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Tuesday, October 23, 2007

This Hop Shortage Thing May Be Serious

We have been hearing rumblings of an imminent hop shortage for a month now, and I'll admit that I haven't taken it all that seriously. I wasn't thinking very deeply about it, and ignored the market reality. In my mind, hops are grown in the NW, so somehow we'd be the first in line. Of course, that doesn't square with how the national hop market actually functions, nor with the unsavory truth that little breweries like Oregon's are going to have to get in line behind A-B and the national brands--never mind how close they are situated to the hop fields.

Well, about the time our NPR affiliate ran a locally-produced story about this (they've changed their website and it's not online), I started to get alarmed. A few facts worth considering:
  • Cascades, the signature hop of the NW and one you find in at least half the beers brewed here, was selling at $1.70 a pound last year, when the last of a backlog was finally exhausted. A month ago they were selling at $10 a pound. The 1,000 acres of Cascades are 300-400 short--and no new acres are being planted.
  • Hop supplies from around the world are down, thanks to a hailstorm in Slovenia and a poor crop in the Czech Republic. This will increase pressures on hop supplies coming from the US.
  • Hop acreage is down from over 200,000 acres from the 80s into the early 90s to just 123,000 acres now. It takes three years for a hop vine to reach full production.
The upshot is potentially grim. Industrial lagers aren't in particular danger--their IBUs are at or below the level of perception, and there's no way to tell the difference in varieties. (To save money, the big companies buy high- and super-high-alpha varieties so they can use fewer hops per barrel. Most of the planned new acreage is of these varieties--most of which aren't broadly used by craft brewers.) But craft brewers, especially those on the West Coast, use lots of hops, and the vast majority of our beers are distinct because of the hop varieties and amounts used. Mirror Pond, for example, is hopped solely with Cascades. If they run out, Mirror Pond will essentially cease to be Mirror Pond--no matter what label the brewery uses.

At the very least, beer is going to cost a lot more for craft brewers to brew: they can't easily substitute varieties, which will cause the supply of certain hops to spike. Where the bigs could take advantage of other types, craft brewers are going to have to bite the bullet and shell out. At the worst, breweries may have to experiment with different varieties and hope to approximate the beer's character. This will hurt bottling breweries more than brewpubs, where variability is embraced. Can you imagine the consequences of a beer like BridgePort IPA having to change its recipe? Oy.

If there's a silver lining for breweries, it's that this may force certain innovations--experimentation with new hop varieties, use of non-hop bittering adjuncts, new, low-hop styles. This would actually be a wonderful thing, but the cost may be high.

Brewing isn't a high-margin business. Thanks to the run on ethanol, barley production has lost acreage to corn, which is also driving price increases. Breweries will have to choose whether to cut margins even more or raise prices. If they cut prices, can they stay solvent? And if they raise prices, will they lose market share? Craft breweries will be at a competitive disadvantage to bigger breweries, which can absorb costs more easily. The result could be a downturn in the craft market, and a shakeout that kills off smaller or more unstable brewers. This happened a decade ago, and it was ugly.

I'll quit taking this so lightly and try to keep an eye on what's happening. Stay tuned.


  1. Yet another reason why I grow hops at home. I just wish I'd planted more.

    Happy brewing,
    Bad Ben

  2. Before we moved to a new house, I had Chinook, Willamette, and Cascade vines planted, producing more hops than I could use in a year. Unfortunately, the greatest asset of our new home is its dense canopy--anchored by an ancient oak that rises like an arboreal cathedral from our neighbor's yard. Magnificent, forest-like environment, but with no patch that gets direct sun for more than a few hours a day, it's a no-go for hops.

    I envy you.