HOPPING MAD: Brokers who claimed to have no hops in December, just after harvest, suddenly had lots of them onhand in February. How is that possible?
Were hop markets deliberately manipulated last year to drive up prices?
By Alastair Bland
The great hops shortage of 2008 created a scare so real that many brewers began planning for a future without IPAs and other hop-heavy beers. Others looked up archaic recipes for malt beverages flavored with herbs and spices, and around the nation brewers grew so concerned about availability that when middleman brokers offered long-term contracts at sky-high prices, many jumped at the chance.
But few brewers ever ran out of hops, and many if not most are back to brewing beer as usual—except that now they're handing over four, five and six times what they paid for their hops prior to the panic. This huge price hike has occurred disproportionately on the broker-to-brewer end of the equation, sources say, and that has some brewers a bit miffed. Some even suggest that things worked out suspiciously well for the middlemen from whom they buy.
"Someone made some money on the whole shortage panic, and [brewers] are the ones hurting for it," says Russ Klisch, president of Lakefront Brewery in Wisconsin. Klisch had been paying roughly $5 per pound for hops in 2007, but is now locked into a contract at rates ranging up to $18 per pound.
Gayle Goschie, a hop farmer in Oregon's Willamette Valley, indicates that dramatic pricing markups have occurred on the broker-to-brewer side of business. Goschie says that while she is now receiving roughly 30 percent more money for her hops from the brokers she sells to, "it's nothing like the price spike of hundreds of percent that we saw with some varieties as they went from dealer to brewer." According to numbers supplied by the Washington Hop Commission, United States hop merchants paid farmers an industry-wide average of $3.97 per pound for their hops in 2008. These merchants in turn sold to brewers at anywhere between $14 and $25 per pound.
At Avery Brewing Company in Boulder, Colo., brewmaster Adam Avery has no doubt that a legitimate hop shortage occurred following the poor harvest of fall 2007.
"Sure, the supply wasn't totally adequate," he says, "but was it fair that hop prices quadrupled? Absolutely not."
Arne Johnson at Marin Brewing Company recalls paying between $2 and $6 per pound for various hops in 2007. Now the brewer is locked into a multiyear contract at rates between $14 and $20 per pound.
"The brokers know that we've got to make beer and that we'll pay whatever we have to to get hops," Johnson says.
But some wonder how dire the shortage really was. Tony Magee, president of Lagunitas Brewing Company, observes that between the height of the panic and the apparent return of availability months later—when dealers abruptly began quoting prices for eager brewers—no harvest had taken place.
"I remember talking on the phone to [my brokers] in December of '07, after the harvest, and they were saying they didn't have the hops," Magee says. "Then they called in February saying they had them, and I was like, 'Wait a minute! If you didn't have the hops just three months ago, where did they come from?'"
Others have suggested that the fall 2007 harvest may have been held in temporary storage warehouses until prices had escalated satisfactorily.
The timing of events has stirred Klisch's suspicions, as well.
"As soon as I signed my contract, we saw people online selling hops," he recalls. "That's not a sign of a shortage."
But certain so-called aromatic varieties favored by craft brewers did, in fact, become so genuinely scarce that some small brewers had to rearrange their beer recipes to account for unavailability. According to Jim Solberg, manager and CEO of Indie Hops, a supplier in Portland, it was a lack of communication between brokers and brewers in the years before the panic that caused the aromatics shortage. Solberg explains that farmers at the time were answering to the mega-breweries' demands by steadily replacing their relatively obscure aromatic varieties with high-alpha, extra-bitter varieties—the kinds favored by the large companies—and the brokers, says Solberg, didn't warn the brewers.
"The merchants never told the craft brewers what was happening," he says.
Then, quite abruptly in 2008, some of the aromatic varieties were gone.
"If craft brewers had signed contracts for these hops years earlier," says Solberg, "farmers wouldn't have run out and prices would have remained lower, too."
In the past 18 months, Northwest hop acreage has increased by 30 percent, or about 10,000 acres, say industry sources, and supplies are back up, though just how diminished those supplies ever were could remain a subject of speculation for years. Why, Magee asks, after such a panic did the industry not feel greater impacts?
"So this big gun goes off, but the bullet never lands?"
At Marin Brewing, Johnson says that at the height of the crisis all signs pointed toward a genuine shortage. Yet it appears to have been nothing that some extra cash couldn't fix.
"There seems to have been a shortage, but I think if you really wanted hops you could get them," Johnson says. "It just depended on what you would pay."
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