Rise Of Craft Beer Creating Shortage Of Key Ingredient

Rise Of Craft Beer Creating Shortage Of Key Ingredient

Beer drinking, particularity small batch craft beer, is on the rise. While not good news for brewing giants like Coors and Budweiser, its music to the ears of many small-time American brewers.

It’s also been a boon for farmers who supply the key ingredient – hops – on which the brewers depend.

Ben St. Mary, who own a family hops farm in Washington, saying he’s “riding a pretty good wave right now. The whole craft beer thing is great.”

The spike in demand for craft beers has led to hops are in short supply. Growers in the Yakima Valley, which produces 75 percent of the nation’s hops, are rushing to expand their production to meet the demand.

The cone-shaped plants are added to beer during the brewing process to increase bitterness and flavor. In 2014, acreage grew more than 6 percent in Washington from the year before, and is estimated to rise 10 percent this year, according to industry sources.

The shortage is particularly felt by Craft brewers because their beers typically use four to five times more hops in the brewing process than mass-produced beers. The hops industry, which had been in a slump, was caught by surprise.

Some brewers have had to curtail production because of the shortage. It’s not just the hops themselves that are in short supply. The processing facilities that dry and bale the plant are also out of capacity.

Tomme Arthur, chief operating officer of The Lost Abbey brewery in California said their solution is to simply contract for more hops than they need.

“For the past three years, we have sold off our surplus to friends and other brewers in need,” Arthur said. Yet they be able to keep doing that as the brewery is expecting growth some 20 percent per year, he said.

Paul Gatza, director of the Boulder, Colorado-based Brewers Association, said prices for hops is rising as the supply remains tight. The group has a goal of 20 percent of the market belonging to craft brewers by 2020, an 11 percent increase from today, he said.

As hops are difficult to grow, the increased demand has spawned interest from farmers in other states, such as Michigan, Montana and New York, because the plants only grow best along the 45th parallel.

But it can take two to three years to get a field into full production. And growing hops has not always been a good business in the past 20 years, when points of oversupply caused demand to plummet and some growers to go out of business. That was before the worldwide economic downturn of 2008, which further hurt the industry.

The events proved that hops are not recession proof. Yet farmers likely won’t be deterred. High crop prices always lead to more planting, so while supplies are tight right now that likely won’t last. Over the next five years prices are forecast to decline, which is just what craft brewers want to hear.