While worldwide demand for high alpha hop varieties is about near 6.000 tons, production in 2017 has only been about 4.800 tons, according to a preliminary crop report for 2017 of Barth-Haas group, which was released today.
As the world's largest supplier of hop products and services states, the US high alpha production has dropped from about 4.500 tons alpha in 2009 to 1.700 tons alpha in 2016 while the German production expanded by only 700 tons of alpha in the same period. The steep decline in US production was therefore only partially offset by the expansion in Germany. The resulting deficit was covered by a depletion of accumulated inventories.
The shortfall of available high alpha volumes for spot demand has become very quickly apparent and prices have risen sharply in the grower markets as a consequence.
While an average crop worldwide should not seem to be alarming, the hop industry is actually going through an extended period of structural undersupply with hop acreage trying to play catch-up with continuously increasing demand.
It is well known that the craft industry has been a major driver of the increase in hop demand with its high usage of hops. The hop industry, especially US growers, has forcefully responded to the demand for flavor hops and has radically expanded the acreage of aroma varieties, but at the expense of high alpha. The gap between supply and demand for high alpha hops was mostly served out of accumulated inventories from the previous cycle of oversupply but these stocks had been fully depleted by the summer and hop demand for brewing year 2018 need to be filled almost entirely with hops from the 2017 crop.
In the aroma market varieties such as Perle, Hallertau Tradition and Select are in short supply as a result of below average alpha levels whereas the supply of noble aroma hops such as Saazer and Tettnanger now seems to suffice for current levels of demand. US flavor hops, which now represent nearly 80% of the US acreage, particularly the public varieties, have expanded beyond the level of demand with spot prices below their contract prices as consequence.
With crops 2018 and 2019 already highly contracted forward in Europe, market activity has moved into crops 2020-25 and sizeable volumes have recently been bought by the trade and by brewers.
