Brewing storm: Hop growers pull back as beer drinking shifts
Growing conditions are strong on Washington hop farms but growers are curtailing expectations of modest growth as beer-drinking patterns shift and an entire industry is disrupted by the Covid-19 pandemic.
The unknowns mean 2020 will look a lot like 2019, when the National Agricultural Statistics Service said Washington growers produced about 82 million pounds of hops with a collective value of $476 million.
75 percent of the U.S. hop crop, with about 50 percent to 60 percent exported in a typical year.
Whether hops are shipped overseas or remain on U.S. soil, the destination is invariably the same: a brewery.
“Hops are grown for beer and that’s it,” said Jaki Brophy, spokeswoman for Hop Growers of Washington, with offices in the Yakima area. Brewers consume 99 percent or more of all hops produced.
A fraction is used in one-off products such as hop-infused teas and candies.
But as the brewery industry goes, so goes the hops industry. And the brewing industry is struggling along with the rest of the economy after pandemic-inspired stay-home orders closed restaurants, taphouses, and sports and entertainment venues.
The National Beer Wholesalers Association in Alexandria, Virginia, said increased in-home consumption has not offset the sales for on-premises consumption. Major beer-drinking events, such as St. Patrick’s Day and March Madness, passed with millions of gallons of beer locked in venues, untouched.
The NBWA Beer Purchaser’s Index in April registered 35, where a reading below 50 shows demand is contracting. Based on surveyed responses from beer purchasers, it noted the high-end beers made with more hops in the mix had record low readings. Lower price point beers saw increases but they tend to use fewer hops than their more expensive counterparts. The index goes up to 100.
Brewery sales dropped “sharply,” according to an April survey of small and independent craft breweries by the Brewers Association, which is based in California.
Its survey measured the impact of the Covid-19 pandemic and social distancing on small brewers who lost access to on-premises sales in breweries and taprooms.
The median drop in revenue was 75 percent. The average was not much better — 65 percent. More than half have curtailed production. Nearly 60 percent said they could survive for up to three more months.
Some very small brewers said they would close. It is difficult to assess if that is a business decision that would have occurred without the pandemic. Breweries open and close in the normal course of business.
Bart Watson, chief economist for the Brewers Association, said small brewers face an “existential crisis.”
“The results show a sharp drop in craft category sales, massive furloughs or layoffs, and the high likelihood of large numbers of breweries closing without a swift end to social distance measures,” Watson noted.
For hop growers, their customers’ problems hit home.
“It’s not like if we’re looking at a large amount left over, we could sell them to a hop candy maker,” Brophy said.
The uncertainty is prompting growers to pull back in 2020. The industry expected moderate growth over 2019, when Washington growers cultivated 41,000 acres of hops and their Oregon peers cultivated 7,300.
“It’s too early to tell at this point what kind of year it’s going to be,” Brophy said.
Indeed, 2020 is shaping up as a good year in terms of plant conditions, water and labor, even as demand remains shaky.
The spring was dry, but water is available in the greater Yakima Valley, which is where most hops grow in the state.
Growers hold a mix of senior and junior water rights.
The Yakima Basin water supply will fully satisfy senior water rights, according to a May forecast by the Bureau of Reclamation. Junior water rights were projected at an estimated 91 percent of their full entitlements.
The bureau forecasts the Roza Irrigation District water supply will be 91 percent, down from 96 percent earlier in the cycle. Hops also grow on reservation land.
Worker availability also is strong because of the large number of workers furloughed or laid off by Washington’s Stay Home, Stay Healthy order, which exempted essential activities such as agriculture.
Growers told the association they are not as reliant on the H-2A temporary agricultural workers program because locals are looking for work.
Brophy, of the Washington hop association, said Washington breweries have gotten creative.
Brewers have brought in mobile canning lines so they can sell to retail outlets, something they had not considered because they were not as profitable as taproom sales. Drive-thru pickups are another option.
“While we do hear about how people are drinking at home, the bottom line is less is being consumed,” she said. “Everybody is watching things very closely.”
Hops are a primary ingredient for beer, but amounts vary by recipe.
It takes less than a fifth of a pound of hops to produce a keg of amber, hefeweizen or lager. It takes a little less than two pounds to produce the same amount of imperial stout and almost four pounds for an imperial IPA, according to USA Hops.
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