After years of growth, a slowing craft beer industry is leaving more hops in storage.
In recent years, almost any discussion of hop supplies has revolved around the possibility of a hop shortage. The craft beer industry—with its well-known love of hoppy brews like IPAs—was continuing to see significant growth, leading hop growers to ramp up production to meet demand. But what a difference a year makes: Numbers released last month by the Brewers Association, a craft brewing trade group, suggest craft beer sales growth is the slowest it's been since 2004, and now, talk has turned to an increasing hop surplus.
According to the Yakima Herald, the paper in America's largest hop growing region, Yakima Valley, recent USDA figures show that America has a stockpile of about 98 million pounds of hops across growers, suppliers and brewers. That's about 15 percent higher than the same period last year. An even more telling figure: While growers and suppliers have increased their stock in the past year by 30 percent, brewers have decreased their amount of hops in storage by 5 percent. Since 2012, to keep up with growing demand, U.S. hop growers have nearly doubled their acreage; now, it appears as if the scales may have tipped.
"A lot of (breweries) purchased hops based on 15 to 18 percent growth, which is what we experienced over the five years prior to last year," Steve Carpenter, COO of hop supplier YCH Hops told the Herald. "Last year, we had 5 to 6 percent (craft brewery) growth."
Since hop suppliers and brewers typically work under advance contracts, struggles in the brewing industry—like failing to make payment on hops that are under contract—can lead to major financial issues for hop suppliers. As a result, Carpenter said his company will likely have to be stricter with vetting moving forward.
"What we try to do is do our due diligence on the front end," he was quoted as saying. "That whole effort has helped us keep supply balanced with demand and reduced the need to do some major contract restructures."
However, the idea of a hop "surplus" versus a hop "shortage" is also relative: Not all hops are the same. Similar to how a Prosecco shortage doesn't mean you also have a shortage of Champagne, some popular hop styles—Carpenter uses the IPA-friendly Citra hop as an example—are more in demand than others. And hop suppliers admit that keeping supplies in line with what brewers want is part of the problem.
"Keeping that balance and knowing what the demand is and matching your demand to the supply is our biggest challenge," Carpenter said. "We don't always get it right. There's such a moving target." As a result, hop growers may need to worry less about expanding production and instead, removing less lucrative hop varieties and replacing them with the varieties brewers want.
Overall, this new found surplus speaks to what's currently taking place in America's brewing industry: uncertainty. In the past decade, the number of breweries in the US has grown at a rate not seen since the late '90s—which led, unsurprisingly, to a major slowdown. Though it's still too soon to say whether another bubble is about to burst, that possibility is something every facet of the industry needs to keep in mind.