America's Craft Beer Craze Causing a Hops Shortage

By: CBS MoneyWatch
By: CBS MoneyWatch

May 15, 2014

CBS MoneyWatch - Craft brewers love their hops.

Their obsession with these flowers -- a key ingredient that can make beer bitter, floral, earthy or citrusy, depending on the variety -- has changed the beer industry. Hoppy flavor is best experienced in an India Pale Ale, and for serious hop overload pick up a bottle of Moylan's Hopsickle or Stone Ruination.

America's growing infatuation with craft beer has changed the farming business as well. The average price for all hops rose to $3.59 a pound in 2013, from $1.88 a pound in 2004. For the specialty hops often preferred by craft brewers, the price increases to around $7 to $10 a pound.

The average beer uses about 0.2 pound of hops in every 31 gallons, Businessweek reports, but craft brewers can use as much as 1.25 pounds.

Brewer demand seems to be centering around the aroma varieties of hops, which cost more because they don't yield as much, Businessweek reports. And farmers are adjusting their crops to meet that demand.

In Washington state, the epicenter of U.S. hop farming, some 60 percent of hop acreage is devoted to aroma hops and 40 percent to the alpha hops that bring more bitterness to beers. Years ago, aroma hops were only planted 30 percent of the time.

Blame Sierra Nevada for some of the industry's hops fanaticism. The brewer's flagship pale ale was extremely hoppy when it came out in 1980, Slate reports, and beer drinkers loved how the bitterness blended with a grapefruit aroma and a spicy aftertaste. A decade later, according to Slate, breweries such as Stone and Lagunitas were "engaged in a hop arms race."

Craft brews now make up nearly 8 percent of all beer sold in the U.S., according to The Financial Times. And with their popularity has come the inevitable drain on the nation's hops inventory. "It's been a struggle for the hop industry to keep up with the new demand," the hops manager at BSG CraftBrewing told the FT. That stands to hurt the smallest brewers the most, since they don't have the money to pursue forward contracts with farmers.

That shortage could become especially painful for craft brewers next year when the multinational beer companies bring their deep pockets to the negotiating table. The beer industry giants have been snapping up small craft brewers with amazing speed, and they'll likely want more hops than ever.

You'd think farmers would be jumping into hops to meet the demand, but it's a bit more complicated than that. The initial investment for a hops farm can hit $250,000, The Associated Press reports. And then there's the wait -- the plants need up to five years to hit full production. "It's a hell of a lot of work for just a little bit of money," one Denver hops trader told The AP.

But the money side, at least, seems to be improving for hops farmers, and the craft beer boom shows no signs of fading.


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