EUROPEAN
CROP REPORT
September 1, 2006 • Volume: 2 Number 5
FALLEN YARDS
In the Jura Region, roughly 60 - 70 hectares (approximately
150 – 170 acres) collapsed in a brief but violent storm lasting only
about 10 minutes back on Sunday, August 21st. On Thursday,
August 31st, ministry officials and representatives from the three
largest merchants gathered to officially survey the damage. Varieties
affected by the storm where mixed and included Magnum, Tradition,
Hallertauer, Spalter and several others. Growers left the damaged
yards alone for several days but last week began harvesting them.
Few growers have storm insurance because of the expense. For one
grower the storm damaged 20 of his 25 hectares. With no insurance,
he has no other choice but to harvest the crop.
Despite lying on the ground, alpha values in the damaged
IN THIS EDITION:
• Fallen Yards
• Update from the
Hallertau
• Weather
• Market news
• Conversation with
Edward Kastner
• Herkules Update
• Variety Pictures
Magnums increased from 7-8 percent to 10-11
percent. With the continuous rains, it was not
prudent to leave the hops on the ground any longer.
One grower who lives near damage, but
whose hops miraculously escaped harm, said it was
like a tornado had whipped through the fields.
Wires were twisted around each other. The task of
harvesting these hops was ominous. Tornado or
not, it was clear that whatever wrath the storm
unleashed upon these hop yards was unusual. The
efforts to harvest these fields itself are also taking
their toll. The continuous rain has saturated fields
throughout Germany. With multiple tractors
driving through the damaged fields, and the
expense of new trellis at roughly 10,000 /ha.
growers will have to leave some fields idle in
2007.
Harvesting these downed yards is a slow
process involving many more workers than normal
and the cleanup of the entire yard. Still only a
portion of the crop is harvested. Hops and leaves
clutter the field after one of these fields has been
harvested.
Top right: A downed hop yard waiting to be harvested.
Bottom: The effects of harvesting a hop yard in this method. Other
growers choose to send large crews of men out to pick up all the hops
by hand. While less damaging, it also requires more labor and is much
slower.
Prepared September 1, 2006
2
UPDATE FROM THE HALLERTAU
While pictures of downed yards and the suffering that goes along with them is certainly
sensational, it is not the major news story from Germany at this time. Of more importance is the effect
the unusually cool weather is having on alpha acid production throughout Germany. That there will be
less alpha acid in 2007 than anticipated appears certain at this time. How much less is, at this time,
unknown. Many people with whom I spoke during this visit to Germany estimated that alpha acid
production to be down between 5 and 10 percent (The German estimate for the IHGC in August was
2971 MT). The highest figure I came across during my discussions with people was an estimate of 300 –
500 MT of alpha less than previously expected.
It is not only alpha acid that is reduced. The crop is coming in light. Cones did not have time to
size up due to the cold August weather and the lack of sunshine has led to low alpha acid levels in nearly
every variety. Some growers have noticed that alpha acid production has already begun to plateau in the
Magnum variety. Thursday and Friday of this week were warm, 22 degrees C, but the sunshine may be
too little too late and more rain is in the forecast for next week.
Aroma hop production is down
and the alpha acid in those hops is also
low. Some Hallertau Mittelfruh hops
have produced only two percent alpha.
Normally that variety, used primarily
by Anheuser Busch, produces an
average of 4.5 percent. One merchant
said it looks like we can expect to see
an average of only three percent in that
variety. Given the significant acreage
of that variety, that by itself accounts
for a large reduction in alpha acid
production.
Left: The Tradition variety being harvested. This week
growers are harvesting Mittelfruh and Tradition in addition
to storm damaged hops in the Jura.
On Wednesday, Hüll tested a Magnum variety hop that contained a bit over 11 alpha acid and a
Perle hop at six percent. These data correspond to private tests conducted by other growers. However,
because the Hallertau is so varied from one little village to the next though, this cannot be interpreted as
representing what alpha levels for Magnums or Perles all through the Hallertau or Germany are at this
time.
On August 29th the German hop industry hosted its annual Hopfen Rundfahrt, a day of meetings
and tours designed to present the hop industry to ministry officials and important people. A wide range
of people attended the event with approximately 200 people in attendance. During the meeting there
were some comments about price and the market situation. It appears that representatives from both
Barth and Steiner made comments that gave an impression as to their position on the market. Those with
whom I spoke who had heard all the comments of that day came away with the very clear impression that
one merchant was definitely interested in seeing prices increase and was supportive of the increase while
the other was not. Dr. Pichlmaier was, of course, in attendance and made several statements as well.
Dr. Pichlmaier is perceived by growers as having a very moderate position on the market with
conservative opinions and hesitates from making bold attention-getting statements. Many think this is
Prepared September 1, 2006
3
good but many growers also think this is a serious problem. They cite it as one of the causes of a
“controversy” between the Hop Growers Association and the HVG, both linked by the presence of Dr.
Pichlmaier. Having spoken many times with Dr. Pichlmaier, I believe he tries to portray a realistic
portrait of the market as he sees it. I would agree however that he does not seem to prefer the
sensationalism of characters from the history of German grower organizations. Apparently, this is
exactly what some growers miss. Whether that is good or bad is up to the individual, but it seems to be
one thing fueling the current controversy. He did say at the Hopfen Rundfahrt that there will be a deficit
in alpha acid production in the EU and that the alpha acid from the U.S. may not be enough to cover it.
During the day, a representative from the Barth organization did not hide their dissatisfaction with
the fact that the HVG receives 2 – 2.5m /yr. from Brussels. The money, it was stated, is grower money
and should be used for grower projects or given to the growers. The claim was made that instead of
doing this, the HVG keeps the money in a more liquid form to use for operating expenses.
WEATHER
Hail insurance inspectors
were fair with their assessments
of some fields from the
hailstorm of early August. Most
damaged fields will still be
harvested. It appears that
growers receiving insurance
money will receive a better than
average return with the
insurance money and money
received from the sale of the
hops.
Relentless
weather
continues throughout Germany.
Rain off and on all day and
throughout the night has been
the norm. The weather forecast
promises dryer and warmer
weather for the weekend to the
relief of every grower.
Thursday and Friday were both Above: A wet dirt road between fields before harvest.
warm with temperatures
reaching 22oC.
More significant is that there was no rain for two days in a row. This offers the fields a muchneeded chance to dry out. From the continual wetness, Peronospra has begun to affect several varieties.
For the past week or two it has been too wet to spray. Now, it is too late to spray since harvest in nearly
every variety is less than two weeks away. Growers are a bit nervous about this development but there is
little they can do now but wait and harvest the hops when the time comes. Peronospra is present in the
Mittelfruh variety currently being harvested but the effects thus far have not been severe.
Prepared September 1, 2006
4
MARKET NEWS
The most noticeable thing when talking to German growers today is their optimism about the
future. There is a lot of talk about balance in the hop industry and stability for the future, at least the next
several years. The market analysis in the most recent Barth report mentions growers having subdued
optimism. Today, their optimism is much closer to the surface. Growers are talking about long-term
contracts returning to the hop industry. When they speak of long-term contracts, they are thinking of
contracts that cover 5-8 years. Surprisingly, growers are not talking about getting rich from big profits
and high prices, although in any conversation the topic of increasing prices is inevitable. The past few
years, with prices for Magnums being 2.5 /Kg., has taken a toll both financial and psychological on
growers.
Growers believe the price for Magnum
hops may reach 3.5 /Kg. this year. Several
independent sources, in the Jura and the
Hallertau both cited this same price as possible
and were optimistic that it would happen for
this year and even perhaps in contracts or future
years. I could not determine from where this
number originated, but it seems to be a number
that is generally accepted.
The key though is alpha acid production.
Price may increase to the level of 40-45
/KgA. That is the price level necessary on the
world market for growers to receive a price in
their coveted 3.2 - 3.5 /Kg. range. If alpha
acid production is down by 10 percent, the Above: Bales sampled on a farm in the Jura region
equation changes. That may be enough to drive by Hopfenring officials. Minimum of 8 samples
the prices upward to the brewer but lower to the totaling 800 grams from each lot of hops.
grower depending upon whether hops were
purchased by the zentner or by the KgA from the farmer. Merchants in Germany seem to be erring on the
side of caution. They are waiting to see what will come from the crop. There has not been a rush to
purchase whatever hops may be left in growers hands. It seems though that German growers, like their
American counterparts, have sold nearly all the anticipated production for 2006 already. Unfortunately, it
will be another two weeks before we can know with any certainty how the Magnums are producing.
This brings a question to my mind of the maximum price that is possible for alpha acid. Just like
there is a minimum price for hops in the U.S., which seems to be $0.50 per pound, there is very likely a
maximum price for alpha acid to the brewers. Once the price for alpha acid reaches such high levels
other sources will become available. There are many breweries that purchased alpha acid for 18-20
/KgA in 2004 and 2005. At some point breweries may decide that the alpha acid they purchased at a
low price is more valuable to them if they sell it on the world market than if they use it for brewing.
Another very likely scenario is that breweries will delay hop purchases and decrease inventories knowing
that another harvest is only 12 months away. I mention this only because it seems that the talk I have
heard this past week is with the assumption that there is no upper limit when it comes to hop prices.
Growers talk freely of the possibility of the price rising to levels of 40 - 45 /KgA. even for future
contracts. It is dangerous to believe that the price can increase with no end and without any negative
repercussions. With this threat of increasing alpha prices on the horizon, long-term contracts for growers
at reasonable prices are a very real possibility. Many growers have hops that are not yet contracted for
2007 so are anxious to see how this trend plays out.
Prepared September 1, 2006
5
It appears that the German hop industry is at a point where several large growers with resources
control a large portion of alpha acid production. These growers are not so interested in expanding
acreage in response to increasing prices. Growers who would be interested in expanding acreage don’t
have the necessary financial resources or trellis. Added to that is the fact that it will take three years for
hops planted today to produce a full crop. Speculative planting is a risk the German growers with the
necessary resources do not seem willing to take at this time. The situation is similar to that in the U.S.
We are therefore at a point in time where the alpha acid should not expand drastically from year to year.
The industry has become so small that the alpha production is in very few hands. This is the first year
when the growers have the possibility to proactively move in concert instead of reacting to the market.
Those who produce the majority of the alpha acid seem to know it is wiser to be responsible for the long
term than to try to capitalize on the current market next year for one or two years only, which is precisely
why there is more concern over the future contract prices of tomorrow than spot market prices of today.
CONVERSATION WITH EDWARD KASTNER
Edward Kastner used publish the Wolnzacher Anzeiger. He no
longer has the printing rights to the paper and has started a new newpaper
called Aktion. In it, each week he has a small news article on events in the
hop industry.
Mr. Kastner speaks with many people and has many opinions,
which he does not mind sharing. He attended the Hopfen Rundfahrt last
Tuesday and came away with the understanding that the merchants may
have a problem this year if alpha acid yields are down by 1 or 2 points
(again a reference to approximately a 10 percent reduction in the alpha
acid production). He explained how the merchants have sold alpha acid to
the brewers on an alpha basis and still buy the hops from the growers on a
zentner or kilogram basis. Therein lies the problem according to Mr.
Kastner. It will take more kilograms of hops to make one kilogram of
alpha acid. In his article that will appear next Tuesday, he mentions that
the price of alpha and of hops will increase.
I believe he does not finish painting the picture. There are growers
that have sold on an alpha basis or who get a discounted price if alpha acid
is low. These growers will actually receive less money at the end of the
day even if the gross prices for hops increases due to the lower alpha
yields.
Herkules Update
Apparently figures extrapolated from small field trial data suggest
that the Herkules variety can yield 69.5 zentners per hectare (3100 pounds
per acre) and 16 percent alpha acid. The calculation (69.5 ztr/ha. X 16%
alpha = 556 KgA./ha.). This yield was reduced to come up with a
conservative estimate of the minimum alpha production per hectare. The
commonly used figure is 400 KgA/ha. In 2006, there are still only a few
hectares of Herkules that will be in full production. They will yield more
accurate data. Only in 2007 and later years, the full impact of Herkules
will be obvious.
Prepared September 1, 2006
6
VARIETIES
Herkules
Prepared September 1, 2006
7
Nugget
Prepared September 1, 2006
8
Magnum
Right: Magnum cones
pictured here on the
ground in a Magnum
field.
Notice the
standing water in the tire
tracks.
B e l o w : A Magnum
Yard. More leaves than
the Taurus or Herkules
variety. No problems
this year with mildew or
pests.
Prepared September 1, 2006
9
Taurus
Prepared September 1, 2006
10
Perle
Prepared September 1, 2006
11
Mittelfruh
Prepared September 1, 2006
12