In a Bine(d): a Final Review of Hop Harvest 2023
Where will the hops go?
Introduction
The 2023 National Hop Report, issued a few weeks ago (December 2023) by the National Agricultural Statistics Service of the USDA, is a finalized report of what actually came off of the bines in 2023. This report, which provides an in-depth analysis of the year's hop production, is particularly significant for the stakeholders in the hop industry, including both farmers and brewers. It sheds light on production trends, economic values, and the impacts of strategic decisions within the industry, offering a comprehensive overview of the challenges and opportunities faced in this dynamic sector. In this article, I’ll be reviewing some of the key points of the report, and repeating some of the trends in hops that I believe are still relevant to the future of the industry after this report was released. If you would like to read more about the hop strung report (what was planted), please see this breakdown or Eric Sannerud’s report.
Overall Production Trends
The report indicates a 2% increase in overall hop production in key states like Idaho, Oregon, and Washington. Interestingly, this increase comes amidst a 10% decrease in harvested acreage, suggesting a significant leap in farming efficiency. This paradoxical situation is indicative of several underlying factors. The adoption of advanced agricultural practices, cultivation of high-yield varieties, and the impact of technological advancements in farming are likely contributors to this trend. Such improvements suggest that hop growers are becoming more adept at maximizing their yield per acre, utilizing better farming techniques, or opting for more productive hop varieties.
State-specific Production Insights
The dominance of Washington in hop production, contributing a significant 74% to the U.S. hop crop, positions it as a central player in the industry, influencing market dynamics significantly. Idaho and Oregon, contributing 16% and 10% respectively, play vital roles but face unique challenges and market positions. Washington’s significant share in production means that any changes in market demand or environmental conditions could profoundly impact the state's economy. Meanwhile, Idaho and Oregon, while smaller producers contribute essential diversity to the U.S. hop market. Oregon in the Hop Strung Report, was the largest acreage to be reduced in the Hop Strung Report I originally discussed.
Impact on Hop Varieties
The preference for certain hop varieties like Columbus/Tomahawk/Zeus (CTZ), Citra, Mosaic, Cascade (reminder: public variety), and Simcoe presents both opportunities and risks. These are high-demand varieties. This demand did drive up prices, benefiting farmers who grow these varieties, however, due to the massive 40mil pound surplus of Citra, Simcoe and Mosaic (see the McKinnon Report for a more hearty analysis), we saw a reduction or total elimination in acreage especially amongst smaller growers and a change in the pricing structure for many.
Economic Implications
The report notes a 9% decrease in the overall value of hop production in the U.S., despite the increase in yield. This decline could be attributed to various factors, including market prices, demand dynamics and the above-mentioned insane surplus (brought on by numerous factors which is discussed in the previously mentioned hop-strung report analysis). The decrease in value, despite increased yield, could indicate falling market prices for hops, affecting farmers' profitability. As we have recently seen, changes in beer consumption patterns and a mature craft beer industry will only exacerbate these swings in value moving forward.
Long-term Planning and Investment
Hop farmers are facing a rapidly changing landscape, necessitating strategic planning and adaptability. This includes investments in new hop varieties, technology, and strategies to mitigate risks such as climate change and market fluctuations. With the growing impact of climate change, farmers and breeders need to develop strategies to cope with new weather patterns and environmental challenges. Both private hop companies (ie. Those who typically own proprietary varieties) and the public sector such as the USDA are investing in R&D such as new breeding technologies, new more resilient varieties and new farming practices in order to help farmers stay ahead in the industry.
The Impact on Smaller Hop Farmers
The directive to cut acreages, especially for growers of proprietary varieties like Simcoe, Mosaic, and Citra, poses specific challenges. Reduced acreage directly affects these farmers' production volumes and revenues. They might also face difficulties accessing lucrative markets or negotiating favorable contracts. Maximizing returns from reduced acreage can be achieved by emphasizing efficiency and planting public varieties that offer stability without third-party ownership (ie. Proprietary varieties such as Simcoe).
Brewers and Market Dynamics
The fluctuations in hop availability and pricing directly impact brewers. The reduction in harvested acreage, despite an increase in overall yield, might lead to fluctuations in hop availability, especially for popular varieties like Simcoe, Mosaic, and Citra. This could affect the cost of these hops, potentially increasing the price brewers have to pay, especially those without secured contracts. The increase in yield per acre suggests that while brewers might have access to high-quality hops, they need to be vigilant about consistency.
However, identifying older crop years that are still of suitable quality is crucial for long-term market stability. As mentioned in an earlier article, the hop storage index (HSI) is essential in the current hop surplus fight, both on the distribution and brewing side. New research currently being conducted by OSU will hold the key to aroma degradation in hops over time, indicating the best "vintage" to use depending on the beer.
Changes in the availability of certain hop varieties will encourage or force brewers to experiment with new flavors or beer styles, especially with lesser-known, less expensive hops or hops that are on the spot market for those who are not locked into long-term, long contracts. This hopefully will lead to innovation in the industry, with brewers exploring underutilized hop varieties or developing new brewing techniques. Brewers must stay attuned to market trends and consumer preferences, which can be influenced by the availability and cost of hops. Shifts in hop production might inspire or necessitate changes in the types of beers produced, potentially affecting consumer choices and market dynamics.
Renegotiations of contracts, especially of the “key three” varieties that has led to the surplus, is a critical step in reducing the risk to smaller farmers who do not have control over the contracts for planting said varieties, and to smaller breweries who may not need all of the hops they were required at one point to contract. Utilizing older crop year and leveraging this surplus is essential for any brewer working with a distributor or “farmer representative third party”.
Strategic Adjustments and Risk Management
The surplus in specific hop varieties like Simcoe, Citra, and Mosaic, and the subsequent strategic acreage reduction, highlights the complexities of supply-demand dynamics in the hop industry. Such imbalances can lead to price volatility, affecting both farmers and brewers. Farmers might see fluctuations in the profitability of their crops, while brewers could face uncertainties in raw material costs. Farmers and brewers might consider contract farming agreements to mitigate the risks associated with price volatility, and cutting out the “middle man” altogether. This approach can provide farmers with a stable income while ensuring a consistent supply for brewers.
Environmental Considerations and Sustainability
There is a growing need for farmers to adopt sustainable practices that ensure long-term soil health and minimize ecological impact. As key stakeholders in the hop industry, Brewers have a role to play in promoting sustainable practices. As we have seen in Washington, brewers are increasingly demanding “Salmon Safe” hops, even more so than Organic certified. Choosing to source hops from farms that employ sustainable practices can encourage more environmentally friendly farming methods. As Eric Sannerud says, “brewing is an agricultural act”. Brewers can also educate consumers about the importance of sustainability in the hop industry, potentially influencing market trends toward more sustainable products and varieties.
Final Thoughts
This is a very tumultuous time. There is a surplus still lingering, breweries exceptionally long on ill-advised contracts and a decline of craft beer consumption. We can only hope the folks who ultimately hold the majority of the grown varieties and helped navigate the market in this direction will do something to bring relief to everyone.