How to lower hop prices!

For the past two months, I’ve been hearing how everybody is waiting to buy hops until after harvest so they can get lower prices. To some extent, that’s normal at this time of year. This year, however, I think the copious articles running since spring touting the fact that there will be a record crop in the U.S. exaggerated the trend. If journalists were writing about deficits and short crops, I imagine the situation might be different. The words “record crop” make for great headlines that we all want to read. What does that really mean?

There are more acres in the ground than ever before and the U.S. will most likely produce more pounds of hops than ever before even if yields are poor. When I read “record crop” though, my reaction is, “Wow, there’s going to be a LOT of extra hops around!” Maybe that’s my mistake, but I think that’s the way a lot of other people interpret it too. There’s also a record demand for hops driving that supply forward. The result of all this hype over a record crop is that brewers now expect prices to crash in the fall.

American hop growers and merchants would be happy to cut prices. When prices are higher, there’s more risk involved and more at stake for everybody on the supply side. It costs more to grow, process and store hops. Unfortunately, profit margin and ROI doesn’t grow proportionately as prices increase because the market is very competitive. The perception seems to be otherwise. Growers and merchants have always responded to brewer demands in the past. They have no choice really. Brewers are the only significant source of all the money in the hop industry. If prices should be lower, brewers should just decide which things are not so important to them.

Where to start? For the past 4 years growers have been borrowing hundreds of millions of dollars from banks to grow more hops for all the brewers who have signed contracts. The banks probably won’t agree to cut those payments, so we have to take that off the list. Washington and Oregon have the two highest minimum wages in the country. The Governors probably won’t agree to roll minimum wage back just for the hop industry, so there goes another one. Below is a short list of things that are entirely within grower power and could be cut. It would be helpful if the brewers wanting discounted hops after harvest could identify the things from the list that are not so important to them so the industry can cut them right away and start giving every brewer the lower prices they need.

Hop research programs

Fair wages for employees

Clean warehouse facilities

Filtering out metal material

Random sampling by USDA

Low temperature hop drying

HACCP and ISO certification

Food grade production facilities

Separating leaves from cones in the kiln

Portable Toilets in the fields for the workers

Picking hops during the ideal harvest window

Hops in cold storage within 48 hours after harvest

Cold storage kept at freezing temperatures year-round

New food-grade polypropylene bale material each year

Never send to know for whom the bell tolls, it tolls for thee.

– John Donne (1572 – 1631)

If you’re a brewer, please send an email to somebody at Hop Growers of America or to the Hop Quality Group.  Let them know which things are not important to you so they can get the ball rolling and change industry standards.

Back in the days when Cascades were two dollars per pound (AKA: about a billion dollars of investment ago) the hop industry was different. There were things we value today that apparently were not so important then. Brewers made some great beer back then too somehow. Were the brewers back then more talented? Today, there’s attention to safety and cleanliness on the farm and at the merchant’s facilities. We’d like to think that’s a good thing. A billion dollars ago, hop kiln temperatures were 30% higher meaning a grower could pick more hops in the same time. The minimum wages in Oregon and Washington States increase with the rate of inflation each year. That has added over 24% to the minimum wage in the past 10 years alone. A lot of people think that’s a great thing. Unfortunately, that makes labor-intensive crops like hops more expensive. It’s not realistic to think we can turn back the clock on price alone. There are actually plenty of cheap hops out there for people who want them. They come from China and a few other countries around the world. Many of the farms there don’t bother to do any of the things on the list above because they don’t have to. As a result, their hops are much cheaper.

In this life, you get what you pay for.

– Kurt Vonnegut, Cat’s Cradle

Ironically, the price of hops is higher today than in the past because the very people who demand lower prices and would benefit from them have caused prices to be high. It’s wonderful that brewers today are so passionate about hops. It’s great that brewers care enough about hops to get involved in the process of growing and processing them and require the things from our bell-shaped list above. Every straw added to the camel’s back makes its load heavier, but we should all be willing to bear our share of that load if it makes us better. At this year’s Hop Growers of America convention, for example, there was a brief discussion about requiring the use of food-grade tape on the bales after USDA inspection, something that would cost 10 times more than the existing practice of using regular duct tape. This was the result of one grower voicing one brewer’s request. In principle, food-grade tape is not a bad idea, but it has additional costs associated with it. This harvest, as a result, the USDA has altered its normal practices and no longer uses duct tape. Up go the costs again by a few extra pennies per pound of hops. If prices of hops should be lower, then let’s figure out where we can start cutting together.

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