Grower Investment

Grower Investment

August 04, 2015 / Farming

Craft beer is growing in popularity. The Brewers Association, a national organization that advocates for craft brewers, home brewers, and other industry organizations, recently published the astronomical growth trends over the past ten years, which you can find by clicking here. The economic impact craft beer is having on the United States alone is staggering at over $33 billion, and those numbers are from 2012.

Despite concerns, hop farmers are doing their part to keep up with the growing supply and quality demands. Hop acreage over the past four years has been steadily growing in the United States at an average of 13% over that time period, which was almost entirely due to new aroma acreage. In 2015 alone, 5,976 new acres were planted in the Pacific Northwest: 3,347 in Washington State, 1,232 in Idaho, 1,397 in Oregon. Additional acres are also being planted in emerging hop markets throughout the US. This expansion has taken a considerable amount of investment by growers and distributors.

Farm land in the Pacific Northwest is running anywhere from $6,000 to $22,000 USD (very rare to be this high, but it has happened in the last year) per acre, with an average being in the $10,000 range. The investment doesn’t stop with land. The establishment cost to put in trellis, drip irrigation stations, rootstock, rolling stock (tractors, trailers, sprayers, etc.), and staff adds $7,000 - $8,000 per acre. Before the growing season even starts, the growers are investing $15,000 to $20,000 per acre to establish new hop yards. In order to pick all of the new acreage, growers also must invest in new infrastructure. In years past, growers have been able to increase capacity in their current picking operations to expand acreage, but that capacity is running out. Expanding capacity even further requires a massive investment in upgraded or new picking, drying, cooling, and baling facilities. A new picking operation can cost upwards of $13.5 million USD.

Answering the Call

Growers are investing in the craft growth in big ways. Right now, there are at least five new picking machines and two new kilns being built in the Pacific Northwest. Purchases are also being made on new land and facilities for next year, including two entirely new picking operations that are in the planning process. Growers are also updating their existing equipment with new, more efficient ways to pick hops.

A reasonable estimate for investment in the hop industry at the grower level in 2015 is $130 million, and next year we predict growers will make even larger investments than that. Growers are gearing up on all fronts, from purchasing more poles for trellis, contracting companies to build new facilities, and making offers on land.

In 2012, Select Botanicals Group, LLC, an integrated botanicals management group that specializes in breeding new hop varieties, contracted six growers to produce roughly 2.3 million pounds of Simcoe®, Citra®, Mosaic®, and Ahtanum™. In 2015, SBG has contracted 36 growers to produce just over 11 million pounds of these varieties (including the addition of Equinox®), and 2016 will see over 16 million pounds of these varieties. I know its easy math, but that is about seven times more hops in five years! And this isn’t just about supply, it’s about quality; growers are picking these varieties in tighter harvest windows at lower temperatures, directed by brewer feedback, to produce a more consistent product for brewer customers.

In order to keep up with the craft beer revolution, growers and brewers need to commit to each other. Growth is never easy, and rarely cheap. I recently asked one of our growers, Steve Perrault, why his farm is making this kind of investment. “We aren’t making this investment with the short term in mind; we are looking at long term sustainability. We are committed to the brewers. This isn’t about the next five years, this about the next 50 years, for three generations from now.”

*Simcoe® YCR 14 cv., Citra® YCR 394 cv., Mosaic HBC 369 cv., and Ahtanum™ YCR 1 cv. are registered trademarks of Select Botanicals Group, LLC (Brand YCR) and/or Hop Breeding Company LLC (Brand HBC).

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