Expanding your Small Hop Farm? Think twice!

Dear Small Hop Grower,

I’ll preface this by saying if you are a small hop grower somewhere outside of the Pacific Northwest region and are in love with the idea of growing more hops, you may not like what you read, but this will probably be the most honest and useful advice you’ll receive. 

You should stop expanding your farm unless you have all your future production fully contracted. If you can’t do that, it would be better for you to find something else to grow unless you can compete on a price basis with growers in the Pacific Northwest … unless you’re not concerned with the possibility of losing your investment. The large farms in the Pacific Northwest enjoy economies of scale that you, as a smaller grower, will likely not have an opportunity to reach. Unfortunately, in the past during times of surplus, growers in the Pacific Northwest have used their size as a weapon against competitors (even other growers in the Pacific Northwest) to sell for less … oftentimes below their cost of production. Yep, you read that right!  I remember one grower saying during the poor market times, “I grow more so I can lose less per acre.”  That statement was only a little more than 12 years ago. That might be hard to believe considering a market like we have today, but the hop market changes quickly. Many growers still think that way. 

Most of the growers in the Pacific Northwest have been around for generations and many of them want their farms to exist 100 years from now. They will do what they think necessary to make that happen. Growers in the Pacific Northwest who are still expanding should not be. They are not seeing the signs. Many large brewers across the country are over contracted and a surplus of certain aroma varieties is growing as we speak. The industry today is very segmented. Not all growers have access to the most relevant information. Some of their farms won’t survive too many more years if prices soften, but you can be sure they won’t go down without a fight.

I am not trying to discourage anybody from growing hops. On the contrary, I would advise you think about your situation, be aware of your position in the market, and make your decisions on an economic rather than an emotional level. It’s a fascinating industry with amazing people that will challenge you every day. It is also a very cutthroat industry, and you must be ready and willing to fight to survive if you wish to remain when things are not as rosy as they are today. In my opinion, your strength as a grower outside the PNW is to find local breweries who are willing to buy “locally grown” or fresh/wet hops and pay a premium. That will provide some excellent returns for you in the short term and allow you to survive when the hop market takes a turn, which it inevitably will. The growers in the Pacific Northwest can’t possibly compete with your local production in a cost effective way and that is an amazing advantage you have if you can find breweries who also value that. There are some who won’t but many who will.

The fact that growers around the country, including in the Pacific Northwest, are looking for varieties to fill acreage they have already planned to plant is part of the problem with the industry. That is why, in the very near future, a surplus of hops is now possible and, if this type of thinking continues, likely. I would recommend you search in your home state and the neighboring states for more local customers to take advantage of your strengths. Find breweries who might want hops from your area, are willing to pay a premium and who will tolerate some occasional inconsistency in the product. If you’re not able to contract your production in advance, don’t plant anything now. The time for widespread planting in the hop industry has come and gone. Unfortunately, not all the growers in the Pacific Northwest haven’t gotten that memo, which can cause serious problems in the future. I hope you can take advantage of this knowledge to adjust your strategy accordingly. Hopefully your farm will survive well into the future and can also be one that is around 100 years from now.

Regards,

Doug

PS: This blog is based on a letter I recently sent to a small hop grower. He was asking for varieties to fill an additional 200 acres that he is already determined to plant.