Hop contract renegotiations?

[sloop of war]

I've been seeing hops selling for prices lower than our contracted prices, as many have by now. Has anyone tried renegotiating their hop contract(s)? Can you share in general terms your success?

[Fred Scheer]

Hop contracts

In general, most of the existing contracts with hop suppliers are supported by "firm" contracts between the grower and supplier. Due to the excellent hop crop in Germany last season, new acreage in the U.S. and impact of a major brewer being taken over there are a number of significant changes in the market causing the spot market price to fall below contract prices. Depending on the grower, the hop supplier may have options and it's worth having that discussion.

Cheers

Fred

[mkunce]

Re

Why would this cartel (I have used the term oligopoly in the past) member renegotiate? Where will you go if they don’t?

[hops cynic]

Good luck with that.

[pbutlert]

I am trying to push some of my contracts back a few years, but as far as re-negotiating prices a signed contract is a signed contract. Contracts can be a bit of a gamble, but at least you know you will not run out of a particular variety. It helps the growers plan in advance too, I believe.

[Laughing Dog]

Hops Contracts

I have a few varietys in my contracts I have too much of any one want in on them?

LDB

[beerking1]

What varieties do you have to spare, and how much?

beerking1 <at> verizon <dot> net

[NYSBrewer]

Here are my thoughts on this. We all bought into extensive contracts when we were lead to beleive that there would be this "world wide hop shortage". This did not happen. Hops are available and we all have too much in inventory. I tried selling some on this forum and got no response, when a year ago everyone was clamoring for hops. My question is this: Why are the brewers the ones who are expected to eat this? Between my 07 and 08 contract I have enough hops to last me for the next 2, possibly 3 years. I bought this way to protect myself in the event that there would not be hops available, but there are. I think everyone should take a hit in this miscaulculation; growers, suppliers and brewers. What does everyone else think?

[hops cynic]

Tim: You are 100% right. We were all sold a b*llsh*t story and hustled into signing 1, 2, 3, or even 5 year contracts at grossly inflated prices. Many even with pre-payment. Now we're left looking like suckers.

The hop merchants will do their best to hold up the spot prices. I can guarantee they'd rather have some hops go unsold than see the prices fall back to "normal" levels. But the lure of $20/lb hops is a siren song. Hops will be grown a-plenty and a price crash is inevitable. Might take another year or 2 though.

[beerking1]

IMHO, this is just market forces at work. Hops have been, for many years, a commodity just like oil is. 10-15 years ago, the hop version of OPEC (HOPEC?)was making too much. Last year HOPEC cut production, and offered what seemed like sweetheart deals. Consequently, some breweries cut back a bit, and some non-HOPEC producers (Venezuala and Mexico in the oil analogy) began producing a lot more. Price went down.
Oil has been low for about 6+ months. Anyone think it will stay that way? I don't, and I don't think hops will either. Hops were in short supply last year, esp particular varieties, and the market over-reacted, just like gas prices spike everytime there is a hurricane in the Gulf, or everytime Iran rattles a sabre.

Just my $0.02.

[mkunce]

Re

The few direct hop wholesalers to smaller breweries in the US represent a textbook oligopoly. Most small breweries are stuck buying from this group because it is not feasible (for many reasons) to go direct to the growers. Oligopolists are notorious for exercising their market power. However, the oil analogy is not a good one. Oil is a nonrenewable resource where proved reserves are geographically fixed. OPEC members possess this absolute advantage. In contrast, I have hops growing in my yard. Perhaps my use of cartel above was a bit strong.

[hank]

You know about the housing bubble well you are about to see the hop bubble. I am glad I only have a three year contract because they will not be able to give them away in 2010.

[Valleybrew]

Why is it that so many people have so many excess hops is my question. I tried to do an accurate forecast for my needs but was unfortunately late to the hop rush and got zero hops contracted last year. As bummed as I was then.. I made it through the great scourge via help from generous brewers and a delayed production ramp due to our shortage. Now it is actually nice to see some excess hops. If you contracted them why do you have such excess? This is of course I believe one of the main problems, everyone over ordered and instant shortage. Maybe I seem a little jaded but if you contracted them you really should be responsible for buying them. Just my 2 cents.

[NYSBrewer]

We contracted them because we were led to believe that we would be on short supply if we didnt. I agree, we made a breif shortage happen because most of us overreacted to the scare and bought more than what we would need in case hops became unavailable, in short we were covering our asses. I was prompted by my supplier to "buy and store" and in the event I had too much, I would be able to sell to people who didnt have enough. Guess what, I have to much, and I cant sell em. I know a deal is a deal, but I still think that due to such misrepresentation, we should not be held compleatly responsible. There has to be give on both sides. 08 hops are now available, why would anyone want to buy some of my 07 supply? Do you? Cause if so, I have plenty I can sell you.

[CrosbyHops]

If you would not have signed your contract there would still would be a hop shortage. No sane person is going to make a significant investment in the business without the guarantee a legally binding contract provides. Everyone loves a good spot market, but you can't bet the farm on it.

It is obvious that brewers over-estimated/hedged their needs due to the 'crisis' they were in - responsibility should fall on their shoulders and their decisions - the free market can be brutal. Sure, you can renegotiate any contract...if you are willing to buy your way out of it.