Hop Market Report - October 2007 - German Hop Industry Association
2007 crop yields much worse than originally expected. /Poor alpha values in the main
high alpha varieties Magnum, as weil as Columbus/Zeus/Tomahawk®I World-wide alpha deficit likely to be 1,000 mt of alpha.
Optimistic forecasts for good crops in the US and Germany gave hope to the growers to participate in an attractive spot market and gave brewers hope that the tight supply situation would be relieved.
Six weeks later, we now haue a completely different picture. The world crop 2007 will not even reach average levels. We moved from a tight supply situation in crop 2006 to an acute crisis in supply for 2007.
Crop 2006 resulted in an alpha deficit of 1,400 mt of alpha. 17% of the demand had to be satisfied by depleting inventories of breweries. The deficit was a direct result of the poor 2006 crop in Europe and rising beer sales. The quickly melting industry inventories fueled the demand. After years of acreage reduction, it became apparent that the hop trade and growers haue to change their thinking for the first time in 15 years and deal with a growing demand for hops and thereby a demand for more hop acreage.
Acreage
Based an present data 2007 acreage increased by roughly 2,000 ha. Most of the acreage increase took place in China with approx. 1,000 ha and the USA with 900 ha. The acreage in Germany was increased by slightly more than 500 ha. In several smaller growing areas, the acreage continued to decrease.
Germany experienced an average crop. Some aroma varieties such as Perle and Tradition yielded very well but unfortunately Magnum is 8% - 10% below average, a big disappointment. The yields of Hallertau Mittelfrueh were also way below average.
Bad weather, hail, tornados, flooding in some areas, drought in other areas have hit the growing areas of Spain, Czech Republic, Slovenia, and other small areas heavily and reduced the expected crop yields drastically.
In the Czech Republic there will likely be 25% to 30% less hops by volume. Since alpha values are again 10% to 15% below the long-term average, contracts will likely not be met.
In Slovenia a tornado destroyed 40% to 50% of the crop. Alpha values for Aurora are about 10% below the long-term average. Other varieties show normal figures. Slovenia is experiencing a crop failure.
China
Despite more acreage, the crop in China is significantly below last years. It is caused by the unusual weather, which brought great heat in April followed by cold and rainy weather from May until harvest. These conditions led to uneven ripeness within varieties and also to many plant diseases (mildew, Peronospora and browning). Because the extent of the disease was so large, it could not be dealt with quickly enough. Alpha values for Tsingtao Flower and Kirin Flower in Gansu and many areas in Xinjiang are 15% to 20% below the long-term average.
USA
The US record a disappointing harvest with lower than expected yields as well as lower average alpha values. Since the American growers increased the super high alpha acreage by 557 ha, it was generally expected that the total alpha production in the US in 2007 would be increased. Actually, the US crop will be approx. 500 mt alphas less than expected. This would mean that the US produced 300 mt of alpha less than last year. The reduction occurred mostly within super high alpha varieties.
The reasons for the bad US crop are varied. Some examples are bad weather in Idaho, continued problems with powdery mildew, as well as very uneven maturity within the varieties.
Alpha Values/Alpha Balance
We believe that the crop 2007 has yielded between 7,100 to 7,500 mt of alpha. Dependent on the method of calculation, the demand is estimated to be about 7,600 - 8,400 mt of alpha, which results in a deficit for brewing purposes between 500 - 1,000 mt of alpha. To this you will have to add demand from areas outside the brewing industry, which at this moment are estimated to be between 150 to 200 mt of alpha.
Average Alpha values according to EBC 7.4 in %:
| Variety | 2003 | 2004 | 2005 | 2006 | 2007 | 05 years | 010 years |
| Hallertau Hallertauer | 3.1 | 4.3 | 4.4 | 2.4 | 3.9 | 3.6 | 4.1 |
| Hallertau Hersbrucker | 2.1 | 3.0 | 3.5 | 2.2 | 2.6 | 2.7 | 3.0 |
| Hallertau Hallertauer Saphir | - | 3.4 | 4.1 | 3.2 | 4.6 | - | - |
| Hallertau Opal | - | - | - | - | 7.4 | - | - |
| Hallertau Smaragd | - | - | - | - | 7.4 | - | - |
| Hallertau Perle | 3.9 | 6.4 | 7.8 | 6.2 | 7.9 | 6.4 | 7.0 |
| Hallertau Spalter Select | 3.2 | 4.9 | 5.2 | 4.3 | 4.7 | 4.5 | 5.0 |
| Hallertau Hallertauer Tradition | 4.1 | 6.3 | 6.3 | 4.8 | 6.0 | 5.5 | 6.0 |
| Hallertau Northern Brewer | 6.0 | 9.8 | 9.8 | 6.4 | 9.1 | 8.2 | 8.9 |
| Hallertau Magnum | 11.7 | 14.8 | 13.8 | 12.8 | 12.6 | 13.1 | 13.6 |
Alpha values measured at time of harvest and evaluated by AHA (Working Group Hop Analyses).
Market
At this moment we assume that the already low inventories will be reduced even further while spot prices will increase. This will not be enough to overcome the structural supply deficit.
At this time there is not enough hop acreage in the ground to safeguard the supplies to the breweries. We suspect that the structural supply deficit will last for several more years, particularly if beer consumption continues to rise strongly.
We emphasize that the hop trade still has not a clear picture about the actual inventories of breweries. As long as this figure is not known, we are all in a strategic dilemma. Continuous deficit results in a loss of growth and turnover opportunities for growers, which at this moment would realistically exist. On the other hand all participants on the growing and trading side fear to operate sooner rather than later again at or below the cost of production, a bitter memory just left behind.
