Rising hops prices could push craft brewers to maltier beers

The rise in demand for hops is growing faster than can be met by farmers. Here's what it could mean for the 10 million beer drinkers in Canada.

U.S. hop prices increase 31% in last 2 years and if trend continues, could see pricier pints

First published on March 11, 2016.

Hop-rich IPAs could be replaced with maltier beer offerings because the world's hop crop can't keep up with demand. 

"It will be interesting to see over the next couple of years — because the craft beer movement isn't slowing down — if there is a trend back toward more malt-forward beers. We anticipate that might start happening," said Big Rock Brewery spokesperson Susanne Fox.

In 2015, the American hop crop saw a growth in the number of acres planted, as well as in yields, despite a hot and dry growing season. 

However, even with the increase in supply, growers just can't meet the demand for hops —  the flower buds of vine-like plants that are used by brewers to add bitterness, unique flavours as well as aroma — from craft breweries that continue to pop up across North America. 

"It's really changed the way small and big brewers manage their businesses in terms of access to the hops that they need," said Fox. 

Changing the brewing game

It's all about buying power.

Big Rock Brewery is in the middle of the pack when it comes to buying power, so it hasn't experienced any shortages when it goes to order hops, but it's heard from smaller breweries that have, according to Fox.

What's changed is that brewers are forced to draw up "innovation calendars" two or three years in advance now, she said.

That means they plan what they're going to brew and order the hops accordingly, with very little wiggle room.

The hope is that what's in vogue doesn't change too much in the interim.

In June 2015, the American Northwest saw average temperatures that hadn't been seen in the 121 years since record keeping started. (National Oceanic and Atmospheric Administration)

The shortages that exist are largely affecting microbreweries — those that are too small to order hops in bulk contracts years in advance.

They're left to order off "spot lists" that are made up of whatever producers have left over after fulfilling their contracts.

"As these hop shortages pop up in different regions — and right now it seems like it's the United States — we are seeing a lot of the higher-end hops and the trademarked hops owned by certain farms just aren't showing up on spot lists anymore, because the bigger breweries with the million-dollar contracts or two-million-dollar contracts are able to buy everything," said Ben Leon, co-owner of Calgary's Dandy Brewing Company.

Leon, whose brewery already has a number of malt-forward beers, said the shortage has inspired creativity. Sometimes it means adjusting the hops used to create a taste, sometimes it means entirely scrapping the envisioned brew.

"It forces us to adapt. I guess it's similar to bad grape years [for the wine industry], where it's not going to kill the industry but it makes producers work a little harder," he said.

The other game changer, Fox said, is the multi-national brewers that want a piece of the craft-brewing market. They're starting to create beers with flavour profiles they've never been interested in before.

"They have way more buying power than anyone will ever have. So in some cases they can come in and buy out an entire farm, and they secure all they need. So that has changed the game a lot, too," Fox said.

Some kinds of hops are more difficult to find. Citra, the star of Citradelic, is one of those hot commodities. These palletized hops come from the Yakima Valley in Washington. (Sarah Lawrynuik/CBC)

Feeling the heat

For the most part the Canadian climate does not lend itself to growing hops, and while farmers in B.C. are growing hops, they haven't had enough impact to affect the buying habits of Canadian brewers. Nearly all Canadian-brewed beer is made with imported hops.

The American northwest is one of the area's best known for growing hops, responsible for roughly one third of the world's production. About 75 per cent of the hops grown in the United States come from one area of Washington — the Yakima Valley. The other 25 per cent is made up by growers in Idaho and Oregon. 

The 2015 growing year in the U.S. was heavily impacted by weather. Last summer, the U.S. Drought Monitor classified Washington and other parts of the northwest to be in severe or extreme drought. In Washington, April through to September broke heat records set in 1958. June was on average the hottest month in Washington on record (tracking began in 1895).   

These conditions meant the average yield per acre did take a hit, but it was made up by 15 per cent growth in the number of acres planted in 2015 compared to 2014. 

Growers and brewers are keeping a close eye on the snow conditions in Washington this winter because of the amount of hops that come from the Yakima Valley, which is largely desert-like except for the areas that see snowpack runoff from the Cascade Mountains.

"If we do have two bad years in a row — which would be pretty unlikely — then it wouldn't be great. Essentially all the contracts that were on order last year were, for the most part, filled. There were a few things that had to get substituted. … But again the spot market was the issue," said Jaki Brophy, the spokesperson for Hop Growers of America.

It's hardly what you would call a trend, she said.

"Obviously things will have some variation year to year, and last year was a very, particularly bad year."

What's driving the shortage is the increase in demand, more so than the one bad weather year, Brophy said. But she added Germany, another big hop producer, had problems with growing conditions last season as well. 

More frequent water shortages and heat waves are predicted for the Yakima Valley, according to a report released in 2013 by the University of Washington. 

Pricier pints

Thanks to increased demand, the price American farmers are getting per pound of hops has risen 31 per cent in the last two years, according the United States Department of Agriculture, and CNBC reported an imminent rise in the price of beer earlier this year.

At Big Rock Brewery, Fox said Calgarians can breathe a sigh of relief because we're not quite there yet.

"Consumers have a very specific idea of what they want to pay for their beer, and as a result, brewers like us, we have to have that padded in so we don't have to pass the cost on to the consumer, and we'll do that for as long as we can," she said.

She couldn't rule out the possibility of a price increase down the road.

The silver lining

What Fox thinks is more likely is pressure on the agricultural science side of things, so that hop plants can be altered to better weather the climate in B.C. She also anticipates a producer-generated move away from the heavilly hopped beers that are in vogue today, towards beers that favour barley for flavour.

"When we start to round that corner — which inevitably we will — the agriculture producer in Alberta, Saskatchewan and Manitoba who is growing wheat and barley — world-class wheat and barley — can only stand to win on that," said Fox.


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