The world is not running out of hops, at least according to the Hop Growers of America.
While fears of a global hop shortage have plagued the minds of brewers all over the world, Hop Growers of America (HGA) today reported that the bitter bud’s international supply is actually on the rise — with the United States fueling much of that growth.
According to a report issued by the National Agriculture Statistics Service in March, the U.S. hop inventories had increased by 10 percent in the last 12 months compared to the same period last year. Growers, dealers and brewers in the country had collectively housed 131 million pounds of hops by March 1 of this year, according to the United States Department of Agriculture — nearly 70 percent of the 190.4 million pound global hop supply available in 2015.
“We are finally beginning to see some signs of breathing room in the supply chain,” Pete Mahony, vice president of supply chain at Haas, a hops distributor in Washington, said in a press statement. “Although, we’ve not reached comfortable levels quite yet.”
Although a portion of the U.S. hop harvest will be added to the “spot market” for brewers to purchase as needed, most of the supply will be held specifically to fill orders for breweries that hold contracts with hop farmers — an increasingly popular practice.
According to HGA, contracts with brewers have enabled hop farmers to expand their acreages and borrow more money from lenders to build out their operations.
“Thanks to the efforts of the hop and brewing industries working together, contracts have increased, resulting in more breweries reliably having their needs fulfilled and at a known price,” Ann George, executive director of HGA, said in a press statement. “We hope to see this continue, reducing reliance on the spot market, which acts as a good buffer for unanticipated need and yield variances.”
The United States now leads the world in hop farming, and is expected to increase its hop acreage by 13 percent, or 6,000 acres, this year. Germany, the world’s second largest producer of hops, is also expected to increase its hop acreage by 10 percent.
According to the International Hop Grower’s Convention, 2016 will mark the fourth consecutive year of hop acreage growth in the U.S. and the third straight year of expansion internationally.
A full press release with additional information is included below.
Moxee, WA – As a member of the International Hop Grower’s Convention (IHGC), Hop Growers of America participates in the IHGC preliminary projections for the 2016growing year: Hop Acreage is increasing yet again at a global level for the third straight year, and for the fourth straight year in the United States.
With demand reaching new heights, largely thanks to increased hop usage in craft beer and the U.S. Brewery count reaching an all-time high, hop growers across the globe have responded with more acreage.
“The industry has worked hard to keep up with demand at a frenetic pace and the stock report is a lagging indicator of success in those efforts,” said Jason Perrault, a U.S. Hop Grower and Breeder of Select Botanicals, a hop breeding company, speaking in reference to the USDA Hop Stocks report released by the National Agriculture Statistics Service last month. The report found hop stocks rose 10% in the past year, meaning brewer’s supplies are 10% larger in the U.S. compared to the same time last year.
The total amount of hops in U.S. inventory at the time of the report is 131 million pounds. To put this number into perspective, the total 2015 global hop harvest was 190.4 million pounds. While a small portion of these hops will be available for purchase on the spot market, the majority of this inventory is contracted and in storage until brewers request shipment.
However, the number also indicates increased infrastructure improvements and services of product storage for brewers, especially smaller production facilities that do not have a large space for raw materials storage, allowing more frequent shipments throughout the year.
“The stock report is an indicator that industry efforts to keep up with demand are increasingly successful. But, in high demand varieties, despite an increase in stocks, burn rates on these varieties have met expectations and are experiencing continued growth in future contracting,” notes Perrault.
As for the hops yet to come with the 2016 Harvest – the outlook is a sunny one. With a projected increase of 5,400 acres in the Pacific Northwest (Washington, Oregon, and Idaho) and 600 acres in smaller farms across the country, the estimate increase for the United States is 6,000 total acres, a 13% increase following a 19% increase the year before. The projected increase would bring the U.S. hop acreage to 51,275 acres, widening the gap with other world-leading hop producer Germany, projected at 45,468 acres (10% increase). Aroma and dual purpose varieties, including popular proprietary varieties, will continue to dominate U.S. acreage expansion.
“We are finally beginning to see some signs of breathing room in the supply chain,” said Pete Mahony, Vice President, Supply Chain/Purchasing at John I. Haas in Yakima, especially speaking to popular craft varieties hard-hit last summer. “Although, we’ve not reached comfortable levels quite yet.”
To add on to the good news for hop lovers, normal irrigation water supplies are currently projected for Washington’s Yakima Valley, home to approximately 70% of the U.S. hop crop. In addition to an uncharacteristically hot year, low water supplies due to a small snowpack in the 2014/2015 winter resulted in lower yields for 2015 on some varieties – particularly early maturing aromas which are in high demand.
“Going into the growing season with a good supply of water, another large acreage increase, and last year’s new acreage coming into full-production, we are excited for the 2016 growingseason,” said Ann George, Executive Director of Hop Growers of America. “Thanks to the efforts of the hop and brewing industries working together, contracts have increased, resulting in more breweries reliably having their needs fulfilled and at a known price. We hope to see this continue, reducing reliance on the spot market, which acts as a good buffer for unanticipated need and yield variances.”
Forward contracting also allows growers to secure necessary capital from their lenders as they can prove their crop is sold. This is especially crucial for expansion to meet demand where the per-acre cost of establishing new acreage is very expensive – estimated at a minimum of $40,000 (likely higher) an acre considering grower and merchant costs. Included in this projection cost is land, growing supplies, rootstock, labor, additional farm equipment, harvesting facilities (picking and drying), and increased cold storage warehouses, packaging equipment, etc.
While a healthy spot market is crucial for buffering unexpected needs for brewers, an oversaturation results in market price volatility and increasing risk.
To see the full IHGC report, click here.
About Hop Growers of America:
HGA promotes American grown hops to brewers and merchants of hops 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.