Hop variety pricing?

[csoard]

Hi! I'm a marketing assistant at Veering Creek Farm - the largest hops farm in Kentucky - and we're entering our first year of harvest (it's the second year for the plants.) I'm trying to make a pricing sheet to send to potential clients we've been speaking with, but I'm not sure what fair prices are for wet and dried whole-cone hops. Is there a good resource for me to look up hops prices for the season, or the previous season? Note: Our owner is new to hops, and inexperience along with a very hot, wet summer in Kentucky lead to slightly lower alpha acids than I would've liked to see. I know that may play a role in pricing, I'm just not sure how, as I am also new to the business and trying to learn as much as I can on-the-fly.

Here are the varieties we are currently growing:

• Cascade
• Columbus
• Chinook
• Mt. Hood
• Nugget
• Willamette (These never flowered; I spoke with another Kentucky grower and he said that his never came in either. I'm not sure why that may be? Any answers there would also be appreciated.)

Is there a price difference between wet and dried whole cones? What about pellets vs. dried whole cones?

Thanks so much and happy brewing!

Caitlin Soard
Veering Creek Farm

[gvh_Dan]

If you want to know what you can get for the hops on the open market, check out the classified section of this forum (http://discussions.probrewer.com/for...plies-For-Sale) and head to Lupulin Exchange (https://lupulinexchange.com/listings...SortBy=1&v=124). On this forum, you can go back through 4 years of ads to get an idea. On LE, you can see what whole cone vs pellet prices are doing at the moment. They have some sort of pricing history if you register.

If you want to know what your cones are really worth, head to your local brewers. Many will pay a slight premium for local but you better be upfront about the low alpha and any other quality issues you have. They can work around it but it may cost you. If you don't tell them and they figure it out, don't expect repeat business. The craft beer industry is all about honesty.

Some areas of the country will take whole cone but most prefer pellets and will pay more. Some of it comes down to brewing equipment but a lot of it is about storage space and oxidation prevention.

Wet hop price is a really long discussion. Some say cut the price to a quarter because there is 4 times the water in them. Others say its a premium because of the extra effort needed to get them off the bine and to the brewer in a short time. I think there was a discussion thread here a couple years back.

Honestly, its kind of the wild west with prices. I know guys in San Diego that were getting $40/lb for a bit due to so little local hops. I know guys in MI that can't sell their hops at market price or less because its flooded with local hops. In our area (WI), its taken us almost a decade to determine a reasonable price point for our hops. If you want to be realistic, use spot market prices and hope for a bit more.

[csoard]

If you want to know what you can get for the hops on the open market, check out the classified section of this forum (http://discussions.probrewer.com/for...plies-For-Sale) and head to Lupulin Exchange (https://lupulinexchange.com/listings...SortBy=1&v=124). On this forum, you can go back through 4 years of ads to get an idea. On LE, you can see what whole cone vs pellet prices are doing at the moment. They have some sort of pricing history if you register.

If you want to know what your cones are really worth, head to your local brewers. Many will pay a slight premium for local but you better be upfront about the low alpha and any other quality issues you have. They can work around it but it may cost you. If you don't tell them and they figure it out, don't expect repeat business. The craft beer industry is all about honesty.

Some areas of the country will take whole cone but most prefer pellets and will pay more. Some of it comes down to brewing equipment but a lot of it is about storage space and oxidation prevention.

Wet hop price is a really long discussion. Some say cut the price to a quarter because there is 4 times the water in them. Others say its a premium because of the extra effort needed to get them off the bine and to the brewer in a short time. I think there was a discussion thread here a couple years back.

Honestly, its kind of the wild west with prices. I know guys in San Diego that were getting $40/lb for a bit due to so little local hops. I know guys in MI that can't sell their hops at market price or less because its flooded with local hops. In our area (WI), its taken us almost a decade to determine a reasonable price point for our hops. If you want to be realistic, use spot market prices and hope for a bit more.

Thank you for the information, I really appreciate it! It's hard to find knowledgeable people in hops in this area of the country, because even the farms that are doing what we're doing are doing it on a smaller scale and haven't been at it much longer than we have. We're asking $6/lb right now, but what we've actually sold I've sold at $5/lb because they are wet hops and because our main focus this year is to really build relationships with brewers for the future. We've only sold the Cascade and Chinook so far, but I'm going out to the farm myself today to get samples to send to the lab because the other types are getting close to harvest time. This is what our levels are like right now, I'm not sure if that's unusually low (as in, low enough to offer a lower price point,) but if it is, that's okay, it is what it is for this year:

Chinook:

• 10.4% Alpha Acids
• 2.5% Beta Acids

Cascade:

• 4.3% Alpha Acids
• 4.8% Beta Acids

[hopheadfarms]

Hop variety pricing?

It's way deeper than looking at Lupulin exchange for average prices. It's a good start but there are too many driving factors into those prices. There could be no market depth when someone is in a jam and a brewer is forced to pay a crazy price for a certain hop at a given time. There are also breweries on the 7th year of a 10 year contract so their price is very low. Those same breweries aren't getting those prices when signing new contracts(which is the real number you're looking for). Then factoring in that not all hops are properly kept. So some hops seem to be reasonably priced or even cheap, but don't sell because it shows they are stored at a brewery and not a broker or farm (where they would be properly kept). There are also multiple years available, brewers lower the prices to lock in a loss because they have the new crop year coming up and will be forced to take that. Lupulin Exchange is great for current spot market, but that changes daily. It's hard to gauge current 2016 contract pricing.

The main thing with pricing is the quality. Brewers will pay for quality. It's also very expensive to farm hops so you need to know what it costs to produce. If you need to cut your price by a certain amount of dollars per pound just to sell them, then you need to look to see if you can keep producing and expanding at that rate while staying in business. If you're producing quality hops then there should be no need to lower from $6 to $5 on wet hops, local brewers will be happy to buy them. The shipping is the expensive part.

As far as knowing MI farmers can't sell their hops at market price or less because of a flooded MI market? That's complete garbage. I know farmers in MI, WI & IN that cut prices and it has nothing to do with a flooded market. It has to do with the business itself and the quality attached to it. If you want to just sell in your backyard and push "local" then there will be a saturation point. Local and Quality are two completely different things and you need to differentiate the two. We are selling in almost every state and a handful of countries outside the US. There are plenty of brewers who want quality and will pay for it. So it all depends on how far you want to go.

[nohandslance]

CA Wet Hops

We are hand picking Cascades for $11.00/lb in California and have tremendous positive feedback on the "wet hop" ales. I think you are under charging for your product. especially if you are picking and packaging them yourself.

Lance
Rebel MaltingCo.
Reno, Nevada USA

[BrewinLou]

Hey Caitlin,
Your Cascade Alpha is on the low side but still within acceptable range, Cascade is more often then not used for aroma additions so low alpha is not that critical. Your Chinook is below average for Chinook but still high enough to be used as a bittering hop. I would not discount either for the low alpha. Good luck!

[csoard]

Hey Caitlin,
Your Cascade Alpha is on the low side but still within acceptable range, Cascade is more often then not used for aroma additions so low alpha is not that critical. Your Chinook is below average for Chinook but still high enough to be used as a bittering hop. I would not discount either for the low alpha. Good luck!

Thanks Joel! I appreciate it.

[hopguy]

to the original poster, if your model is to stay truly small, and sell locally, then brewers (at least in the short run) will have no problem paying higher pricing for your hops; that market is very thin (there is not a place to go to get "local" hop pricing); really it is up to your local brewer and yourself; if the local brewer wants to continue to source local hops from you well into the future, he will have to pay you a premium for the product, regardless of what the commercial hop production market is; your model has some legs, given you produce a high quality product AND "stay in your lane" and not overproduce your local market, and get yourself into a situation where you have to compete on the open, commercial hop production pricing arena.

the issue though with the "local" supply angle is that is going to be a very low volume one; depends on what your definition of "local" is, but, I think most people would think in a several hundred mile radius kind of thing, at the most, "State" wide; it does not take much hop volume for this whole "local" angle to get way too many hops chasing too little demand;

a good example is MI; the state has roughly 1 million barrels of craft beer production; that implies a hop demand of around 1,500,000 lbs roughly (based on 1.5 lbs/barrel) right now you have two farms whose stated goal is to reach 800-1000 acres each, and, their model is supposedly "small grower/high quality" and/or "sell locally"; both are putting infrastructure in to achieve those high acreage goals;

1600 acres of hops, even at low yields of 1200 lbs per acre, is 1.9 million lbs of hop production; do these growers really believe that they are capable of capturing 100% of the in-state craft beer hop demand??

The avg size of the commercial Pacific Northwest hop farm is 550 acres; I guess I find it interesting that their model is "local" and "small producer at higher quality", but, yet they will be larger then the average PNW grower at the end of their build out and, their production, from just those two farms, will be more hops then the entire MI state craft brewers use. Thats not a "local" model; that is a commercial model; you can't use these marketing terms of "local" and "small grower higher quality" tag lines with any honesty when you are building farms that are commercial size operations that are as large, or larger, then the traditional PNW commercial farms;

I also see that many of these operations are buying hops produced in the PNW and Germany, and re-selling them under their own logo, to supplant their hop farm revenue stream; that is not a "local" model, that is a commercial hop dealer model.

"local" will not insulate you from commercial hop production pricing 5 States away in the long run……nor will "local" brewers ever dedicate 100% of their hop needs to locally produced hops;

so, my advice to you is stay small, stay truly "local", produce a high quality product, and price them in a manner that is sustainable to both you, and your local brewer; that price is one that just the two of you will need to come up with; resist the urge to grow more then your local market wants because that is a rabbit hole that once you go down is hard to come back on; one thing to understand, is that craft brewers will get all the hops they need; the commercial growing areas of the PNW and Germany are completely capable of meeting demand; there are plenty of hops for craft brewers to brew with…….. so, if you go down that commercial path, you will eventually end up having to compete not only on the merits of quality, but also price, and that is not an easy task. The way for you to insulate yourself from commercial pricing, is to stay local;

[hopheadfarms]

Local?

to the original poster, if your model is to stay truly small, and sell locally, then brewers (at least in the short run) will have no problem paying higher pricing for your hops; that market is very thin (there is not a place to go to get "local" hop pricing); really it is up to your local brewer and yourself; if the local brewer wants to continue to source local hops from you well into the future, he will have to pay you a premium for the product, regardless of what the commercial hop production market is; your model has some legs, given you produce a high quality product AND "stay in your lane" and not overproduce your local market, and get yourself into a situation where you have to compete on the open, commercial hop production pricing arena.

the issue though with the "local" supply angle is that is going to be a very low volume one; depends on what your definition of "local" is, but, I think most people would think in a several hundred mile radius kind of thing, at the most, "State" wide; it does not take much hop volume for this whole "local" angle to get way too many hops chasing too little demand;

a good example is MI; the state has roughly 1 million barrels of craft beer production; that implies a hop demand of around 1,500,000 lbs roughly (based on 1.5 lbs/barrel) right now you have two farms whose stated goal is to reach 800-1000 acres each, and, their model is supposedly "small grower/high quality" and/or "sell locally"; both are putting infrastructure in to achieve those high acreage goals;

1600 acres of hops, even at low yields of 1200 lbs per acre, is 1.9 million lbs of hop production; do these growers really believe that they are capable of capturing 100% of the in-state craft beer hop demand??

The avg size of the commercial Pacific Northwest hop farm is 550 acres; I guess I find it interesting that their model is "local" and "small producer at higher quality", but, yet they will be larger then the average PNW grower at the end of their build out and, their production, from just those two farms, will be more hops then the entire MI state craft brewers use. Thats not a "local" model; that is a commercial model; you can't use these marketing terms of "local" and "small grower higher quality" tag lines with any honesty when you are building farms that are commercial size operations that are as large, or larger, then the traditional PNW commercial farms;

I also see that many of these operations are buying hops produced in the PNW and Germany, and re-selling them under their own logo, to supplant their hop farm revenue stream; that is not a "local" model, that is a commercial hop dealer model.

"local" will not insulate you from commercial hop production pricing 5 States away in the long run……nor will "local" brewers ever dedicate 100% of their hop needs to locally produced hops;

so, my advice to you is stay small, stay truly "local", produce a high quality product, and price them in a manner that is sustainable to both you, and your local brewer; that price is one that just the two of you will need to come up with; resist the urge to grow more then your local market wants because that is a rabbit hole that once you go down is hard to come back on; one thing to understand, is that craft brewers will get all the hops they need; the commercial growing areas of the PNW and Germany are completely capable of meeting demand; there are plenty of hops for craft brewers to brew with…….. so, if you go down that commercial path, you will eventually end up having to compete not only on the merits of quality, but also price, and that is not an easy task. The way for you to insulate yourself from commercial pricing, is to stay local;

That's a pretty big blanket statement about MI hop farming and the market, unfortunately there is some merit to that and it doesn't include us. We are one of the bigger hop farms in Michigan and 800-1000 would be pure speculation or gossip. Every domestic hop we grow is grown in Michigan, nothing from the PNW, every European hop we offer is not a sticker slapped on a box. We have network growers in Europe, personally know every farmer that it comes from and select each bale by hand on their farm for a month or so during harvest. We visit with them several times a year and they also fly over to help build and consult on our farms. These are deep relationships with German, Slovenian & Czech families with generations of experience. We then ship the bales to Michigan and process them on our farm on our system. We don't have mega PNW production facilities, we have smaller German style family farm operations that allow a lot of quality control and consistency. As we grow, we have to keep on building more facilities to keep true to the original business model that produces the quality product that brewers have grown to expect from us.

But on the other hand there are Michigan farms that are like 5-50 acres that slap their logo on brokered hops from all over the world that have nothing to do with Michigan. As well as another big farm that is basically a contract grower for a large PNW broker. If proper research was done we wouldn't be lumped into a broad statement about an entire state's hop production. From your post I feel like you know enough about the industry to easily have that info readily available. So I am not quite sure what to think of your post. Each farm has a unique situation. Those 2 other farms I just mentioned aren't doing the same thing as each other either.

I don't think think any of us expect to capture 100% of the Michigan hop market. That would be very short-sighted as breweries use such a cross section of the world when it comes to sourcing hops and at this point we cant compete by price with the PNW, we have to compete by quality. I think its also short-sighted to think you can capture 100% of the domestic hop market in Michigan. Our systems cant crank out at those speeds and we wouldn't want them to since there is less control. Brewers will support local when it makes sense for them.

I do agree with your points on the local market. Its a whole different market that co-exists with the actual production hop market. Your pricing doesn't totally have to be dictated by the other market. But you have to remember that "Local" is a bonus. It isn't synonymous with Quality. There is no dead-set guideline to what distance is local. Michigan is more local than the PNW to more than half the country. But that means nothing if the quality isn't there.

[gvh_Dan]

...back on topic, Caitlan, what BrewinLou said about your hops is correct.

If you want to look up the normal ranges for hops, check out the Variety Manual from USAHops or the summaries they have here:http://www.usahops.org/index.cfm?fus..._info&pageID=8. It will give you a good idea if you are doing everything right. You should also look at oil content to make sure your drying method is proper.

So, did you have any luck selling them wet?