Tuesday, November 13, 2007

About those hops prices...

...almost forgot to mention: a brewer told me today that he'd been quoted $32 a pound for Cascades. Cascades are the workhorse of craft beer, the bedrock of many a pale ale and IPA. $32 a pound is more than insane, it's just ridiculous. Maybe I've underestimated how bad this is.

27 comments:

Anonymous said...

I have Cascades contracted for significantly less than this. I have a feeling that the brewers that contracted early received prices that the suppliers now can't make a profit on. Without the ability to adjust the contracts I'm guessing the difference is being passed on to the spot hop buyers making the price increase much worse than if it were spread out evenly. I feel for anyone trying to start a new brewery right now. It's going to be a rough couple years until the growers can catch back up with the current demand. Perhaps Gruits will become the next extreme brewing movement :)

Alan said...

If I were a craft brewer or a craft brewer association, I'd be buying up all the rootstock I could and arranging with contract farmers to cooperatively create my own supply. This blip in the market is entirely correctable. And who is watching out for hop gouging?

Lew Bryson said...

Hold on to what you've got; I'm also hearing about contracts not being honored. What kind of penalties are there for non-delivery? Does $32 a pound cover them?

Steven said...

Are hop farms and oil companies owned by some of the same conglomerates? I guess gouging is the "in" practice these days.

Stan Hieronymus said...

Now even NPR is covering hops:

http://www.npr.org/templates/story/story.php?storyId=16245024

Anonymous said...

I have heard of contracts not being met and followed up on it, but according to my supplier they are going to have everything that I'm contracted for so I'm not worried yet.
I would hesitate to use the term price gouging with what is going on right now. I think it's more like the agave shortage a few years back. Hops are a plant that take 2-3 years before they are at their max production and farmers are forced to follow the market demand. When the supply exceeds the demand it would have been economically disastrous to keep planting at the rate they were so they started planting other crops in those fields. But with the current surge in hoppier and hoppier beers coupled with a bad growing year (droughts, fires, etc.) the demand over took the supply and that is why we are where we are with prices. It's ugly right now and I think next year will be too but I expect that every thing will cycle back to "normal" after that. I just hope we can all ride this out. Please just keep supporting your local (and not local) brewery when they are forced to inevitably raise prices.

David said...

Blue & Gray in Fredericksburg, VA introduced a Belgian Ale last month. Now they've posted a notice that they can't get the hops for it and have stopped making it.

http://www.blueandgraybrewingco.com/

I expect we'll see more changes in lineups from small breweries in the coming months. Eventually the brewers (and consumers) will adapt I'm sure. We'll surely be treated to some new flavors. :-)

Butch said...

Just for clarification, what was a typical price this time last year for them?

Lew Bryson said...

Butch,
I was told that prices were more like $2-$3 on the spot market. Huge increase.

Alan said...

Do you also know the price % of hops in the cost of beer production? I realize a DIPA will differ from a porter but any ballpark?

Alexander D. Mitchell IV said...

Am I the only one that foresees a huge interest in ancient traditional Scottish beers without hops--Heather Ale, elderberry black ale, gooseberry wheat ale, etc., just like Bruce Williams does in Scotland? Maybe we have or can create American variants--dandelion or prickly-pear-cactus beer, anyone? (Hey, pardon me for thinking outside the box.)

Lew Bryson said...

Alan,
My latest Portfolio column has some ballpark figures on hops cost in 'average' beer.

Loren said...

Bah...Cascades are overrated anyway. Just substitute Target and no one would be the wiser.

:-)

Alan said...

Tanks Lew - so if the 15 cents a pound hop is a nickle a bottle, we should expect that a 30 cent a pound hops makes for a dime increase per bottle.

Andrew said...

I dunno about seeing these Scottish styles with no hops, but I wouldn't be surprised if we see a lot more of styles that have less hops. Belgians, sweet stouts.. I for one wouldn't mind a few new breweries putting out some more oatmeal stouts.

Steven said...

Lew, you need to add a Portfolio link to the STAG home page.

Stonch said...

Aren't you more worried about your house prices right now?

Lew Bryson said...

There is a Portfolio link, Stonch: it's the first one. "1st Draft" is the name of the column. Hmmm...guess that could be clearer. But I want it to be the first one. Damn. Priorities.

Lew Bryson said...

Alan,

"Nickel a bottle" is based on $15 a lb. hops, not 15 cents, but yeah, $30 a lb. would be mean about 9 cents (the nickel figure was rounded up a bit), which would be 54 cents a sixer. Compare that to about six cents a sixer last year, and you can see where really small brewers might have a problem...if they want to keep making hoppy beers. If they start making hefeweizen and witbier, not so much, eh?

Lew Bryson said...

Well, me, I'm not worried about the house prices: I'm not buying or selling right now, and my local market is actually up a bit over last year, Philly's still up quite a bit.

Seriously, though, I am concerned about the economy in general. If oil prices continue to go up, and the subprime mortgage thing gets even uglier (which some think it will), discretionary spending will take a hit, which of course might hit 'luxury' expenses like better beer. I'm okay personally, in other words, but things completely out of my control could tank us.

Alan said...

Thanks Lew - the interesting thing may be that craft beer may go up, say, 7.99 to 8.59 a six but macro brew may go from 3.99 to 4.59, a bigger percentage jump.

On the oil, seeing as we Canadians have so much, all you need to have is each craft brewer set up a branch plant in Canada to get the benefit of Canadian market and profits as well as just diversification. Plus then our brewers would have to face real competition which goes beyond brewing one amber ale and one "clean, clear pilsner". You win, we win.

Steven said...

"If oil prices continue to go up, and the subprime mortgage thing gets even uglier (which some think it will), discretionary spending will take a hit,"

That's the direct epicenter I stand on at this time - I have a condo that's been on the block for 3 months and a gas-guzzler I bought long before gas started to climb. Discretionary spending has all but completely ceased for me -- it's why I sound like such a cheapskate when it comes to beer buying!

And that was me looking for a link Lew, noted and will be remembered.

---Guy said...

From your article: "The U.S. Department of Agriculture says that in September, the price for a bushel of malting barley was $3.70, or about 8 cents a pound. Work that out for an average-strength bottle of all-malt beer—made with about 2.5 ounces of the stuff—and that’s less than a penny a bottle"

Unfortunately breweries don't use malting barley, they use malted barley. Small brewers buying palletload quantities of bagged malt were paying $.40-.60 per lb. for domestic and $.60-$1.00 per lb. for imported.

Last time I purchased the prices had yet to increase. I imagine they will have gone up for my next order.

Lew Bryson said...

Damn! What a n00b error! Thanks for catching that, Guy, and my apologies to everyone for not having dug a little deeper. Stupid mistake on my part. So...around a nickel a bottle for malt, too. Smaller increases than hops...still, a difference. Thanks.

Jeff Alworth said...

We're around eight and a half a sixer here, on average. I think that may not reflect these prices, though--that's beer that was brewed a month ago.

This is shocking news, if it's the norm. I sense that the character of American pales is about to change. How about a nice Willamette pale?

Actually, I wonder if this price isn't the result of a run on the market--it's SO well-known that even homebrewers are trying to stock up. Not that, ahem, I'd know anything about that.

(Incidentally, last year's prices aren't a good gauge--they reflected the last of the surplus going back several years. They were cheaper than the average, inflation-adjusted price.)

Alan said...

Are all hop varieties rising at the same rate? I mean is anyone paying a premium for Mt. Hood, that good old rasp of a herb?

Gunter said...

Might be cheaper to just substitute pot for similar hop flavor.