A hot and dry summer last year hit the European hop harvest, while craft beers (which use up to six times the amount of hops as conventional beers) continue to rise in popularity. This is putting small brewers’ profit margins under pressure and forcing them to raise prices, according to Reuters.
Prices of some hop varieties have risen by up to 50%, while others are not available at all.
Germany and the US are the biggest hop growers, each making up a third of the world’s production. Germany’s harvest shrunk by 27% last summer, according to figures from the International Hop Growers’ Convention.
Many brewers have contracts with hop growers to protect them from sudden price rises, but future supply could be affected.
In addition, more multinational companies are entering the craft beer arena, boosting up craft production from the brands they buy. This could put pressure on hop supply.
Rabobank says the demand for hops is at record levels, and also notes the demand for malting barley could put pressure on the industry.
Grains and oilseeds analyst Ciska van den Berg says that production of, and demand for, barley is almost equal. This means there is no room for crop failure.
“Many farmers regard malting barley as a risky crop and one with highly volatile premiums, which inevitably means that they will only grow [it] if the premiums are high enough.”
Brewers, and particularly craft brewers, should be prepared to face these challenges in the future, Rabobank concludes.