The hops industry is currently grappling with two significant issues that could lead to severe disruptions, including potential insolvencies.
Firstly, the craft beer boom and the increasing trend towards heavily hopped beers led producers to significantly expand their cultivation areas and processing capacities pre-pandemic. However, with many developed craft beer markets still reeling from the ongoing cost of living crisis post-covid the anticipated demand for hops has not materialized, resulting in massive stockpiles.
Processed hop products, like hop extract, have a long shelf life, which previously helped manage peak consumption periods but now poses a problem.
According to the German Hop Industry Association, hops production has outpaced consumption for the fifth consecutive year. Research by the German beverage magazine Inside Getränke has revealed a global stockpile of up to 120,000 tons of raw hop equivalent. In the cooling warehouses of traders, hops products from Germany and other European countries worth 250 million euros are accumulating.
This surplus as well as ongoing market uncertainty around beer sales has made the industry hesitant to enter new contracts.
Of the approximately 42,000 tons of hops produced, 40,000 tons have been sold for this year, and 39,000 tons have been pre-sold for 2025 through long-term contracts. However, the contracts for subsequent years are causing concern among growers. For 2026, 26,000 tons are pre-sold; for 2027, 22,000 tons; and for 2028, only 14,000 tons. The reluctance to sign follow-up contracts after 2025 is becoming evident.
There are fears that without these follow-up contracts there will be a drastic reduction in cultivation areas that would eventually lead to shortages. In the USA, hops cultivation has already decreased by 21.7% in one year due to a significant sales slump among craft brewers. Australia has also announced a 21% reduction in hops acreage from a much lower base.
Adding to the industry’s woes is the impending ban on dimethomorph (DMM), a fungicide used against downy mildew. An EU regulation mandates that member states revoke approvals for DMM-containing fungicides by November 20, 2024, with a phase-out period until May 20, 2025.
A similar issue previously arose with stockpiles of hops from the US and Czech Republic containing bifenazate, a contact poison against mites, which cannot be used for food processing with a best-before date beyond April 2024.
If DMM residue levels in hops are drastically lowered, it could mean that hops, and potentially the beer produced from them, could no longer be sold retroactively. With DMM fungicides currently being used in up to 90% of German hop-growing areas this could be a disaster for the industry with many growers facing bankruptcy as a result.
