Unhoppy Reality | Skyrocketing prices, diminishing supplies, squeeze micro-breweries
It’s rough out there in beer country.
Not from a consumption standpoint – imbibing is ever-popular, and specialty craft beers are enjoying new prestige – but marketplace pressures and natural events are threatening to choke off hops and malt barley crops. As a result, prices for both are skyrocketing for Connecticut brewers.
Curt Cameron, president of the Bloomfield-based Thomas Hooker Brewing Co., isn’t worried about running out of materials, but he has seen hops prices rise from about $4 to as much as $20 per pound in a month.
And those rising costs may be shared between beer drinkers and the breweries.
Bob McClellan, owner of East Hartford’s Olde Burnside Brewing, said higher consumer costs are unavoidable. In the next three to four months, he said, customers will see about a $1 increase for a six-pack.
“Everyone’s suffering because of it,” he said. “Our hands are tied.”
The rising crop prices are particularly hurting smaller, specialty brewers because their beer requires significantly more hops and barley than, say, mass-produced domestics such as Budweiser, according to McClellan.
Weather Damage
So what’s to blame? A lot of things, including weather, a fire in Yakima, Wash., and the pernicious influence of the new villain of the food markets – ethanol.
“This is a global situation, and it is a very complex one,” said Julia Herz, a spokeswoman for the Craft Brewers Association.
Weather nailed both hops and barley crops on a worldwide scale. Hops, grown mostly in the U.S. Pacific Northwest and Germany, suffered from hailstorms in Idaho and Germany and floods in Slovenia. And a warehouse fire in Yakima knocked out 4 percent of the U.S. hops crop in one swoop, according to the association.
The current hops shortage is also the culmination of years of overvalued crops that cost more to produce than to sell. As a result, weather troubles coincided with a reduction in hops farming.
Barley production also had its share of troubles, with damage done by floods in Europe and a drought in Australia.
Supply And Demand
The rising demand of corn crops earmarked for biofuel production is also contributing to the shrinkage of barley crops. U.S. farmers are getting top dollar for their corn crops, thanks to subsidies intended to aid biofuel production, said Seth Schneider, general manger for Westport, Mass.-based distributor Crosby & Baker.
With regard to corn crops, quality takes a backseat to quantity. In contrast, growing barley is risky: The finished crop must meet certain quality specifications that, if not met, can make an entire year’s crop worthless, Schneider explained.
With corn easier to grow, barley farmers are instead growing corn, which reduces the supply of barley and increases prices.
While good weather could help lower the price of hops, barley prices will probably stay high for the foreseeable future, Schneider added.
Regardless, many smaller brewers had to buy their year’s supply ahead of time, instead of waiting to buy as-needed. Schneider said Crosby & Baker was confident it would have enough to supply its customers, but that at some point, there simply might not be enough to go around.
Killer Contracts
Ron Page, brewmaster at Hartford’s City Steam, wasn’t happy about his hops contract this year. He had to pre-order his hops, essentially having to guess how much he’ll need for the year, but also had to agree to pay whatever new, higher price the supplier sets –and if the hops run out, he had to agree not to hold the supplier responsible, since the huge demand means some shipments could very easily be stolen.
But Page was much cheerier about the situation than some of his co-brewers. Brewers like City Steam, which sells directly to patrons, have fewer middlemen to pay off than those who sell in packages, he said. Packagers live with tighter margins, and a sudden jump in certain costs hurts them much more; brewpubs can better weather the storm.
But some owners, seeing the furor over crops, might use this opportunity to raise prices more than they have to, Page said. As it stands, Page doesn’t expect City Steam patrons to see much of a cost increase, if any. But “we’ll play it by ear,” he said.
Thirsty For Beer
Beer-drinkers themselves also are contributing to the squeeze – either they have grown in number, or are merely drinking more specialty beers. The national association reported that Connecticut produced 12,000 barrels of beer in 2006, up from 10,800 in 2005, and such increases are echoed nationally.
Cameron expects that the beer-loving public will continue to drink despite the increases in costs, but Thomas Hooker brewery is trying to absorb more of the costs itself in the hopes of mitigating price increases.
“We don’t want to do this, but it’s inevitable,” he said.
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