As businesses brew, midstate farmers invest in volatile hops market
Hop growers deal with a high number of variables — and each of those variables is accompanied by a cost. It's an industry that has openings for the midstate but might not get any takers.
“There's so many things that go into it,” said Derrick Michael, one of the owners of Central Penn Hops, a hop yard based in northern Dauphin County. The business dedicates about an acre to hops within its larger vineyard, he said.
Michael is among several farmers in Pennsylvania and neighboring New York making a small investment in the volatile hops market. The popularity of craft beers is contributing to a shortage of commercially grown hops, which are used primarily as a flavoring and stability agent in the beverage.
The hop plant grows easily. Central Pennsylvania is home to plenty of fertile ground, as well as craft beer makers big and small. So it would seem the market potential is strong for local producers.
If it were only that simple, Michael said.
“We pretty much break even on the hops,” he said. “I could probably sell more than I do, but I don't want to invest in a hop picker, a dryer and a pelletizer.”
The national shortage of hops drove the average price to $3.59 a pound in 2013, up from $1.88 in 2004, according to the nonprofit Hop Growers of America. The unsettled hop market could eventually threaten the booming craft-brewing market.
Central Pennsylvania is home to several craft-brewing companies, led by Tröegs Brewing Co. in Derry Township. The success Tröegs enjoyed since incorporating in 1997 has led to many other entries in the market.
In 2012, Pennsylvania's 108 craft brewers produced nearly 1.8 million barrels of beer, the Brewers Association reports, good enough for second among the 50 U.S. states. The $1.9 billion economic impact ranked fourth. The number of Pennsylvania craft brewers grew by 23 percent from 2011 to 2013, the trade organization said.
Virtually all of the hops used by local beer makers are imported from the Pacific Northwest and Europe.
“We import more than 20 varieties of hops and we source those from the Yakima Valley (Washington state), and also from the United Kingdom and Germany,” said Mike Parker, marketing manager at Appalachian Brewing Co. of Harrisburg.
ABC purchased a small amount of locally grown hops from a farmer in Centre County, Parker said. Those hops go directly into production of a limited wet-hop ale produced annually by ABC.
While ABC is lobbied by local hop growers from time to time, the match isn't always practical. To equal the quality of commercially grown hops requires a significant investment in equipment, such as a picker, a dryer and, in particular, a pelletizer.
The difference between whole-leaf hops and the pelletized form is one of reliability. The leaf forms are more unpredictable in what they will deliver, whereas pellets are processed and offer easier storage and a consistent acid extraction.
Predictability is the key, Parker said.
“In order to consistently brew the type of beers we do, we need to have (hops) in the pelletized form,” he added.
The equipment can cost tens of thousands of dollars, Michael said. Add in diseases and volatile weather, and it's easy to see why investing in hop farming is a risky venture.
Ann George, administrator for Hop Growers of America, said the difficulties in growing hops are countered by positives. The crops offer price certainty, since most hops are sold before they are harvested. In addition, demand from the beer market is likely to remain strong.
“I think there's a lot of interest in some of these breweries to be able to source local production,” she said. “People like to know where their food comes from, and that applies to beer as well.”
Hop-picking season will begin in a couple weeks. So far, ABC has not felt the price hikes, Parker said. The beer maker orders about 1,000 pounds at a time and a high average, depending on the variety of hop, is about $10 a pound.
“We're actually ordering the futures price of that, so we're actually buying a year in advance,” Parker added. “And we always order more than we need so we have a reserve.”
While hops grow in specific areas, other states besides Pennsylvania could fill in the gap. New York was a major hop producer until blight and Prohibition killed the industry. Hop acreage is multiplying there each year, George said.
“There's a great window of opportunity if growers are interested in getting into this from various parts of the country,” she added.
A six-pack of facts about hops
1. The more daylight, the better hops will grow. That makes the hospitable climate in the Pacific Northwest a perfect area for hops.
2. Only female hops have the gland that produces oils desirable for brewing.
3. Hops are toxic to dogs and cats. Depending on the breed, even small amounts can prove fatal.
4. Hops grow vertically on bines, not vines. A bine grows straight up around a separate support, while vines grow on a structure using tendrils and roots.
5. Germany remains the No. 1 hop producer in the world. Historians trace hop cultivation to the early 700s in the Hallertau region the country.
6. There are more than 75 varieties of hops.
Sources: Hop Growers of America, U.S. Department of Agriculture