Craft beer slowdown sends down prices for specialty hops

Hop growers and traders are used to extreme business cycles but the latest sharp decline in demand seems to have caught some unawares. As wrote the Financial Times (FT) in February 2018, a sharp slowdown in US craft beer sales growth has sent the speciality hop market from boom to bust.

The fall comes as growers both in the US, the world’s leading hop producer and exporter, and elsewhere have increased their planting areas to cope with rising demand.

Many of the hop varieties popular among craft brewers have plunged from their peaks between 2015 and 2016, says the FT. For example, the price of Citra has almost halved from USD 23 a pound, while Cascade’s was down to USD 1.20 from USD six to seven a pound in 2015-16.

The main issue has been the sudden slowing of growth in the craft beer market, which until a few years ago had been rising annually by double digits. However, with over 6,000 craft brewers in the US, market saturation has affected growth, which peaked in 2014 at 18 per cent, slowing to about five percent in 2017.

According to the FT, the oversupply situation has been made worse by the jump in hop production and acreage which almost doubled in the past five years. Brewers fearing a shortage rushed to sign three- to five-year contracts with farmers, who increased plantings on the back of those contracts and high prices.

The slowdown is having a ripple effect on prices. New forward contracts offered will be shorter.

The rising output amid falling demand has also resulted in a hop glut, with inventories up both at brewers’ and traders’ warehouses.

At a hop convention this year, the Barth-Haas Group, an international hop trader which is headquartered in Germany, told growers not to plant more hops.

Growers and traders are unsure how long the tough times will last. There will be a rough patch for a few years and then hopefully things will be better again.