Rising hops prices could push craft brewers to maltier beers

Firstpublishedon March 11, 2016.

Hop-rich IPAs could be replaced with maltierbeerofferings because the world's hop crop can't keep up with demand.

"It will be interesting to see over the next couple of years because the craft beer movement isn't slowing down if there is a trend back toward more malt-forward beers. We anticipate that might start happening," said Big Rock Brewery spokesperson Susanne Fox.

In 2015, the American hop crop saw a growth in the number of acres planted, as well as in yields, despite a hot and dry growing season.

However, even with the increase in supply, growers just can't meet the demand for hops theflower buds of vine-like plants thatare used by brewers to add bitterness,unique flavoursas well as aromafrom craft breweries that continue to pop up across North America.

"It's really changed the way small and big brewers manage their businesses in terms of access to the hops that they need," said Fox.

Changing the brewing game

It's all about buying power.

Big Rock Brewery is in the middle of the pack when it comes to buying power, so it hasn'texperienced any shortages when it goes to order hops, but it's heard from smaller breweries that have, according to Fox.

What's changed is that brewers are forced to draw up "innovation calendars" two or three years in advance now, she said.

That means they plan what they're going to brew and order the hops accordingly, with very little wiggle room.

The hope is that what's in vogue doesn't change too much in the interim.

The shortages that exist are largely affecting microbreweries those that are too small to order hops in bulk contracts years in advance.

They're left to order off "spot lists" that are made up of whatever producers have left over after fulfillingtheir contracts.

"As these hop shortages pop up in different regions and right now it seems like it's the United States we are seeing a lot of the higher-end hops and the trademarked hops owned by certain farms just aren't showing up on spot lists anymore, because the bigger breweries with the million-dollar contracts or two-million-dollar contracts are able to buy everything," said Ben Leon, co-owner of Calgary's Dandy Brewing Company.

Leon, whose brewery already has a number of malt-forward beers,said the shortage has inspired creativity. Sometimes it means adjusting the hops used to create a taste, sometimes it means entirely scrappingthe envisioned brew.

"It forces us to adapt. I guess it's similar to bad grape years [for the wine industry], where it's not going to kill the industry but it makes producers work a little harder," he said.

The other game changer, Fox said, is the multi-national brewers that want a piece of the craft-brewing market. They're starting to create beers with flavour profiles they've never been interested in before.

"They have way more buying power than anyone will ever have. So in some cases they can come in and buy out an entire farm, and they secure all they need. So that has changed the game a lot, too," Fox said.

Feeling the heat

For the most partthe Canadian climate does not lend itself to growing hops, andwhile farmers in B.C. are growing hops, they haven't had enough impactto affect the buying habits of Canadian brewers. Nearly all Canadian-brewed beer is made with imported hops.

The American northwest is one of the area's best known for growing hops, responsible for roughly one third of the world's production. About 75 per cent of the hops grown in the United States come from one area of Washingtonthe Yakima Valley. The other 25 per cent is made up by growers in Idaho and Oregon.

The 2015 growing yearin the U.S. was heavily impactedby weather. Last summer, the U.S. Drought Monitor classified Washington and other parts of the northwest to be in severe or extreme drought. In Washington, April through to September broke heat records set in 1958. June wason averagethe hottest month in Washington on record (tracking began in 1895).

• On mobile?Click here to see a graphic of the hops production 2013 - 2015.

These conditions meant the average yield per acre did take a hit, but it was made upby15 per centgrowth in the number of acresplanted in 2015 compared to 2014.

Growers and brewers are keeping a close eye on the snow conditions in Washington this winter because of the amount of hops that come from the Yakima Valley, which is largely desert-like except for the areas that see snowpack runoff fromthe Cascade Mountains.

"If we do have two bad years in a row which would be pretty unlikely then it wouldn't be great. Essentially all the contracts that were on order last yearwere, for the most part, filled. There were a few things that had to get substituted. But again the spot market was the issue," said Jaki Brophy, the spokesperson for Hop Growers of America.

It's hardly what you would call a trend, she said.

"Obviously things will have some variation year to year, and last year was a very, particularly bad year."

What's driving the shortage is the increase in demand, more so than the one bad weather year, Brophy said. But she added Germany,another big hop producer, had problems with growing conditionslast season as well.

More frequent water shortages and heat waves are predicted for the Yakima Valley, according to a report released in 2013 by the University of Washington.

Pricier pints

Thanks to increased demand, the price American farmers are getting per pound of hops has risen 31 per cent in the last two years, according the United States Department of Agriculture, andCNBCreported an imminent rise in the price of beerearlier this year.

• On mobile? Click here to see a graphic showing the price spike for American-grown hops.

At Big Rock Brewery, Fox said Calgarians canbreathe a sigh of relief becausewe're not quite there yet.

"Consumers have a very specific idea of what they want to pay for their beer, and as a result, brewers like us, we have to have that padded in sowe don't have to pass the cost on to the consumer, and we'll do that for as long as we can," she said.

She couldn't rule out the possibility of a price increasedown the road.

The silver lining

What Foxthinks ismore likelyispressure on the agricultural science side of things, so that hop plantscan be altered to better weather the climate in B.C. She also anticipatesa producer-generatedmove away from the heavilly hoppedbeers that are in vogue today, towards beersthat favour barley for flavour.

"Whenwe start to round that corner which inevitably we willthe agriculture producer in Alberta, Saskatchewan and Manitobawhois growing wheat and barleyworld-class wheat and barleycan only stand to win on that," said Fox.