The anticipated crop 2000 alpha deficit became a reality because of brewer demand and also because of two major warehouse fires in Yakima, Washington during September 2000. The immediate effect of the fires was artificially high spot prices. Thereafter USA prices stabilized at a somewhat lower level.

The trend away from aroma hops and towards a greater use of bitter hops continued in the past year, and growers are adjusting their mix of varieties accordingly.

The high spot prices for crop 2000 hops led to a slight increase in acreage in Germany and a smaller-than-expected acreage decrease in USA. As bitter varieties continue to yield additional weight and alpha per hectare, each extra hectare contributes more than ever before to potential overproduction. The negative consequences of overproduction are well known but the discipline required to stay away from these situations does not yet exist, despite the efforts of USA growers
to reduce acreage.

We expect Crop 2001 to have average weight and alpha yields. We estimate that worldwide alpha production will be approximately 7,930 tons and demand will be for 7,710 tons, leaving a slight overproduction.

Brewers’ hop inventories have been reduced from past excess levels due to both smaller hop crops and more disciplined buying practices. We expect solid demand from the 2001 crop. The demand for hops continues to narrow towards certain main varieties, and the difference between the aroma and bitter markets has become more pronounced. This difference is attributable to the different hopping philosophies of brewers depending on whether they primarily use bitter or aroma varieties. Please refer to the graph that shows that acreage expansion and the changeover to higher alpha hops for crop 2001 should mean a higher supply of alpha than in 2000.

The interchangeability of bitter hops from USA and Europe has been and, in our opinion, will continue to be largely influenced by the Dollar-Euro exchange rate. For this reason, spot and future European hops and hop products have been more attractive to international buyers than those from USA in recent months.

The current 62-38% share of alpha production between bitter and aroma varieties does not reflect the actual usage breakdown between the categories. For this reason it will continue to be difficult to market many European aroma hops. The demand for certain aroma varieties is constant and separate from the general demand for aroma hops. This is especially true in USA where demand continues to be strong for the principal aroma varieties.

In the coming years we expect hop production to continue to make short-term adjustments to both acreage and the variety mix to meet brewer demand. In our opinion more future contracting is needed to give growers a better idea of demand and therefore give the marketplace much-needed stability. The brewing industry would also benefit from this as costs could be planned in advance and the source of hop supply would be secured. Without future commitments from brewers the trend toward peak-and-valley pricing will continue with unfortunate consequences.