Three Five reports on hops; five conclusions.
It was all coming up roses, or hops, on 9 July, when Craft Beer Business reported that the 2015 hops harvest in the U.S. would be
the third highest total harvested acreage on record. Washington, with 32,205 acres for harvest, accounts for 73 percent of the United States total acreage. Oregon hop growers plan to string 6,807 acres, or 16 percent of the United States total, with Idaho hop growers accounting for the remaining 11 percent, or 4,975 acres strung for harvest. Acreage increased in all three States from 2014 and, if realized, both Washington and Idaho acres will be at record high levels.
But then NBC News filed a much less rosy report on 25 July:
The U.S. Drought Monitor showed 98.6 percent of Washington state in a "severe drought." The state has experienced hot and dry conditions and one of its worst mountain snowpacks on record. The lack of snowpack means there's not enough water to replenish reservoirs.
Washington state accounts for about 73 percent of the nation's hops acreage — and virtually all of the production takes place in the fertile Yakima Basin, according to the U.S. Department of Agriculture.
"We will have some fields that will probably see a little lower yield this year because of the combination of water stress and heat," said Ann George, executive director of the Washington Hop Commission. "We really won't know until harvest."
Most of the current crop is already locked up by contracts, but analysts say the drought will boost prices for anything on the spot market.
Michael Butler, chairman and CEO of Seattle-based Cascadia Capital, predicted that there could be a hops shortage starting in 2016. "Next year you won't have more land for hops," he said. "You have a shortage of water. You're going to have more demand from the craft breweries, and so you kind of pass the inflection point where the demand is greater for hops than the supply."
On the other hand, the Barth-Haas Group was more sanguine in its Hops Report, the July 2015 version of its annual, international analysis of the hops industry.
The winter of 2014/2015 proved to be one of the warmest and driest in the Pacific Northwest in some time. There was very little snowfall in the Cascade Mountain Range over the course of the winter, resulting in restricted water availability to some growers in the Yakima Valley for the 2015 crop growing season. Curtailment of supply during the cooler spring months will allow them access to water during the warmer late summer months. Hop growers do not anticipate that the hop crop will suffer from lack of water. Growers in Oregon and Idaho will likely get through the summer with little or no impact from restricted water supply.
Bart Watson of the (U.S.) Brewers Association was warily optimistic in a report released on 16 June.
The topline news is very good, showing a strong increase (16%) in acreage [in the Pacific Northwest] between the 2014 harvest and 2015 plantings, and a further shift toward the most in demand aroma varieties.
Finally, a few words about drought and climate change are in order. Although I would summarize the acreage numbers as exactly what brewers (collectively) wanted to see (though individual brewers may be various levels of pleased), the yield question is huge. A low yielding crop could easily swing a five million pound projected increase (over 2014) to a five million or – in worst case scenarios – ten million pound decrease. You don’t have to be an economist to guess what spot prices and future contracts would look like given that scenario. In addition, long term water issues could have devastating effects on the ability of new plantings to mature.
And, at Appellation Beer, Stan Hieronymus reported this today:
Earlier this week, Otmar Weingarten of the German Hop Growers Association told the those attending International Hop Growers Congress in Bavaria that production in Germany’s main hop growing regions would likely fall 12 to 22 percent short of earlier predictions. And Ann George, executive director of the Hop Growers of America, said that US alpha varieties yield would be down up to 5 percent and aroma varieties off 10 to 15 percent.
What about all the local, small-farm, non-Pacific Northwest hops we're hearing about? Again, Bart Watson:
Some of these pressures may be mitigated down the line by hop growing regions outside the Pacific NW. Michigan has ~400 acres now and another ~400 being planted and strung. Other regions like the Northeast are also being expanded. Nevertheless, in the grand scheme, a few thousand acres here and there do very little in a hop market if the ~44,000 acres in WA, OR, and ID see serious shocks.
Wait and see, but the bottom-dollar line is that breweries should have secured their hops contracts by now. Or, as Mr. Watson suggests: "If you want to throw in a little rain dance, that would be fine too."
- According to the Barth Haas report, worldwide planting of hops in 2014 was 47,666 hectares, an increase of 3.3% over 2013; world hops production equaled 96,477 metric tons in 2014, an increase of 15.9% over 2013. A hectare is the equivalent of 2.47 acres, and a metric ton is the equivalent of 2,204.6 U.S. pounds.
- For more from YFGF: