The humble little hop cone continues to captivate the craft beer industry — so much so that there are more than 60 varieties on the market today. Hop-forward IPAs are by far and away the most popular choice compared to other craft style categories, and (unfortunately) demand and variety for hops has been so great that farmers probably overextended their crop in 2017. Like any commodity, hop production is a delicate balancing act — for both brewer and farmer.
For instance: The trends in hop buying continue to shift hop production from alpha varieties to aroma varieties that are higher in value and produce less yield, which is attributing to increased acreage. This shift to alphas has occurred in all three of the major hop-growing U.S. states (Idaho, Oregon and Washington), resulting in a higher average price per pound. So, along with a possible surplus, price per pound has gone up because of the type of low yield hop being demanded by craft brewers. These are the market conditions brewers need to be cognizant of when choosing, using and contracting hops.
Today, America’s craft brewing pioneers are innovating industry hop usage, but how exactly does a brewhouse produce those unique hoppy flavors? How should brewers contract for their hop needs? What are the latest techniques and innovations changing the hop and beer industry? We decided to ask the experts. Below, hop and beer professionals from across the industry shared their insights with us on everything from flexible contracts to proper storage. Thanks to all who participated.
Understanding the process
It is helpful to keep in mind that currently we are at 60-plus hop varieties in commercial production in the United States. This is a significant jump up in inventory to manage — both in warehouses and in the ground. To keep up with current demand, there is a period of two or possibly three years — depending on the growing region — until these hops get into full production.
This waiting period that the farmer experiences is often experienced at the customer level as well, unless there is enough in the ground already from expiring contracts to allow an immediate pickup on the next harvest. Newer varieties, being new, don’t have the same luxury of being in-ground already. Due to the high cost of growing hops, it is a risky venture for growers or merchants to plant anything unless it is contracted. Aside from contracts serving as a binding transactional agreement, it is also a formal communication to the hop industry about what the changing needs of the brewing industry are. Buying on the spot market doesn’t provide this feedback. To note, there are aroma varieties in good supply: Cascade and Chinook (the top one and two varieties, acreage-wise, in the United States, respectively), for example.
The other key thing to keep in mind is that once contracts are inked, farmers and merchants not only get planting, but also often reinvest in their operations to meet these increased demands, whether it be additional staff, picking or drying facilities or upgraded equipment. As a side note, U.S. hop acreage has grown over 80 percent in the last five years — this requires more equipment and staff at the least. The loans taken out to cover these costs are amortized over the life of the contract. When breweries over-contract and then try to readjust, it is very damaging. On the flipside, it is, of course, damaging to breweries when they require more hops than they contracted for and can’t supplement with the spot market.
So, the overall message we are trying to convey: If you need it, contract it. If you don’t need it and can substitute/or can’t live with excess, you may want to grab it on the spot market or contract very conservatively.
The unpredictable hop market
Blake Crosby, CEO; Peter Busque, Northeast Coast sales manager,
Crosby Hop Farm (Woodburn, Ore.)
It’s easy to get caught up in the inevitable swings of the hop market brought on by supply, demand and Mother Nature. One crop year, there are varieties that are short, and consequently, contracting activity for futures often increases. The next crop year, those varieties may be long (bumper crop) and the spot market is flush with the illusion of unlimited supply and perceived unfavorable historical contract pricing. Keep in mind these spot hops would not exist if it were not for the contracts underpinning them — ultimately contracts are what drive the hop industry worldwide.
Like all markets, the market for hops is unpredictable. Breweries that remove emotion from the equation while consistently contracting (pragmatically) for their critical production needs will come out ahead in the long run.
Since we don’t have a crystal ball to consult for future crop years, we can instead look at recent historical data and the best buying positions at that time. Going into crop 2007, those with contracts had a competitive advantage and those without struggled greatly as pricing soared to record highs globally for alpha (bringing all other varieties along with it). Conversely by 2009, it was highly advantageous to be on the spot market and historical contract pricing became a liability in some cases. By 2012, as continued craft demand pushed the limits of U.S. hop infrastructure, hops like Cascade were trading at $9 to $10/lbs versus $3 to $4/lbs just a few years prior. The U.S. hop industry has since responded in a big way for the craft brewing industry. Today, we are back in balance on many varieties and long on others. How long will this last? It’s hard to say.
All breweries have different appetites for risk. Rather than get caught up in the rhetoric of the market, it’s best to have a balanced approach when it comes to purchasing hops.
A brewer should be reviewing hop contract positions on at least an annual basis. We’re finding the optimal contracting window for most small to mid-size breweries currently ranges from one- to three-year rolling contracts. In year one, look to secure 75 to 100 percent of your critical varieties and quantities. For year two, secure 50 to 75 percent of your projected needs and in year three, 25 to 50 percent. Revisit those values each year with updated projections and top up contracts and/or backfill with spot accordingly while also rolling everything forward one year. Of course, take advantage of favorable spot markets where applicable, but remember this is generally a short-run approach and should not be the core of your long-term hop strategy.
Most importantly, don’t get caught up in the emotions of what the hop market is doing at that moment. The only guarantee is that it’ll change in the future and no one can truly predict it.
Relationships in hop selection
Ben Smith, co-head brewer
Surly Brewing Co. (Minneapolis)
My advice to any craft brewer purchasing hops is to know the suppliers, be it the wholesalers or the farmers themselves. They have a wealth of information and are generally open to working with you on current contracts, future needs, spot-buying and innovations like extracts or experimental varieties.
The first step into building these relationship is simply meeting with them on a regular basis. Build traveling for hop selection into your budget every year. Select your hop lots, visit the farms, and network with suppliers and other brewers. Once you’ve made your selection, secure what you know you’ll need for the next few years on contracts, but don’t overcommit. Make sure you shop around and compare pricing with different wholesalers before committing to new contracts. Don’t let hops dictate or limit the styles and direction of your brewing plans; always allow for flexibility that supports innovation.
Speaking of which, hop suppliers are great resources for experimental hop products, like extracts or powders, and new processes that improve utilization and product yields. This may be a long-term plan, but invest in your internal quality department to include sensory and chemical analysis of your beer in process, especially when trialing new products and/or processes. Let your hop suppliers know how the experimentation is going; they’ll appreciate the knowledge swap.
These actions establish critical relationships that support quality beer, innovation and staying ahead of the curve with new products and flavor profiles.
Hop contracts, screw’em
Bret Kollmann Baker, chief of brewing operations
Urban Artifact (Cincinnati, Ohio)
Hop contracts are a great resource for large and rapidly growing breweries, breweries whose branding and focus is heavily reliant on specifically hopped IPAs, and those on the regional or larger scale for the price breaks. For the rest of us, specifically, for those of us that are brewing sour and funky beers, Belgians, lagers, English beers or don’t care too much about hop varieties, and making less than 15,000 barrels a year, I see little point.
Hop acreage continues to grow, total beer volume continues to decline, and all things are coming up golden for those of us that aren’t reliant on the newest cutting-edge hop variety. The hop “shortage” of a couple years ago was overblown. The market is poised for oversaturation in the coming half decade, old hop varieties are losing favor but still maintain acreage, new hop varieties that are the flavor of the month change rapidly, and farmers in all regions across the U.S. are planting rhizomes in order to capture this “growing” craft market. All of this tells me, the local <15K bbl/year brewer, that my odds are better played in the increasingly saturating hop spot market. Why lock yourself into a multiyear deal at a fixed (or increasing!) price, when hop pricing on the spot market is staying level and in some cases already starting to decline? Do yourself a favor, roll the dice and play that spot market, and I’ll bet you come out ahead.
N.C. hops: research trials
Sebastian Wolfrum, executive brewmaster
Rocky Mount Mills (Rocky Mount, N.C.)
When I began working with N.C. grown hops in 2007, we all had a lot to learn including the growers. We started out asking: “What to grow?” We did an initial trial with 20 varieties. The goal was to get a strong subset of what varieties might be favorable. Quickly, it became that a wish list was hard to come by as the yield and aroma results differed across the varieties. Did we need a new variety or did we just not grow them right?
As a next step, we began a more thorough review of the growing practices utilized in traditional hop growing regions. Again, we had a lot to learn. From the number of daylight hours which were lacking in the Southeast U.S. to pruning, irrigation, fertilization and even what would constitute a mature hop cone in N.C., we discovered we had to develop some new best practices. We found if we timed perfectly when to cut back the first growth in a warm spring, watering down peak growing season and picking the cones at the right time, we produced a robust bitterness with or without a complex aroma profile. I’ve found letting them wilt and turn away from lush green a bit while still on the vine is better, even though that is counterintuitive to what we’re accustomed to with more traditional hops.
Once we have the hops where we want them on the vine, we turn to the complicated task of using them while they are still fresh for locally sourced, small batch brews. This adds to the complication of brewing since the hops are 80 percent moisture instead of a more traditional 8 to 10 percent. The math on making the right recipe adjustments is fairly easy, but making an informed decision on what the flavor outcome will be for your fresh hopped beer is much less clear with all that added “volume of green freshness.” Adding them in on the hot side is safe, and the added liquid can be compensated for during cast-out, but this does not hold true when using fresh hops for dry-hopping down toward the end of fermentation. Drying the hops in any drying cabinet or similar device is worthwhile when you don’t know what to expect. Even when you have to concede that there will be a sacrifice of aroma, you gain it back by having a straight bitter beer with a character of aged hops.
How do we get to a similar-but-otherness hop experience with a regional signature? Well, it all comes down to demand and someone to step up and take the risk of investing in the harvesting, curing, packaging and storage infrastructure that a modern hop production would necessitate.
Check out specialty hop equipment
Udo Funk, sales director for North America
Ziemann Holvrieka (Germany)
The “green gold” is of crucial importance for the success story of craft beers, since the combination of different types of hops results in unique sensory properties that the consumer appreciates and honors accordingly. The brewmaster can support this factor by means of technological adjustments, such as the time of hop dosing, either in the brewhouse or in the fermentation. However, the high hopping rates lead to corresponding raw material costs. In addition, the shorter and colder extraction processes result in lower hop yields and higher beer losses due to the larger trub quantities. Moreover, it is difficult to ensure the desired consistency of flavor and bitterness manually. Ziemann Holvrieka has faced this challenge by offering two processes: Hop Back dynamic hot wort hopping, suitable for cone hops or other spices and aromatic plants, and Hop Slurry dynamic dry-hopping, suitable even for large beer volumes.
The Hop Back is a dosing vessel with an integrated sieve unit. Hop dosing with this vessel is possible during the wort boiling as well as between the wort kettle and the whirlpool or between the whirlpool and the wort cooler. The entire process, including its cleaning, is automated. Only the hops must be filled or removed manually.
The Hop Slurry consists mainly of a stainless-steel vessel as well as the necessary pumping, dosing and control units. In this vessel, the beer circulates through the pellets with different flow directions. Due to this very intensive mixing, a homogeneous hop-beer suspension is formed. This dynamic dry-hopping process is easily reproducible, the hop yield is significantly improved compared to the classical static dry hopping and it’s even suitable for large beer volumes.
Brad Cooper, head brewer and owner
Steam Bell Beer Works (Midlothian, Va.)
We currently purchase our hops off the second-hand market but will be moving into contracts moving forward with the opening of our second brewery Canon & Draw. For the hops that we use strictly for bettering, we typically purchase in the 44 lb quantities for the price breaks. Anything that we use to dry hop we prefer to purchase in 11 lb quantities so we can keep the aroma as fresh as possible. Regardless of the use, we store all of our hops in a freezer at around -12 F.
Don’t go overboard
Andrew Foss, head brewer
Saint Benjamin Brewing Co. (Philadelphia, Pa.)
My experience with hop contracts has been this: Don’t go overboard! I inherited the hop contracts at Saint Benjamin from the previous production manager, and when I looked through them I nearly had a heart attack. We were contracted for more than 1,000 lbs of one hop variety (for reference, we brewed about 2,000 bbls in 2017), and hundreds of pounds of others. To add insult to injury, these were not hard to get hop varieties, meaning that their value on the exchanges was actually less than what we were committed to pay for them. In the end, I ended up selling a lot of hops at a slight loss, while they still had some value.
These hops would be worth zero in a year, so I just set my price as the lowest on the exchange and sold everything I could not use. This way we fulfilled our contract, paid our vendor and didn’t get stuck with the hops. Moving forward, I contracted us for about 2/3 of what I thought we could go through, and only contracted harder to get varieties. Right now, almost every brewery is overcontracted on hops, meaning that almost anything you need is available on the spot market. This advice might not stand in two or three years, but in 2018 I say: Don’t contract more than you need!