May 26, 2008
SALMON, Idaho -- Like apple pie and baseball, beer has achieved favored status in the lexicon of American traditions, with US sales of the drink outstripping purchases of liquor and wine by billions of dollars.
But an international shortage of hops -- the ingredient that adds aroma, body and bitterness -- is causing prices of the agricultural commodity to soar, industry officials say.
The origins of the hops shortage are linked to an oversupply a decade ago of the agent that provides flavors in beer that range from fruity to woody, said Paul Gatza, director of the Brewers Association.
The glut sent prices plunging and caused farmers to plant fewer acres to hops. That included hops growers in Washington, Oregon and Idaho, the states that produce the commercial supply of US hops.
At the same time, excess hops were converted to an extract to allow long-term storage and a supply that only now is being depleted despite the fact that production went below usage five years ago.
Add to that what Gatza and Washington-based hops broker Ralph Olson describe as today's global hops market, where weather and other conditions that affected hops harvests worldwide ramped up international competition.
"All the sudden last year, panic hit the street," said Olson, head of Hopunion, a leading supplier of hops to the craft brewing industry.
"It was, What do you mean you don't have hops? We want hops.' International brewers came in to buy, the supply was tight and they were prepared to pay anything."
Now hops farmers in the Pacific Northwest are scrambling to boost acreage by an estimated 8,000 acres, an increase of 26 percent. It will nevertheless take several years before the additional acreage can be harvested.
Craft breweries make up 4.0 percent of US beer production by volume, but account for 1,406 of 1,449 breweries nationwide.
But with a fivefold increase over the past year in the per-pound price for some varieties of hops, many craft brewers are poised to pass on hikes to customers at the bar and in the store.
Nick Bertram has been producing beers, ales and stouts at Bertram's Salmon Valley Brewery and Restaurant in east central Idaho for 10 years.
In April, Bertram was eyeing a dwindling supply of hops for the first time in the brewpub's history.
"I was right down and couldn't get any," he said.
The crisis was averted when Bertram was among winners of a lottery sale of hops offered by a big brewery to its struggling, small-scale counterparts. Unable to obtain certain types of hops, Bertram's is among breweries that have turned to tweaking beer recipes.
The renaissance of the American craft beer industry, which was all but dismantled during the prohibition era from 1920 to 1933, has long been associated with the laidback lifestyle of the Pacific Northwest.
That is the region that gave early approval to the small, independent and traditional breweries that meet the classic definition in the United States of a craft beer business.
Today, top craft beer markets are in Oregon, Washington state and Colorado even though the industry can now track a national presence.
Steve Hindy is founder and president of Brooklyn Brewery Corp., a regional craft brewery that can boast a ranking among America's top 40 and an amber lager that is the fourth best-selling draft beer in New York City.
Hindy marked up his products, ranging from Pilsners to ales, by 5.0 percent in February when skyrocketing hops prices hit home.
The markup had virtually no impact on Brooklyn Brewery's exports to countries like England, Denmark and Sweden because of strong European currencies like the euro and the pound.
"They didn't bat an eye, the dollar is so weak," Hindy said of sales to eateries and bars in such cities as Stockholm and Copenhagen.
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