Rising cost of hops takes toll on local breweries

Missoula beer drinkers can expect to keep shelling out their dollars for their favorite beer while local breweries scramble to stay afloat amid the hops crisis.

Excessive rains and bad weather in Europe, coupled with a drought in Australia have helped create a worldwide shortage of hops and barley. Paul Roys, head brewer at Kettlehouse Brewery, said that North America is limited to only about 25,000 acres of hops, produced mostly in Washington.

“Worldwide, there’s huge shortages,” said Roys.

Last spring, the price of hops jumped six-fold.

“They went from $4 a pound to about $24 a pound in a matter of two months,” said Roys.

Double Haul IPA, brewed and canned at Kettlehouse, is one of the hoppiest beers they produce and it takes about ten pounds of hops per batch, Roys said. “So you’re looking at about a $200 increase per batch,” he said.

Jürgen Knöller, president of Bayern Brewing, Inc., said that he recently paid $70,000 for two pallets of hops, the same amount that cost him $15,000 before.

In stores, Bayern prices have gone up an additional $1 to $2 per six-pack, he said.

The rising costs of ingredients have even forced some recipe changes.

On the Kettlehouse Web site, owner Tim O’Leary wrote patrons should expect that their beers will have to be reformulated at best, and some brews might not be available at all.

“To try and make the same product, you have to make a lot of changes to your recipe or to your water to get back to where you were,” Roys said.

He said by adjusting pH levels and calcium levels in the water, they are able to create a different body in the beer as well as bring out different hop characteristics.

Contracts between brewers and hops manufacturers are typically used to help protect brewers as well as farmers keep steady production.

Knöller said that last year the major breweries in the world had contracted to buy about 130 percent of the world harvest of hops.

“If the farmers would have honored their contracts, all of us brewers in America except Anheuser-Busch, Miller, and Coors would have been out of business, period,” Knöller said.

Knöller said that he has been dealing with the same hops supplier for 20 years and that the longevity of their business relationship has helped keep Bayern in business.

“If you are the brand new brewer, the new kid on the block, you’d get skunked,” he said.

Roys said it takes three to 10 years and a huge initial investment to begin producing hops. He said that he expects the hops market to eventually level back out, but not for a few years.

“Barley might be a different story,” Roys said. “I don’t know if we’ll see much increase in supply. Plus the climate has such a big effect on that. That’s out of everybody’s control.”

Roys said that while hops have seen a tremendous increase in price over the last few years, the price of barley has only risen by about 80 percent.

“Germany only got about half the barley they needed for the year, so they’ve resorted to using lesser quality barley to produce beer,” Roys said.

He said that American farmers are getting subsidized by the government to grow corn instead of barley, in order to produce ethanol. This has led to an underproduction of barley that farmers may be more reluctant to correct.

The Energy Policy Act of 2005 provided subsidies to increase ethanol production, setting goals of 4 billion gallons of ethanol produced per year by 2006, 7.5 billion gallons per year by 2012, and in his 2007 State of the Union speech, President Bush set a new target of 35 billion gallons per year by 2017.

Since they grow in similar climates, corn can be produced on farms that used to grow barley and, as ethanol production demands increase, corn becomes the more attractive option.

Knöller said that in the next couple of years, hops prices should level out and the hops crisis should be over.

Once that point comes, he said he expects hops prices to be more expensive than they used to be but about half of what they are now.

“Until then,” he said. “We’re just going to have to hoof it.”