Hops Shortage causes beer prices to skyrocket.

Supply shortages are estimated between 700 and 1,300 metric tons alpha or approximately 8.6% to 15.5% of the annual worldwide demand due to the poor 2006 European crop. The main factors that have contributed to this situation are that Europe's 2006 crop was ruined by heavy rains; while Australia's was cut by a severe drought and Canada's was "just average. Slovenia (grower of Styrians) lost at least 1/3 and possibly as much as 1/2 of their crop to a hailstorm. England is almost out of the hop business. Their acreage of 2,400 in 2006 (down from 17,000 in 1976) represents only 2 percent of the worldwide acreage. The Czech crop was down 25% and estimated alphas on Czech Saaz from the 2007 crop are 2.7 - 2.9. The German crop is average at best with earlier aroma hops coming in below normal (such as Hallertau Mittelfruh). New Zealand and Australia crops this year (which arrived in the US in June and July) were normal.

Even though US hops for 2007 was an average crop a warehouse fire in the US destroyed 110 metric tons alpha. Also, acreage reductions as a result of low prices in the last years and a tendency of most global brewers to rely heavily on the spot market and not on forward contracts have caused growers not to be able to invest in their hop fields and equipment. For 10 years, Northwest farmers grew too many hops. Prices plummeted. Farmers grew less. Local farmers were lured to plant more lucrative crops, such as cherries, apples and grapes, or to sell their land to be built on. Now, with increased beer output, the brewers are in need of hops and a lot of the hop farmers are gone.

The long-term average growth in beer output has ranged between 1- 2%. However, annual growth has increased over the last 10 years (1995-2005) to approximately 3% coinciding with the fall of communism and the establishment of capitalistic free market economies in Eastern Europe and China. During the same 10-year period the world acreage for hops has decreased by 35%. The brewing industry could help by sending the right signal to the growing community by committing to long-term contracts of at least 4 years duration in order to entice growers to stay in business and to make the necessary investments into modernizing their operations. Of course, forward contracts are not a guarantee against crop failures they greatly enhance the farmers’ security of supply and represent an effective tool for forward planning.

Right now the craft-breweries are paying tens of thousands of dollars right now for something that will not be used until the following year. When there is a price increase in raw ingredients it will be passed on to the consumer. The impact will be higher beer prices or your favorite hop-heavy brew might have a slightly different taste.