Thursday, August 30, 2012

Hops and the Weather

James Altweis posted a great read over at the Gorst Valley Hops blog. You should read it. the sea ice is melting and the glaciers are thinning out. The sea is becoming less salty and ocean currents are fluctuating. We knew this would happen based on the hotly debated data sets over the last 10-15 years.

What we didn't anticipate is the RATE at which this would happen. In the last 2 years the globe has experienced the beginning of nearly every predicted change outlined in these data...except that it was to happen over the next 50-100 years.
The gist of James' article is a very salient one. Hops are not exactly the most resilient and tolerant plant out there. Indeed, while hops do grow wild as a weed in some places, growing them on a commercial scale is not easy.

If you'll recall, a few years ago (2007-ish) there was a hop shortage and prices for hops were all over the place. Most of the blame, at the time, was put on craft brewers and the sudden surge of hoppy beers. This impacted in bottom line and made the price of beer go up [ed note: I noticed that when hop prices decreased, the cost savings weren't exactly passed on to the consumer].

As I understand James, you can expect the prices for hops to be all over the place in the next few years. Indeed, if I think I understand James correctly you can expect the prices for hops to be all over the place for the next ... well, forever.

Translating that for you, Mr. and/or Ms. Beer Drinker, you should expect to see beer prices continue to increase.

Yes. That's right. I'm a genius. I predicted that prices for beer will increase.

But, more particularly, the availability of some hops that simply aren't as drought resistant will be extremely limited. So, which hops are more drought resistant? Well, we can start with the proprietary, genetically modified selectively bred, hops (Amarillo, Citra, etc.). But not anyone can grow these patented hops; you need a licensed rhizome. Moreover, the patent holder often also insists on being the sole source of processing and distribution for the hops once they are picked.

So, if we keep going down this rabbit hole: the hops most likely to withstand drought are those that are most expensive and most difficult to distribute. Those IIPAs are about to get much more expensive.


  1. I've spoken with James for a bit on this subject (hop prices, markets, efficiencies) at a hoppy beer event at the Vintage. I was discussing the possibility of a hop exchange (like a commodities exchange). Either a lot of standardization would be required or purchasers would have to be quite flexible (and thus brewers).

    But, this would create standardized units to hedge hop prices. Even though malted barley isn't a CME contract, one could reasonably hedge other crop prices, such as wheat, to approximate risk mitigation. With a hop exchange, brewers could lock in hop prices by simultaneously buying and selling a hop futures contract. The short contract (from the purchaser) would eventually be sold, and delivery would be taken on the long contract. Farmers could do the opposite. Finally, the market would probably require about 30% speculators so there are enough contracts for hedgers.

    Areas that would require flexibility
    -hop variety (Fuggles could be substituted for E.K. Goldings, Progress)
    -AA/BA range

  2. I should add malting barley is a premium, and i understand a lot of hop purchasing is done on a forward basis, so over financialization might not revolutionize the industry.

  3. The problem with a hop exchange is this: it wouldn't (couldn't) include proprietary hops (many already require that supply be distributed through them, exclusively). So, you'd be left with an exchange that had dwindling, or more erratic, materials entering the market. The futures contracts would not only need to segment on variety, but various points of quality as well due to wide variations in quality in the market. Moreover, given the wide swings in oil and other commodities due to rampant speculator trading, I'm not convinced that the market couldn't be disrupted by a large non-market player (e.g., Hop Union, Yakima Chief) that were, themselves, almost as large as the exchange and see the exchange as competition.

    Not trying to be Mr. Sourpuss, just interested in the idea and thinking it through.

  4. You refer to several proprietary strains as genetically modified. My understanding is that they are bred, not genetically modified. There is a big difference between splicing a fish gene to a potato (ie monsanto for McDonalds), and using the seedfrom a maleplant in conviction with another variety female plant to force a new flavor profile.

  5. Ron, good point. Selectively bred, not genetically modified. I'll correct.


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