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Forward Contracting Hops

When breweries contract their hops usage at least three years in advance, it lets hops growers better project the varieties to grow and whether to expand the farms, helps prevent shortages or overages, and creates more stability in the hops market.

Stan Hieronymus Apr 18, 2017 - 17 min read

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Among the many things Sierra Nevada Brewing Co. got around to before 5,000 other American breweries was learning about hops contracts. Founders Ken Grossman and Paul Camusi discovered from the beginning that the hops market can be volatile. They ran into their first hops shortage in 1980, the year they started the brewery. “While planning the beers we were going to produce for the year, we projected that we would need to purchase about ten 200-pound bales of whole-cone hops to cover our needs,” Grossman writes in Beyond the Pale: The Story of Sierra Nevada Brewing Co. When they placed their order, they learned there were varieties they might not be able to get and that the prices had gone up dramatically from the previous year.

Prices surged from $2 to $3 per pound on the spot market to more than $14 for some varieties. Sierra Nevada found the hops the brewery needed, most notably Cascade, but at almost three times more than Grossman had budgeted. “Because there is no realistic substitute for hops, you either change your recipe or you pay up,” he writes. “We learned our lesson and started contracting the following year.”

Giving the Industry Direction

In 1985, Steve Dresler was in his third year at Sierra Nevada when he traveled to Washington’s Yakima Valley with Grossman to select hops from the current harvest to use in 1986. “We go up there to buy, and we hear one of the major breweries—I don’t remember which one—had pulled out of Cascade. Everybody told us [Cascade] could go away. That’s when we began contracting three years forward,” says Dresler, who recently retired as head brewer.

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