YAKIMA, Wash. — The continuing growth of craft beer is squeezing the U.S. hop industry.
It’s driving an increase in plantings in the nation’s premier hop-growing region — the Pacific Northwest. And it’s causing states that haven’t produced hops for decades to venture back into it. Even then, there probably won’t be enough for craft brewers or to prevent a worldwide shortage of hops for big brewers in a few years.
Craft breweries are projecting 20 percent annual growth through 2020, according to Ann George, administrator of Hop Growers of America and the Washington Hop Commission in Moxee, Wash. That means hop acreage is likely to keep increasing, she said.
To meet that demand, growers in Washington, Oregon and Idaho have been shifting from alpha variety hops that large brewers prefer to the more profitable aroma varieties that craft brewers want.
Oil in the hop cone, or flower, is used for flavor and to stabilize the beer.
Pete Mahony, director of supply chain management and purchasing for John I. Haas Inc. in Yakima, has warned the shift could lead to a shortage of alpha hops.
At current trends, there will be a worldwide alpha shortage by 2018, predicted Lynn Kemme, owner of Great Lakes Hops, a hop propagator in Zeeland, Mich.
Large brewers, however, say they don’t rely solely on the open market.
“We have seen changes in the amounts and types of hops produced over the years, similar to any agriculture crop. We own and operate hop farms in the U.S., Argentina and Germany and also work closely with global hop suppliers to ensure that our hop needs are met. We monitor market conditions and adapt as needed,” said Pete Kraemer, head brewmaster at Anheuser-Busch in St. Louis, Mo., the nation’s leading brewer.
“If the craft industry continues to grow at 15 to 18 percent (nationally), it’s hard to see how the hop industry keeps pace with it in 2016,” said Doug MacKinnon, president of 47 Hops, a Yakima hop dealer.
Early word-of-mouth estimates are that Washington is adding more than 4,000 acres this year, Idaho 1,100 and Oregon 500 to 600. It’s difficult to envision banks financing similar growth next year even without continued drought in the Yakima Valley, MacKinnon said.
A one-year drought shouldn’t slow planting but a longer drought could, he said.
Hops use a lot of water, up to 3 gallons per day per plant, Kemme said.
“That probably depends on what type of irrigation system he’s talking about,” Mackinnon said. “We’re on drip so I don’t know that it’s that much.”
Oasis Farms, between Prosser and Benton City, is among the Washington farms expanding acreage this spring. Brenton Roy, a co-owner, declined to comment on exact amounts.
Germany leads the world in hop production and is only slightly ahead of the U.S., China and Czech Republic in the top tier of producers. Half a dozen other nations also grow hops.
In the U.S., Wisconsin and New York were huge producers in the early 1860s, with Wisconsin peaking at 11 million pounds in 1867 before a mildew outbreak caused the state’s industry to crash in 1870, MacKinnon said. In those days, growers had no means to combat mildew.
For decades, U.S. hop production has centered around Yakima. It’s in a zone slightly north of the 45th parallel north latitude, regarded as best for yields due to the length of the daylight hours during the growing season.
The area also has a dry climate, plus good growing temperatures, soils and water.
In 2014, the U.S. produced 70.9 million pounds of hops, valued at $272 million, according to USDA’s National Agricultural Statistics Service. Washington accounted for 79 percent of the production.
Washington grew 73.9 percent of the acreage at 29,021 acres, Oregon grew 14.2 percent at 5,559, Idaho grew 9.7 percent at 3,812 and other states grew 2.2 percent at 880 acres, according to Hop Growers of America. In 2014, the average price per pound of Washington hops was $3.89 per pound, according to NASS. It was $4.34 in Oregon and $2.75 in Idaho.
Other states have been so minor that USDA’s National Agricultural Statistics Service doesn’t track their hop production. But there’s discussion of adding Michigan next year, said Dennis Koong, deputy director of the NASS Northwest regional office.
In northwestern Michigan, Empire Hops Farm harvested 118 acres last year and plans to add 200 acres this year and next. Michigan totals about 400 acres of hops right now and Empire is the largest producer in the state.
The company also grows apples but co-owner Dan Wiesen said he sees a strong future in hops.
“We have a lot of water and (lack of) water is an issue out West,” he said. “We are close to major markets and we have plenty of labor.
“We are basically starting an entire industry here. Brewers have been leery. They want high quality and consistency. We had our profiles tested and they came out well.”
Wiesen said he visited the Haas operation in Yakima recently and discussed the future with Mahony.
“The scope of things out there is amazing,” Wiesen said. “We’re just a drop in the bucket compared with Washington.”
Lynn Kemme, the hop propagator in Zeeland, Mich., said small craft breweries experienced 40 percent growth across the Midwest last year and can’t get contracts with hop growers in the Pacific Northwest. They have to buy on the open market, he said.
“Grower groups are starting in Montana, North Dakota, South Dakota, Colorado, New York and Pennsylvania. Growers are selling regionally or locally to craft brewers,” Kemme said.
Hop Growers of America is starting a small grower council to help small growers nationwide, he said.
Many growers in the Midwest and New York are small, just a few acres, but they are ramping up, with craft breweries linking up with specific hop yards and sponsoring them, Kemme said.
Craft brewers want different hops and “we have well over 60 varieties compared with the four to six big ones (aroma varieties) for craft brewers out West,” he said.
Yields are on par with the West and Midwest climate is better for some English varieties of hops than the Yakima Valley, which can get too hot, he said.
“We are getting bigger but we will stay craft. We don’t have the volume and consistency to supply Anheuser-Busch,” Kemme said.
Mahony, at John I. Haas in Yakima, said some other areas are not as conducive to growing hops as the Pacific Northwest, but growers see good demand and good money.
Minnesota, Iowa, Illinois, Indiana, Ohio, Virginia, Vermont, North Carolina, Ontario and British Columbia are all growing hops but Michigan, New York and Wisconsin, at a few hundred acres apiece, are the big three newcomers, he said.
“They will have more challenges with mildew, disease and pest pressure. Their yields likely will not achieve the levels we have, so they will be a more expensive source of hops,” he said.
“Still it’s something for us to keep an eye on. We’re in discussions with some of the larger growers to see where it goes, to learn more about their plans on acreage and varieties,” Mahony said.
Haas is a industry leader in growing, processing and research and development.
“The big question is whether these other states will become a viable source of supplemental hops into the U.S. industry,” Mahony said. “Right now they serve very local craft brewers. In many cases it’s wet tops for fresh hop ale, not processing, pelletizing or storing.
“We’re looking at the sensory aromatic characteristics of these hops versus the Pacific Northwest. They do take on a different aroma and flavor based on the growing region. We don’t know if brewers will accept these as interchangeable with what they buy here.”
That’s true but it can be a good thing for craft brewers looking for different aromas and flavors, MacKinnon said.
“Each brewer wants something unique and that filters to hop yards,” Kemme said.
“The big advantage Washington has over everyone else in the world is that Washington can plant in the spring and harvest in the fall. Idaho can a little. Everyone else has to wait two to three years to get a full yield,” MacKinnon said.
That more than anything else will temper financing and growth of growers outside the Pacific Northwest, he said.
Larger farms are evolving in Michigan and New York but are only beginning to reach the consistency of product the Northwest can provide and that brewers big and small want, he said.
“All the states have their strengths and weaknesses,” MacKinnon said. “Washington’s strength is it can respond to the market quickly and its flavor profile is dominant and is the standard.”