Hopping Mad: The Impact of Hops Market Turmoil on the Specialty Beer Industry
DOWNLOADJune 30, 2009 - William A Knudson and Hamis Gow
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As a result of production shortfalls there has been a dramatic increase in hops prices. From 2006 to 2008, the U.S. price of hops increased from $2.05 per pound to $3.97, an increase of 93.7 percent (NASS, 2008). Furthermore, stocks of hops in September 2008 were at their lowest levels since 1981 (NASS Agri-Facts). However, these figures may understate the true impact of shortage of hops. It has been reported that spot prices have been much higher than published prices and that some varieties of hops were unavailable in 2008. For example some home brewers have stated that prices for some varieties have tripled in price and that some varieties are in the range of $7 to $8 an ounce (Nair), and in some cases much higher than that.
This paper analyzes the hops situation with a particular focus on the U.S. market. Given the size of the U.S. beer and hops industry what happens in the U.S. affects the global hops market. A brief history of the hops market is presented followed by an analysis of the structure of the beer industry in the U.S. While a small player in terms of volume, micro and craft brewers use a disproportionate share of hops, and are responsible for a disproportionate share of new product introductions and product innovations. Besides home brewers and brew pubs, micro and craft brewers are most likely to be adversely affected by high hop prices.
