Scott Yarosh, owner of Sonoran Brewing Co. in Scottsdale, holds a handful of hops at his brew pub. A global shortage of hops, combined with a run-up in barley prices, is sending a chill through Arizona's craft-beer industry.
PHOENIX – A global shortage of hops, combined with a run-up in barley prices, is sending a chill through Arizona’s craft-beer industry.
The hops shortage threatens to boost prices, cut into profits and close down brewpubs. It could change the taste and consistency of treasured local ales.
In Bisbee, “hop heads” already are weaning themselves from Electric Dave’s India Pale Ale. Dave Harvan closed his 7-year-old Electric Brewing Co. in November, citing the scarcity and high cost of ingredients. Anthony Canecchia, owner and head brewer at Santan Brewing Co. in Chandler, spends hours on the telephone daily, scouring the world for hops.
“I get a pound here and a pound there,” he said.
Canecchia, who opened his brewpub in September, acknowledged, “I couldn’t have picked a worse time to go into business.”
Brewers are dealing with a 10 percent to 15 percent shortfall in the worldwide supply of hops, largely caused by farmers cutting back on the crop and recent yields diminished by rain and drought. Prices have jumped as much as 10-fold and created severe shortages of popular varieties such as Cascade, Centennial and Chinook.
The shortages are expected to last through 2008, and some don’t expect the market to return to normal until 2011.
The higher prices have led many microbreweries and brewpubs to raise prices from 25 cents a pint on tap beer to $1 or more on a six-pack. Some suppliers estimate as many as 20 percent of recently opened brewpubs and microbreweries could fail in the interim.
For the small craft brewers, the issue is not price so much as availability. Many of the most popular varieties of hops are simply not available to them, prompting brewers to change venerable recipes and experiment with lesser-known varieties and Old World beer-flavoring herbs such as spruce tips, mugwort and dandelions.
“It’s not how much you have to pay for hops, it’s whether you can get any at all,” said Scott Woodcock, owner of Flagstaff’s Home Brewer’s Outpost, a mail-order beer-making supplies business. “I get calls all day long from brewpubs and microbreweries all over the country looking to buy a pound or anything we have available.”
“IPAs are going to get a lot mellower,” Woodcock said.
IPAs or India Pale Ales use more hops than many beers and have garnered an intense following of beer geeks who are as passionate about their pursuit as any wine connoisseur.
Many, such as Rex Rathbone of Phoenix, are former wine aficionados who discovered the intricacies of craft beers and got hooked. For them, the thought of a mellower IPA is horrifying.
“It would be an incredible bummer,” said Phoenix resident Maxwell Higgins, a devotee of Trooper IPA made at the Sonora Brewhouse in Phoenix. “I don’t know what I’d do,”
Sonora brewmaster Uwe Boer signed a year contract with his hops supplier in April and expects to be able to make Trooper until at least the spring. He has been brewing for 15 years and has never seen any shortage of hops, let alone one this severe. “It’s something that has really hit us all,” he said.
Boer has held off raising prices, but his customers say they wouldn’t mind paying a bit more.
“If you worry about the price, you’re setting yourself up to drink cheap beer,” said Mark Serfling of Tempe.
Charlie Papazian, president of the Brewers Association trade group in Boulder, Colo., said hops prices have risen in the past year from about $4 per pound to more than $25 per pound, with some varieties increasing as much as 1,000 percent. Meanwhile, the price for barley, the main ingredient in beer, has almost doubled.
A high hops content is what sets so-called craft beers apart from mass-produced varieties.
“Hoppiness” is measured in International Bitterness Units, or IBUs. Mainstream brewers such as Anheuser-Busch Inc. brew mellower beers with less hops. Budweiser has an IBU rating of 11. But the big breweries are still being hurt by the high cost of barley and looking at raising prices.
“Like all brewers, we are experiencing cost increases due to the rising prices of brewing ingredients,” Michael Owens, vice president of business operations at Anheuser-Busch. He said the company has an ample supply of hops.
Papazian attributed the barley prices to ethanol subsidies that have raised the price of corn, the main ingredient in the alternative fuel. As a result, farmers have switched to barley for livestock feed, which has pushed up prices.
The hops situation is more complex. Years of overproduction and low prices led farmers to replace hops fields with more profitable crops. Add to that corn subsidies that have caused farmers to replace hops fields with corn, a drought in Australia that affected yields and heavy rains in Europe that ruined much of this year’s crop.
The exchange rate between the dollar and the euro is making the situation worse for U.S. and Arizona brewers.
The weak dollar makes U.S. hops a bargain for European breweries, which are bidding up prices.
“Local crops that we previously had access to got sold this fall to the European market,” said Ralph Woodall, director of sales at Hopunion LLC, a Yakima, Wash., hops supplier.
Washington produces 77 percent of the U.S. hops crop and about 25 percent of the global supply.