How the hop market is NOT efficient

Hop supply is a roller coaster of boom and bust cycles resulting in increasing and decreasing acreage over the years. During the past 5 years, demand has increased year after year, but that does not mean that the market has changed. It can still crash. Already growers are planning expansion that could lead to oversupply. In the words of a retired hop merchant friend of mine, “This is when it gets interesting”.  Greed, fear, and the lack of access to good market information cause growers to do things for the promise of short-term gains neglecting the long-term consequences.

Case in point: Over the past 50 years, Washington hop growers have added 56,938 acres chasing opportunities that arose. During that same period, they also removed 40,163 acres of hops when those opportunities faded away. That doesn’t count acreage that remained in the ground but changed from one variety to another. That data is not readily available. That’s a lot of activity to basically stay in place. How’s that for inefficiency?

This year will be a pivotal time as we look back at market trends in hindsight decades from now. How many of the acres going in this year will come out a few years from now? Today, growers all around the country are in a planting frenzy despite the fact that inventory of American aroma hops is building up, growth in the American craft beer market is slowing and big American craft brewers are over stocked with hops. The signs are all there to stop growing now. Nobody wants to listen because they all love hops. It reminds me of a saying a good friend of mine, who happens to be a German hop merchant, shared with me. He said,

“German hop growers can live without money …

But they cannot live without hops.”

The hop market is inefficient at its core. It probably always will be. That’s nothing special about hops. It’s just our own human nature at its finest.