Craft brewers raise glass to U.S. farmers, growing record hops crop

By Rod Nickel
June 15 (Reuters) - U.S. farmers plan to harvest their
largest-ever hops crop, giving craft brewers who are struggling
to match surging demand for beers with more aroma and bitterness
reason to cheer.
Farmers expect to harvest 51,115 acres of hops in 2016, up
17 percent, the U.S. Department of Agriculture (USDA) said on
Friday.
"That is certainly good news for us," said Benjamin Li Yu,
chief executive of British Columbia-based Russell Breweries Inc
RB.V . "I hope the increase is giving everyone room to
breathe."
The United States and Germany are the world's top growers of
hops.
In 2015, sales volume of U.S. craft beer rose 12.8 percent
domestically and 16.3 percent for exports, while overall U.S.
beer sales eased 0.2 percent, according to Brewers Association
in Boulder, Colorado.
Small brewers have feared a hops shortage after adverse
weather blighted last summer's European harvest.
Lager producers such as Anheuser-Busch InBev ABI.BR also use
hops, but in smaller amounts.
Craft beer premiums cover rising hops prices, but Li Yu said
finding enough supplies has been the biggest challenge.
MillerCoors, owned by SABMiller (LON:SAB) and Molson Coors Brewing Co
TAP.N , has absorbed higher hops costs for some beers, like
Blue Moon, said Warren Quilliam, senior director of brewing,
malting and materials. But those costs are offset by low
aluminum and fuel prices, and long-term contracts smooth out
highs and lows, he said.
It is likely that small breweries, who buy hops on the spot
market, are paying the highest prices, said Viv Jones,
brewmaster at Saskatchewan-based Great Western Brewing Company.
The company has hops supplies secured for the next three
harvests at price increases in line with inflation.
U.S. average prices have climbed four straight years,
hitting a record $4.38 per pound last year, up 19 percent,
according to USDA. The U.S. vine-growing crop, which produces
small green cones, is mainly grown in Washington, Oregon and
Idaho.
While U.S. farmers have fretted about sagging incomes, Idaho
hop grower Nate Jackson is enjoying the high prices.
He bought a 60-acre hop farm in 2008 and has expanded
plantings tenfold.
"(I'm) definitely lucky," Jackson said. "I'm not sure
anybody saw that (price hike) coming."
Even so, hops farming is an expensive business, and prone to
busts due to over-supply, said Tom Marsh, a professor of
agricultural and resource economics at Washington State
University.
Unlike hops, malting barley prices are flat this year, due
to ample global supplies, according to Rod Green, a malt barley
broker at Central Ag Marketing in Alberta.