Hops market roller coaster

[einhorn]

Report from the Barth Group

http://www.barthhaasgroup.com/images/pdfs/Presskit2010.pdf

“There is no point in producing hops for a market that will not buy
them.“

"For 2010 that there will be a supply surplus of nearly 3,500 tons of
alpha on the market. This is equivalent to nearly half of the total annual
requirements of the brewing industry – with the result that the warehouses
in the hop industry will be bursting at the seams."

[wildcrafter]

The upshot?
Xanthohumol laden hops are the future for growers? Go neomexicana!
Bring on the herb market.

[South County]

I would need to understand more about the intricacies of farming hops and I don't want to oversimplify it, but here is my question/comment?

The yo-yo effect seems to be a end result of the brokers and farmers incorrectly reading the beer market and over-reacting. Just a year or so ago its was "2012" as far as Hop-Union (and the rest of the hop world) was concerned, yet not 14 months later half the brewing industry can't bail (no pun intended) excess contract poundage fast enough. WTF? not to mention the crop years that are in surplus (2008-2009) are the hops the "didn't" exist. Fishy if you ask me.

As of now there is somewhat of a Craft Boom going on worldwide really, much of it in very small new companies, this equates to new hop demand, but not so much that every producer needs to add millions of acres that wont yield until the following year. Its not a commodity that can rebound very well. One thing to note is that the newest heavy demand is in high alpha/citrus/American varieties. So naturally where the beer markets are stabilized, light macro lagers, lagers in general, the German and traditional hops demand will be as well. However I don't see it pertinent to start ripping out acreage, only for the "surplus" dry up in 3 years and everyone starts panicking and we're back to paying $25/lb. Its senseless, I would think that there is a way to make the bines dormant to the extent that they are disregarded for that crop year and see what the market brings in 12 months, maybe not. That would have to be more cost effective that planting and pulling acreage.

So if someone could validate or even discredit my theory I would appreciate it. It just that none of it adds up to me, multi-billion dollar industries broker all the time with even more volatile commodities and don't have near the supply and demand issues.

[einhorn]

I shed no tears for the hops industry. IMO they are master's of their own destiny, simply due to the oligopoly which exists in their business. A few years back came the "perfect storm" and they decided to get rich quick instead of controlling the situation and holding their own. The result: breweries and homebrewers planting their own hops, people with extra land planting rhizomes and many farmers (even outside of the traditional NW region) trying to get a piece of the $25/lb cake.

I do have a cousin in New York who could make the warehouse fire look like an accident again.

[Thirsty_Monk]

In 2008 on top of hop crises I visited Czech brewery.
They had no idea about hop shortage.

Did anybody heard California energy crices and Enron?
I think similar things are going on.
Hop broker issuing statement that there is too many hops.
Price fixing on large scale.

[wildcrafter]

Not sure where this will go but,,,

,in my humble opinion and experience,,

, getting farmers to collaborate can be more like trying to herd cats. Farmers have commonality as well as a little competition,,but for the most part they help each other for the betterment of themselves as well as their "tribe". Price fixing? Hell,,,you wouldn't believe how many times we've grown a crop,,,established a price with a buyer,,,grown the crop for the buyer,,and AFTER the crop has been loaded for delivery,,,the buyer calls and wants to renegotiate the price. Adventitious hosers or market forces? I'd have a hard time thinking any price fixing could come from the growers when it's actually the buyers that hose the farmer and the whole system. As a hop grower and farmer,,it's been the buyers not putting forth the promise.

[mkunce]

Re

The market power exists for the hop wholesalers (hop cartel) that distribute to the vast number of smaller craft breweries. Don’t weep for Boston Brewing Co. or New Belgium.

[Ted Briggs]

collusion

If you read their press release it is in-itself proof of an attempt to fix prices.
They state that there is too much hop acreage and other growers should also pull up plants.
If a realtor would state at a meeting, "Im going to start charging 7% and I think everyone should do the same" he could be prosecuted! But thats exactly what Haas has done.
Im not sure that they have the pull in the industry to pull it off though. hopefully others will want to take their market share, invisible hand and all that...
As small brewers, we should contract now while the prices are reasonable.

[einhorn]

As small brewers, we should contract now while the prices are reasonable.

Has anyone tried to contract recently at current price levels? Results?

[BrewinLou]

I have gotten several offers to contract. The prices are extremely low. I am probably going to sign one this week, just for our core brands.

[BrewinLou]

I am in complete agreement with you on that point. I contracted my core hops to ensure we can produce our best sellers. But I also buy specialties from indy growers b/c a diverse market is a healthier market, at least if there is no price gouging and or monopolies.

[Pompeiisneaks]

Piping in as someone w/ little knowledge and just a hunch, I think their stats reek of "the bmc's of the world" not the craft brewers. Just my feeling. I agree as well, that if we're having a world wide hop shortage just 2 years ago, and last year seemed similar to this year having an overabundance, I think they just tried to pull a fast one over on everyone and are now reaping what they've sown... pun intended.

[Hberyhops]

Hop Surplus

I dont know if this has been asked, but have you ventured to think of the nature of the macro hop usage? Many craft bewers use unique aroma hops instead of "Alpha". Right now there is a surplus of Alpha in the market and a shortage of Aroma. Or at least that is the case with certain varieties, Amarillo for example.

[Tubbybrew]

...but realize many of the characteristics these varieties impart can be obtained by using a blend of other more traditional varieties that have been handled properly to retain all of the essential oil components.

James-

Could you point us in a direction where these blends might be seen for the hops that are in short supply? I'd love nothing more than to avoid relying upon a proprietary hop whereby the price can be manipulated by a limited set of growers (i.e. amarillo).

Thanks,
- Chris

[BensingBrewery]

I would be very interested to read the stipulations of some of these contracts. Would anyone be willing to let me look at theirs?

Cheers!

Bill Bensing

http://www.billbensing.com