World: Hop surplus for the seventh year in a row

Hop acreage increased in crop year 2020 for the seventh year in a row, rising by 1.3 % to 62,366 ha, according to the newest BarthHaas Report Hops 2020/2021.

The total volume harvested on that acreage was 122,003 mt, a fall of 6 % year on year. The average alpha acid content of all the varieties harvested was 10.4 % (ToP). This is the highest value ever recorded. The total alpha volume amounted to 12,690 mt. Although this was up only slightly year on year, it still set a new all-time record.

 The acreage in the USA is now a good 4,000 ha greater than in Germany. This gap grew further in 2020. However, harvest volume in the USA was below average, with a yield of 1.9 mt/ha across all varieties. This explains the lower world hop production volume despite the year-on-year increase in acreage. Although yields in Germany of 2.3 mt/ha were significantly above the long-term average, they were unable to compensate for the shortfall in yield in the USA.

At least the alpha values were average in both Germany and the USA. Considering the poor results in recent years, this is to be welcomed. Nevertheless, it should be noted that the trend in both alpha content and yield per hectare is downward and can be seen as evidence of the effects of climate change. The risks for hop production and marketing are growing.

The drastic measures taken worldwide to contain the COVID-19 pandemic and the restrictions imposed on public life have had noticeable effects on beer output. In some countries, such as India, there were periodic statutory brewing bans. Due to shutdowns of venues in the hospitality sector, which is the sales channel for one third of global beer consumption, in the early stages of the pandemic, keg beers reached the end of their shelf life and had to be disposed of.

The Olympic Games were postponed, and those few sporting events that still took place did so without any spectators. Conferences, trade fairs, concerts, cultural events and funfairs were cancelled. Private gatherings were not permitted or were only allowed to take place on a very small scale. Even though the restrictions have been eased in some countries in the meantime, the pandemic is far from over. It will take some time for life to return to normal. For that reason, world beer output in 2021 and with it the demand for hops on the part of the brewers will be lower than in 2019.

The supply of hops from the 2020 harvest will exceed demand in the 2021 brewing year. The market will therefore show a hop surplus for the second year in succession. Initially, however, the price reactions in the hop market were weak, probably in part because, due to the very high proportion of forward-contracted hops and the poor harvest in the USA, the volume of spot hops available was low. Price levels were indeed down year on year, but prices did not collapse. With only a few exceptions, all varieties fetched at least cost-covering prices. However, the effects of the surplus are now being felt clearly in the first stage of marketing. The forward-contract market came to a virtual standstill towards the end of 2020.

Increasing numbers of customers enquiring about contract restructuring and delayed call-offs of hop products already ordered are clear indications of lower demand and growing inventory. Depending on the further course of the pandemic, weak demand has to be expected for the next few years.

“The global hop industry can only counter surplus production by adjusting acreage. This is urgently necessary for the market to return towards equilibrium,” says Heinrich Meier, the author of the Hop Report. “Initially, however, there were only minor price reactions in the hop market, probably in part because, due to the very high proportion of forward-contracted hops and the poor harvest in the USA, the volume of spot hops available was low”, explains Meier.

Even though the high proportion of crop volume covered by forward contracts still provides security in most of the hop-growing countries for the time being and is therefore to be welcomed, it also prevents a rapid response with regard to acreage. It is all the more important not to produce any volume that is not contracted.

“These days, overproduction can quickly turn into a shortage for climate-related reasons. Harvests can no longer be planned as they used to be and yields are fluctuating more widely,” says Alexander Barth, CEO at John I. Haas, Inc.

The brewing industry would be well advised to maintain higher stock levels in order to have a buffer for lean times. “All in all, we are facing challenging times,” says Barth.

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