EUROPEAN
CROP REPORT
July 22, 2007 • Volume: 3 Number 4
STORM CUTS SWATH FROM JURA TO HALLERAU
On Saturday evening, July 21st, a storm hit the Hallertau and Jura regions. The area hit hardest
was between Geisenfeld and Rottenegg. It included many surrounding areas as well but did not
reach into Wolnzach. I happened to be in the area at the time of the storm and I can say it was
very powerful and like nothing I have ever seen. While the rain continued into the night, for
about 30-45 minutes at roughly 9:00 PM it rained so hard so quickly that streets quickly flooded
and debris began floating into the streets. For about the last 20 minutes of the heaviest rain, the
wind picked up to what seemed like hurricane force winds.
Prepared July 22, 2007
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On Sunday morning and again Sunday afternoon, I drove the area to survey the damage. Hop
fields around Geisenfeld were still standing but had been severely whipped by the wind
removing all but a very few branches and cones with what looked like hail damage. During the
time of the storm the temperature dropped severely within a short period of time so I would not
rule out hail.
I drove for over an hour following the damage back to Wolnzach. In Rottenegg, a small town
about 8 kilometers from Wolnzach, the wind and rain blew down a small hop yard of
approximately 1-2 acres. I found two other hop yards that had also fallen bringing the total to
approximately 20 acres of downed yards.
All in all, based on my two drives, I estimate that as many as 400 – 500 hectares were affected
by the wind and rain and will have sharply reduced yields as a result, assuming they can be
salvaged at all. Some fields were 90 – 100 percent damaged while others experienced only
moderate damage. Driving together with a hop farmer from the area, we estimated that roughly
half the yield from the area would be lost overall. The area in question is some of the best and
most concentrated hop-growing land in the Hallertau and is split roughly 50/50 between aroma
and alpha varieties.
Prepared July 22, 2007
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BREWR.NET
The new web site www.brewr.net is now online. If
you have not already, you should register for an
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via email.
CURRENT SITUATION
July can make or break a crop. In some years it has been devastating. This year, July has saved
the Hallertau, for those acres not affected by Saturday’s storm. Of course, there is nothing that
can be done about the damage already done to early varieties such as Hallertau Mittelfrüh from
the hot dry spring, but the rest of the crop appears healthy and in perfect condition.
Many growers talking about expansion but are constrained by their farm size. One estimate
places between two thirds and three quarters of the Hallertau growers at or near their production
capacity. The majority of growers are already sold for all the acreage they can produce with
their current equipment. There is some level of frustration and uncertainty because contracts are
available at such good prices and for such long terms. Their instinct is to take advantage of
them, but they cannot. They talk and analyze the possibilities but all roads lead to a change they
do not seem ready to take. That step is in some cases doubling the size of their farm and hiring
outside laborers to help with production year-round. At a minimum, that change requires
buying another picker and a slightly bigger kiln. I posed an interesting question to a couple
growers during a theoretical discussion about expansion. I asked, “What do you do with that
additional acreage when the hops start losing money again, then you have even more hops that
aren’t paying for themselves?” I had caught them off guard with that question, because they were
thinking about today, not 2014, but they quickly responded, “there will be many farms for sale at
that time.” I couldn’t help but think that there farm too might be for sale if they follow through
with the expansion we were discussing.
Growers are concentrating very much on alpha thinking that is going to be their future despite
the obvious advantages of the CTZ variety versus the Herkules variety and the all important
exchange rate, which currently favors U.S. exports and shows no signs of reversing. Growers
are not thinking too much about their biggest strength, the potential of their aroma hops and the
impending shortages in the hop market on the aroma side due to growth in that area and too
much attention to the alpha market.
Prepared July 22, 2007
3
THE BARTH REPORT
If you have not already, you can go online to download your own copy at:
http://www.barthhaasgroup.com/cmsdk/content/bhg/barth_report.htm
While you are on the Barth web site, I recommend you sign up for an RSS feed to the page so
you begin receiving the reports as they become available. Brewr.net and many other web sites
are now using RSS feeds to get information to people once it becomes available. There are so
many other clever things available today to make your online life more efficient, but this is one
of the most universally accept advances. Once you get into the habit of using an RSS feed
together with Google, Yahoo, or your RSS reader of choice, you’ll find it very useful.
The annual Barth Report is really the hop equivalent of the State of the Union Address by the
U.S. President. While the report is full of very interesting information documenting the changes
occurring in 2006, a key turning point in the industry, one key statistic stands out that affects the
current year and where the industry may be headed, the estimate of the percentage of the crop
that has already been sold in future years.
CHART I : CONTRACT RATES (excerpted from the 2007 Barth Report)
The chart above was excerpted from page 9 of the 2007 Barth Report. The percentages listed are
current as of spring 2007. We know that sales have continued in future years since the spring
with the most recent round of offerings happening THREE REASONS WHY THE CURRENT
only last week, as reported in the previous edition of BUBBLE MIGHT NOT BURST SO SOON:
the MacKinnon Report. There is no way to know for
certain at this time, but the sold ahead percentage very 1. Continued growth in world beer
likely will be above 90 percent several years into the production resulting in similar
future for German and American hops.
increases in demand for hops,
While this may be a Godsend to farmers looking for
good prices and stability, it increases the chances of a
perceived shortage. With irregular weather and
German growers’ dependence upon that weather for
crop quality the likelihood that one of the years now
sold at or above 90 percent will deliver a below
average crop increases. Perception plays a powerful
Prepared July 22, 2007
2. Slow increase of world hop
acreage due to lack of farm capacity
in non-U.S. countries,
3. Reduced harvesting capacity in
the U.S.
4
role in the hop industry. This fact may, in fact, work to the benefit of the grower by further
extending the current market bubble before it bursts.
Analysis – an interesting point came up during a discussion with a German grower. We
observed that if, as it states on page 8 of the Barth Report, growth of world beer production for
2004 - 2006 was 14.9% (an average of 4.96% per year), and IF this continues for several years
into the future, growers may be chasing the market for several years to come. To illustrate this
point, I created Table 1 below and offer the following explanation.
The hop industry is not trying to reach a static point of supply and demand at
which everything will once again return to normalcy. At the present time, with
the annual growth of world beer production at approximately five percent per
year, the equilibrium point is constantly moving in a direction that requires
additional hops on a continuous basis. Sooner or later, the law of big numbers
will come into effect and this growth of will lessen as it has in the more mature
markets of Europe and the U.S.
If we assume that we are at the equilibrium point, which it appears we are not
based on inflated market prices, the additional hop acreage necessary to maintain
five percent growth is significant. The current world acreage of approximately
51,500 hectares in 2007 would require 2575 additional hectares for 2008.
Beyond that, if we assume similar growth, the necessary hop acreage quickly
approaches 60,000 hectares (see Table 1 below).
TABLE 1. PROJECTED DEMAND FOR HOPS 2007 – 2009
Year
World Acreage
World Acreage Necessary
2006
49,526 Ha. (122,329 acres)
?
2007
51,526 Ha. (127,269 acres)
53,000 Ha. (130,910 acres)*
2008
?
55,650 Ha. (137,455 acres)
2009
?
58,432 Ha. (144,328 acres)
th
* The source for this number is the press conference on July 18 in Munich during which Stephan Barth was
quoted as saying that to satisfy brewer demands sufficiently could require 53000 hectares.
For this table I have assumed a 5 percent annual growth rate in world beer production and no
further switching to hyper-efficient hop products. I believe that assuming such strong growth for
a long-term is dangerous because it cannot be sustainable indefinitely. Trends in India, Africa,
China and Russia however appear stable for the time being.
WEATHER
This weekend the weather has been hot and humid and with the rains the soil is very damp.
While the sensational storm can easily distract our attention, it is important to see what else is
happening as a result of the weather. The extreme heat of last week following three weeks of
cool weather has brought on wilt in many fields. In one week’s time, fields of Mittelfrüh,
Prepared July 22, 2007
5
Taurus, Perles and other varieties are experiencing wilt, more so than in previous years. The
weather has also created perfect conditions for downy mildew. Downy mildew is running
rampant in many baby Herkules yards in the Jura region and can also be found in the Hallertau.
There is no way for many growers to get into fields to spray at this time as most of the fields are
far too muddy. Please remember that statements like this do not apply to every farmer in
Germany as soil types and weather vary from place to place. The weather forecast predicts good
weather by Wednesday but growers are worried how their infected hop yards will look by then.
HALLERTAU.INFO
A web site that contains information
regarding the release of the Barth
Report and the press conference at
which
it
was
announced
is
http://v554.vanager.de/hallertau.info/
This site is in German and run by Ted
Kastner. There you can find news
related to the Hallertau in general in
addition to events in the hop world.
You can translate all or portions of the
site using http://babelfish.altavista.com/
or any other online translator of your
choice if you do not read German.
There was some very interesting market related information mentioned in the press conference
coverage on this web site. The price of 200 Euros per KgA was mentioned with the caveat that it
was only for a small quantity of alpha acid that did not affect the entire market and should not be
interpreted as anything more.
HARVEST START DATE
At this time, it appears that harvest will begin on or around August 15th, a date that is about a
week earlier than normal for the Hallertau.
Prepared July 22, 2007
6
More Damage from Yesterday’s Storm
Top Left & Right: Fields damaged by the storm.
Bottom Right: Vines damaged from the storm.
Bottom Left: A baby Herkules yard withstood the brunt
of the storm and emerged unscathed.
Prepared July 22, 2007
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Top: Flooded Nursery
Left: Downed yard in
Rottenegg
Bottom: Another
Herkules Nursery. They
are everywhere this
year.
Prepared July 22, 2007
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Top Left: Herkules Bloom. Top Right: Herkules Field
Bottom Left: Nugget Bloom.
Prepared July 22, 2007
9
Top Left: Taurus cones. Some
Taurus fields are more advanced
than others.
Top Right: Taurus Field.
Bottom Left: Magnum Cones
Bottom Right: Another view of
the downed yard near Rottenegg.
With a name like Rottenegg, I
couldn’t withstand the temptation
to use another picture from there.
Prepared July 22, 2007
10
The next edition of the MacKinnon Report will be on August 20th.
Don’t forget to sign up for BrewR.net at
www.brewr.net
Prepared July 22, 2007
11