U.S. hops supply catches up to demand

Hop vines and cones grow in the fall outside the John I. Haas building in Yakima, Wash. Extract from the cones is used in making beer. U.S. hop production has flipped from undersupply to oversupply in the past year.

MOXEE, Wash. — For the second year in a row, U.S. hop stocks were up in March over a year ago, a further indicator that supply has caught up with demand.

U.S. hop growers, dealers and brewers had 140 million pounds on hand March 1 compared to 128 million a year earlier for an increase of 9 percent, according to a March 17 report by USDA National Agricultural Statistics Service.

Stocks held by growers and dealers totaled 105 million pounds while brewers held 35 million pounds. A year ago, growers and dealers held 88 million pounds and brewers held 40 million pounds.

In March 2016, stocks were up 10 percent over March 2015, when they were down 2 percent from March 2014. In September 2016, pre-harvest stocks were up 2 percent from the year before and the September before they were down 8 percent.

All of that shows the hump has been crossed from undersupply to oversupply, sources say.

“In some varieties there will be pretty substantial carryover,” said Ann George, executive director of Hop Growers of America and the Washington Hop Commission in Moxee, near Yakima.

A few specialty varieties still may be undersupplied, she said.

“The main thing is we’re going into a period of re-balancing (amounts of varieties) between growers and merchants. Some brewers are still putting out new contracts while others are coming back in and renegotiating, pushing deliveries out in the future or canceling,” George said.

For years the expansion of small, craft breweries fueled the demand for more aroma hop varieties. But not only has acreage caught up with demand but big brewers are losing market share worldwide because of increased competition from other beverages, she said.

The production of the top 10 breweries in the world dropped 11.4 million hectoliters from 2014 to 2015, which is a lot of beer, she said. One hectoliter equals 100 liters.

Extract from hop cones is used in making beer.

Sixty-four percent of U.S. production is exported.

In 2016, a record 50,857 acres of hops were harvested — mostly in Washington, Oregon and Idaho. The production value was estimated at a record $498 million and volume was the second largest ever, at 87.1 million pounds.

The average price per pound reached $5.72, up from $4.38 the year before, driven by more high-value aroma varieties.

“Prices will remain strong for the 2017 crop. The average price could be similar to 2016, perhaps even slightly higher,” said Pete Mahony, director of supply chain management and purchasing for John I. Haas, a major processor and grower in Yakima.

The 2017 crop is essentially entirely contracted under multi-year agreements for expansion, Mahony said.

Therefore, pricing is still reflective of the peak of the market but will start to drop in 2018 and probably more dramatically in 2019, he said.

The March 1 stock increases are largely the result of production increases of 11 percent annually over the past two crops and the 2016 increase would have been even greater if not for below average yields in many big varieties, he said. Acreage increased 17 percent last year and will slow but maybe still reach 4,000 new acres this year, he said.

Craft beer growth rates are beginning to show signs of slowing, he said.

“The challenge is to determine the right amount of acreage and the appropriate mix of varieties to serve both the U.S. craft and larger global markets,” he said. “It is questionable whether any acreage expansion is needed in 2017.”

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