Germany/USA: Alpha acid balance negative for 7 consecutive years

The world hop crop volume of slightly more than 118,400 mt in 2018 was almost the same as in the previous year, reported the Barth-Haas Group, the world's largest supplier of hop products and services in its newest report.

 While acreage increased by 1,494 ha year on year to 60,383 hectares, the largest acreage figure since 1997, average yield declined from 2.01 mt/ha to 1.96 mt/ha. Average alpha content also fell from 9.5% to 9.2% in crop year 2018, reducing total alpha production by 336 mt. This result was principally due to the lower yields in terms of crop and alpha volume induced by climate effects.

The alpha acid balance is negative for the seventh year in succession. Despite the decline in beer output, the alpha volume required by the beer industry as a whole has grown along with the craft beer segment.

Comparing the results of crop years 2017 and 2018, the proportion of aroma hops in crop yield and alpha production fell by 2% and 2.8% respectively, while that of bitter hops rose accordingly. The countries with the largest share of world alpha production in 2018 were the USA, with 48%, and Germany, with 35%. The two biggest hop-growing nations’ combined share was 83%, as in 2017.

Demand for hops is rising because lightly hopped mainstream beers are losing market share to heavily hopped ones. The estimated alpha demand for the 2019 brewing year is the highest ever recorded. This is all the more surprising in view of the downward trend in world beer production since the 2014 brewing year. During this period, output fell by 67 million hectolitres.

An increasing source of confusion both within and outside the hop industry in recent years has been the difference between the assessments of the alpha acid balance by two major market participants. While the Barth-Haas Group assumes that the ongoing supply deficit is now in its seventh year, others regard the market as now being balanced. It is rather unlikely that both of these opinions can be correct. The different views of the supply situation stem from the calculation of the hopping rate – above all in the craft beer market segment.

The fact that spot hop prices remain high both for aroma and for bitter varieties supports the view of the Barth-Haas Group that the world hop market is more probably undersupplied. In the USA and Germany, acreage increased again, if only moderately. With a joint market share of 72%, these two countries dominate the world market to a greater extent than ever. Even more so, their combined share of world hop and alpha volume speaks for itself.

Already the world’s biggest hop-growing nation in terms of planted area since 2015, the USA continues to consolidate its dominance year by year. No other country has anything like as many different hop varieties under cultivation. In addition, of the astonishing total of 87 varieties, 36 come from companies’ proprietary breeding programmes and seven of the “Big Eight” aroma/flavour varieties are of US origin. This group consists of the varieties that are to be found in virtually every recipe as indispensable guarantors of flavour intensity in coldhopped beers. These hop varieties/brands are: Citra®, Cascade, Centennial, Simcoe®, Amarillo®, Chinook and Mosaic®. The last variety to make it into the Big Eight is Australia’s Galaxy™.

The undisputed number one in the rankings is Citra®. The 2018 harvest saw Citra® displace Cascade as the leading variety, and since then its acreage has been the largest in the USA. Nevertheless, not all that glitters in the USA is gold. In the case of some aroma varieties, such as Centennial and Chinook, there is still a surplus. Among the bitter hops, however, there is a supply shortage.

In global terms, there is no lack of bitter hop acreage which has been continuously increasing again, both in the USA since 2017 and in Germany for years now. However, the market has been suffering from low crop and alpha volume, as was particularly the case for the 2018 crop due to climatic conditions in Germany.

If the crop develops normally in 2019, the harvest should provide the brewing industry with sufficient quantities of bitter hops. There is still a supply surplus of some aroma varieties, but due to the continuing further development of craft beer styles (e.g. Hazy IPA), supply of other aroma varieties in the USA (proprietary varieties grown under licence) is balanced to short.

There continues to be a surplus of German aroma/flavour hops. The traditional German aroma varieties Perle and Hallertau Tradition are in short supply following the below-average German harvest in 2018. The market situation for fine aroma varieties can be described as stable.

A very high proportion of the world market in hops awaiting harvest this year has been forward-contracted. Nevertheless, it has been noticeable in recent years that due to the constant expansion of acreage, in many variety segments supply has been approaching saturation point. This was not reflected by the spot market in 2018, however, due mainly to the below average harvest in Germany.

The price levels for non-contracted hops harvested in 2018 were high in virtually all variety segments. This in turn affected the contract market. In recent years, contracts signed in both the USA and Germany have featured good conditions and long durations. The resulting stability forms an indispensable foundation for the investments in infrastructure and quality that have to be made in the first place in connection with the necessary expansion of acreage, Barth-Haas concludes its market analysis.

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