Harvest Half-Time Report

We’re nearing the half-way point in this year’s harvest. The hop vines are coming down all across the valley, and so are the yields. This year’s hop harvest is a good reminder that agriculture is not predictable and only somewhat controllable. Despite the way they look, hop farms aren’t factories that can produce more hops by flicking a switch. It’s a long expensive process that relies on plenty of skill, a little luck, and Mother Nature.
Most growers are experiencing yields that are down between 5-40% from five-year averages. That, combined with an already highly sold market due to demand by the craft beer industry, has caused prices for varieties already harvested to shoot up, over $10 per pound for raw hops to the grower. Many growers speculate the extreme heat during the month of July is responsible. Harvest in the US has now moved into Cascades. The results so far are difficult to interpret because that variety is not finished being picked, but already it is clear that Cascades are falling prey to the trend that has prevailed this harvest. At the moment it seems yields are only 5-10% lower than 5-year average yields. For Cascades though, that’s a pretty big number! Baby yards have been hit the hardest. Some Cascade baby yards are significantly lower than expected. Since typically a baby yard can deliver a relatively high yield in the State of Washington, growers often sell the majority of expected production on those acres too. That is further complicating the supply problem and exacerbating the variety shortages that are popping up with each passing day.
Early estimates are that proprietary varieties are also coming in a bit short. We don’t have any variety specific information to report. It seems most of the popular proprietary varieties are yielding below five-year averages. According to our sources some merchants oversold those varieties prior to harvest and therefore will not be able to deliver in full on their contracts this year. We can only speculate as to when their brewer customers will learn of this, but it won’t be good when they do. If I were a brewer, particularly not one of the 50 largest craft brewers in the country, I would try to get written confirmation that my contract will be delivered in full or get a written estimate how much I will be shorted.  With force majeure in all the contracts and a low-yielding crop coming in, there’s no recourse to being shorted, but the advance notice would give me time to find alternatives so I could keep the taps flowing.

Brewers with contracts at 47Hops will ALL receive 100% of their contracted hops despite the crop situation this year. We contracted keeping in mind that we’re working with agriculture and that there needs to be a reserve in case of shortages like the ones we’re seeing right now. 
The short crop of 2014 comes at a most inopportune time, a time when demand is extremely high, farms are already at or near capacity, and the price of hops has not yet increased to a level to finance new infrastructure developments. This year will be the one where brewers might not get what they contracted for, but they should contract what they can get. 
Some Q & A:
Q:  What will be the impact of this year’s harvest results? 
A:  Prices have already increased. Hops from crop 2015 are almost all sold now.
Q:  What should I do to protect myself against things like this in the future?
A:  Don’t contract forward with a merchant that doesn’t take good care of you. There are other options … like 47Hops. We have plenty of hops available.
Q:  How will this short crop change things in the future?
A:  Given the uncertainty going forward, contracts for 5-years or more will become common as brewers seek to secure their supply chains.
A:  Once variety specific shortages become more widely understood, brewers will alter recipes and contract for hops that are available rather than what they would prefer to buy.

A:  Prices will begin to rise, not as in 2008, but to levels that can support infrastructure development.