Had the United States experienced a bumper crop in 2016 as many newspaper and magazine articles inferred, there could have been as many as 100 million pounds of hops produced in 2016. That’s right! The capacity already exists with the acreage currently in the ground to produce 100 million pounds of hops in the United States alone! Let that sink in for a moment!
One hundred million pounds of hops is an awe-inspiring thought. No doubt we will see the first 100 million pound crop from the U.S. very soon, especially if growers continue to expand acreage. It’s hard to quantify exactly how much it takes to make a “bumper crop”. If you look hard enough on The Google, you’ll find that a bumper crop is 5-10% above average yields. If 2016 had been a bumper crop year, things would be very different and we would be already talking about that record-setting 100 million pound harvest right now. It is inevitable. Of course, everything is relative. If the brewing industry really needs that many hops, then 100 million pounds is no big deal. We’re not there yet though. The problem is that as the industry grows and hop acreage has increased, the potential for over production has increased even more.
Growing 100 million pounds is not the same as selling 100 million pounds, however. The hop industry has always been very sensitive and filled with risk. With a strong hop market, ironically, risk has increased. The lines of credit and loans used to finance the growth depend on strong hop prices for the next several years. The hop industry balances precariously now on the edge of a very steep cliff. The swing alone in potential yields, from 10% below average to 10% above average yields, in the United States is about 18 million pounds. That’s an amazing number that depends on the weather. How much is that? It represents more hop production than any other hop producing country in the world except for Germany. ANY OF THEM! And that’s just the potential swing in any given year. The higher you climb, the farther and more painful the fall.
Do you think for a moment that if the United States had produced a bumper crop in 2016 growers would not have harvested 10% of their crop to keep the market in balance? Most likely, growers would have harvested everything and sold the extra for whatever prices they could get, even if it was 25-30% of market prices. Why? In their minds, extra production represents extra money today. Nobody considers the effects on the future market to see if those sales might harm the market going forward. It’s all about today. At those prices, a merchant would probably buy those hops on speculation, process them and save them for a rainy day. That extends the oversupply problem well into the future. That’s how things work in the hop industry. Over production and the ability of that over production to stay around in the form of stable hop products like pellets and extract have caused the wild price swings and the cycles we have seen every decade or so for the most of the past 100 years. As they say, there is nothing new under the sun.