Contracts vs. Cash Flow

Unbelievably, there are still hop growers increasing acreage in 2017. They say “they have contracts” or “the wheels are in motion” or that “the plans have been in the works for a while”. That was OK back in July, but the picture has become much clearer in the past few months. Time to change the plan!  Last week, a grower who lives about 45 minutes outside of the Yakima valley growing region called. He said he plans “to start a hop farm this year”. He wanted to know if we needed anything. Crazy!  Actually, I can understand his naivety. He doesn’t know the industry. He probably read some poorly researched articles in the Wall Street Journal and other news outlets saying how there aren’t enough hops in the world. The growers who have been around for a while should know better. Some of them don’t. 

What good is a contract if you don’t get paid on time? I believe the year 2017 will be the year the word “contracted” loses its value in the hop industry. Cash flow, instead, will be the operative word. There is no cost to sign contracts. Contracts are too easy for brewers to sign. When things go sideways, brewers expect merchants to fix their contracts at no cost. The hop industry is trying to help fix the problems where it can. The scale of the problem is too large for half of the equation to handle alone. Merchants and growers contracted with brewers they trusted to act responsibly. It seems that trust was misplaced. There has never been a way to check what the total contracted position of a brewer is prior to signing a contract.

I don’t remember hearing a Latin phase “Auctor Emptor” or “Seller Beware”. I guess the Romans never sold hops. There is no way for a merchant or a grower to know if a brewer is contracting responsibly. During the past few years, many of them were not. Maybe there needs to be a transparency phase prior to signing a contract.