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Global hop market

A local alternative to mass beer suggested by independent brewers has been successful and is now altering the global market. Beer is becoming more diversified, so transnational companies have to accept the new game rules and to switch focus to young and fast growing markets. All these processes increased the demand for aroma and bitter hop as well as their acreage expansion on two continents. However now there appeared a downward trend of alcohol consumption in the world, so even special sorts can soon turn to be sufficient. In this connection the dynamic American hop market is already facing some problems. EU hop producers have become more cautious, they are not racing to exceed the demand and look forward with more confidence, judging by the contract terms. 

Hop Market in Russia

Germany still dominates the Russian market, yet over the recent two years one has been able observe a continuous success of Czech hop suppliers. Their expansion and growing popularity of hops from the United States became the drivers of supplies growth in 2016 despite the preceding modest harvest crop in the EU, as well as the factor of relative stability in 2017. In this connection, in 2017, the ratio of the varieties continued to shift towards the aroma ones, and the supplies of Magnum hop and other alpha varieties were reduced. However, the import of bitter hop pellets is partially replaced by extracts, especially from the major beer manufacturers. Total volumes of alpha acid supplies, according to our estimation, decreased by approximately 5% and returned to the level of 2015. Barth Haas Group continues dominating the hop products market; HVG also increased its weight. At the same time, Morris Hanbury significantly reduced the supplies in 2017.

Hop market remains in need of recovery

A necessary downsizing process that has already begun in hop production: In 2010, worldwide acreage totalled 52,000 hectares of hops – a drop of over eight percent when compared to the previous year, the Bath-Haas Group said in its Barth-Report Hops 2010/2011 released on Monday. 35% of acreage is in Germany and 24% in the USA.

The hop crop in 2010 only totalled around 100,000 tons – a decrease of more than 12%. Germany produced 34% of the world hop crop, while the USA produced almost 30%.

Alpha production was also down by more than 13%, bringing it to 9,475 tons. Germany contributes a share of 36% to world alpha production, the USA 38%. Although the 3,400-ton surplus in alpha acids recorded for the 2009 crop year was almost halved in 2010, a production surplus of 1,800 tons still remained. Oversupply in the high-alpha hop segment remains the biggest challenge facing the hop industry.

Germany and the USA – world leaders in the hop market

These figures also make it clear that the USA and Germany are the world’s leading hop-producing nations in every respect, the Bath-Haas Group said. Almost two thirds of hops and around three quarters of alpha acids produced come from these two countries. What’s more, in Germany and the USA, growers achieve greater yields per hectare. In these two countries, a higher proportion of the crop is sold through forward contracts in comparison to the other hop-growing regions. These forward contracts provide producers, merchants and brewers with planning security.

Hop industry reacts flexibly to market changes

While crop years 2004 to 2008 were defined by a deficit in hop alpha acids, we have recorded a significant surplus in the last three years. Just to remind you: following years of oversupply, acreage was reduced so drastically in 2006 that crop volume no longer met demand in the brewing industry. As a result, the brewing industry concluded increasing numbers of forward contracts. The result was a rapid and extensive increase in acreage in order to secure supply of the necessary volume. The “old-fashioned” forward contract, which had not been used for years, experienced a renaissance with prices at a high level. This development primarily took place in the USA and Germany. Once the structural hop supply deficit was reversed in record time, the focus was on reducing hop acreage again to regulate the market. This is very difficult, as most hops are sold by growers many years in advance through contracts. Hop marketing companies in particular have to play their part here. Huge efforts involving restructuring forward contracts have made it possible to adjust hop supply to meet demand to some extent. As a result, storage facilities are overflowing and the liquidity of the company is under considerable strain.

Different market development within the variety groups despite generalised oversupply

Looking at the open market in terms of the individual variety groups, we can identify different developments. For one, the open market for high-alpha varieties is almost non-existent. When hops were sold, their prices were generally lower than the cost of production. A large amount of unsold stock remained in storage, particularly in eastern Europe and China. Aroma varieties, mainly from the USA and Germany, were placed on the open market, although prices tended to be average or low.

“Flavor Hops” represent a welcome development. This new hop variety fits into neither the classic alpha hop grouping, nor the aroma hops group. This new category consists of hop varieties with strong flavours, which produce beers that have unusually distinctive tastes. It is primarily in demand from the American craft brewer scene, as well as small breweries in other countries. In our opinion, this interesting market niche holds a lot of potential.

Clearing continues – but supply still seems secure

The efforts of the hop industry to strike a balance between supply and demand are having an effect. Around 49,000 ha are available for hop growing in 2011. That is 3,000 ha less than in 2010. This means that acreage is less than in 2006, when a low of a little less than 49,500 ha was achieved. A crop with average yields is still enough to cover demand for alpha acids. This is possible because of the vigorous planting of hop varieties with high yields and mainly high alpha acid values in past years.

However, no-one knows what the weather will be like until the crop is harvested. Furthermore, the possibility of poor harvests caused by damaged or diseased crops cannot be ruled out. In other words, hops are a natural product – so there is always a risk.

Barth-Haas Group

27 Jul. 2011

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