Like flipping a coin, each crop year can produce a short crop or a bumper crop. When a huge stockpile of excess hop inventory exists, the yields of each individual crop is insignificant. That’s not the case in today’s alpha market however, which was teetering on the verge of shortage prior to this season. That makes the news from the most recent gathering of the International Hop Growers Convention (IHGC) all the more significant.
Last week, a couple hundred hop growers and merchants from around the world assembled for the 56th International Hop Growers Convention (IHGC) in Yakima, WA. While there were tours of production facilities, dinners, networking and plenty of schmoozing, the most significant thing to come out of the event was the confirmation that the European hop supply will be very short in 2017 due to a severe drought in many European growing areas as referenced in this and other articles.
A heat wave baking southern Europe, some are referring to as “Lucifer”, is wreaking havoc on the hop crop from Spain to Poland. During the recent economic committee meeting of the IHGC, member nations from many of the European hop producing countries presented grim estimates as to what the 2017 crop will likely bring. Overall, the organization estimates that there will be 10% fewer hops and 10% less alpha acid produced in 2017 than in 2016. That equates to over 21 million pounds fewer hops and one million kilos less alpha acid. Germany, hit particularly hard by the drought, estimates yields will be more than 22% lower than last year. German alpha production will be almost 26% lower. Delegates from the Czech Republic estimate the damage to Czech hops will be more severe still. Delegates from Poland, France, Austria and Spain all reported reduced yields relative to 2016. Only the United States reported increased production over the previous year thereby offsetting Lucifer’s overall effect. Despite the American increase, worldwide yields remain depressed.
A Europe-wide shortage of this magnitude has the potential to affect the hop market because the alpha market is not oversupplied at the moment. The alpha acid market was already teetering on the brink of shortage and now will certainly move in that direction. Typically the realization of a shortage occurs when customers receive word that they will not receive the product they contracted. That does not typically happen until after the harvest when more exact yields are known. To lessen the blow of the shortage inventory can always be shuffled around from the haves to the have-nots. Certainly merchants will be busy doing the harvest shuffle this October and November. How bad can it get? Nobody knows. There are a lot of high alpha aroma hops sitting around in warehouses that could fill some gaps in the alpha market, and there are some big gaps to fill. Shuffling around 21 million pounds of hops or 1,000 metric tons of alpha acid in an orderly fashion, without causing a panic will be a tall order. All the shuffling presumes, of course, that the 2018 crop will replenish supplies and put the world back into balance.
Lucifer’s toll on the European hop crop is bad. Without wide-spread irrigation, most fields are dependent upon the weather. If you believe the effects of climate change are worsening with time, that should concern you. At the least, it can mean less predictability of yields from year to year and decreased stability of supply. Supplied primarily by Germany, the world supply of alpha acid now relies more on the weather than ever before. When combined with the already high sold ahead rates, which in most countries around the world today exceed 90% of an average crop, this year’s deficit means there will not be enough European hops from the 2017 crop to go around.
Every hop variety becomes a substitute during a shortage. We can expect the current situation will put pressure on every available variety out there. It is still early on in the year to make any precise crop estimates. In 6-8 weeks, we will have a much better idea of the situation. At this point, the situation could worsen if the heat wave continues, or it could stabilize with some rain and cooler temperatures. It is doubtful, however, at this late date, that the situation will improve.