brewing industry could help by sending the right signal to the growing community by committing to long-term contracts of at least 4 years to incentivize producers to stay in business and make the necessary investments to modernize their operations. Of course, forward contracts are not a guarantee against crop failure, they considerably strengthen the farmer’s security of supply and represent an effective forward planning tool.
Right now, craft brewers are paying tens of thousands of dollars for something that won’t be used until the next year. When there is an increase in the price of raw materials, it will be passed on to the consumer, possibly between 50 cents and $1 per six-pack. The impact will be higher beer prices or your favorite hop-based beer might taste slightly different.
What’s the bottom line for homebrewers? Well, some varieties are getting more expensive and a few varieties will be sold out. Brewers should be prepared to try other varieties. Homebrewers should be prepared for the potential need to substitute different hops, to replace the varieties that currently give your favorite beer their “signature” flavor. In fact, there may be slight variations in flavor over the next few years as the hop industry works to correct this.
Already, some of the biggest online homebrew retailers have raised their prices and a number of “temporarily out of stock” statements can be found in the “Hops” section. The good news for home brewers is that the cost of hops per five-gallon batch is negligible and incurs an additional cost of pennies per glass of beer brewed. So while all your micro/craft drinking friends are complaining about the cost of their favorite beer, you can smile a little while you brew your next batch of beer.
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