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Fairer skies for hop farmers?

Growers see a chance to make a profit for the first time in years as beer brewers use up supplies.

October 23, 2006|Shannon Dininny | The Associated Press

MOXEE, Wash. — In a frenzy of round-the-clock activity, 200 farmworkers picked, dried and packaged hops at Leslie Roy's 2,300-acre central Washington farm.

The furious five-week hop harvest differed little from years past at Roy Farms, the largest independent hop operation in the country and a supplier to some of the nation's biggest brewers, including Anheuser-Busch Inc. and Coors Brewing Co. The returns, though, could be very different in 2006.

After more than a decade of slumping prices because of a worldwide surplus of hops, growers are seeing a chance to make a profit for the first time in years.

Large brewers have used up their stockpiles, craft beer making has increased demand and prices are turning up.

"When there's overproduction, it takes a long time to get it out of the system," Roy said. "We're finally seeing that happen with the oversupply from the 1990s."

The United States produces about one-fourth of the world's hops, a component in brewing beer. More than 70% of that supply is grown in central Washington's agricultural-heavy Yakima Valley, which is dotted with apple and cherry orchards, vineyards and hop fields.

But buyers -- namely brewers -- have decided the price. For years, a worldwide oversupply had enabled brewers to stockpile dry hops in storage indefinitely. At the same time they began using more bitter hop varieties, thereby requiring less of the crop.

The result: Growers abandoned hop fields worldwide. In the United States alone, acreage fell more than 30%, from 43,430 acres in 1995 to 28,928 acres in 2006.

Aside from one year in the early 1990s when Germany suffered a drought, growers largely haven't turned a profit in years, said Ann George of the Washington Hop Commission.

As much as 70% of the U.S. crop, valued at about $120 million, is exported.

"Are we finally returning to a growers' market?" George said. "We're cautiously optimistic. We live in hope."

After federal limits on hop acreage were eliminated in the 1980s, there was an almost immediate increase in acreage -- and a big surplus of hops.

In 1980, clusters sold for $1.15 a pound in August but rose to $5 a pound when brewers began to perceive a shortage, recalled Ralph Olson, general manager of Hopunion CBS, a group of hop growers who sell primarily to the craft brewers.

Just one year later, the price bottomed out at 30 cents.

Hop growers need at least $2 a pound to cover their costs and make a slight profit.

"You need the stability, you don't need the slot machine," he said. "You just need the in-between. It's very hard to accomplish, but I think right now we're at a place where that's going to happen."

Prices this year have ranged from $1.40 to $2.40.

At least 17 varieties of hops are grown in the United States. Alpha hops are a bittering agent, while aroma hops are used to give beer flavor.

Extra-bitter varieties introduced in the 1990s allowed growers to use fewer hops, resulting in the latest oversupply. As acreage has declined, growers also have processed more hops for concentrated pellets and extract and planted new aroma hops, which have become favorites of the exploding craft brewing industry.

Twenty years ago, there were only a handful of craft brewers west of the Rocky Mountains, where most U.S. hops are grown; today, the Brewing Assn. counts 905 craft breweries as members, producing 7 million barrels of beer in 2005.

"Craft brewers, I would say, are responsible for the breadth of hops. There are so many varieties now, and a lot of these varieties are being grown on anywhere from 1 to 300 acres," said Paul Gatza, director of the Brewers Assn.

The best thing the craft brewing industry has done for hop growers is to broaden consumers' appetite for beer, said Michelle Palacios, administrator of the Oregon Hop Commission.

"They've done a really good job of educating consumers about the different types of beer, about different kinds of hops, and educating their palate," Palacios said.

Oregon produces 17% of the U.S. crop, primarily those aroma varieties that are bought by domestic beer producers.

But Palacios said an acreage decline of 30% since 1997 has leveled off in the past two years, and there may even be an increase in 2007.

"A lot of growers have diversified their acreage into other crops," she said. "It's put growers in a much better position -- rather then growing hops that are not needed and not getting paid well for them."

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