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Thursday, May 31, 2012

The End of Craft Beer

Craft beer has been riding a rocket of growth over the past few years, and unless you are unplugged from the beer world, you already knew that.  Everyone is a champion of craft beer these days.  From the guy crushing pints of IPA at your local, to the fourth guy in your homebrew club to start a beer blog, it seems you can't get away from the juggernaut that is American Craft Beer.

But can this be a bad thing?

Here are the numbers: in 2010, there were approximately 1,800 breweries operating in the US.  This includes brewpubs, large breweries and non-craft breweries.  In 2011, this number increases to about 2040 breweries, not including closures (of which there were 35).  Over 2,000 breweries in the country in 2011, all pumping out beer, all needing one thing: ingredients.

An industry that relies on a purely agricultural product to survive cannot be sustainable forever.  At least, not while experiencing record growth.  There is only so much land on which to grow food to eat, much less to boil it down, ferment, and consume the dregs.  Our land is shrinking to strip malls and condos, and the products we rely on to make beer shrink with them.  Take the US Hop Crop, for example:  The acreage of hop farms in Washington, Idaho, and Oregon (the three states we rely on the most for hops) shrank last year by a combined 16%.  Imagine that - the farms that we rely on for our hops are now smaller than they were last year, by a good chunk.  Now, yields have risen by 80 pounds or so, but when the total crop is down almost a million pounds over last year, 80 seems like a very small number.   We all remember the "hop crisis", when the average size of the hop farms decreased by about 9,000 acres (and the price per pound rose but never really seemed to fall?).  With this giant growth of craft beer, are we going to be able to get the hops we need for our own beer making?

Then you move on to Barley.  Most of the barley that we get here in the US comes from our buddy, The Great White North (most of our crop is 6-row, which we don't really use in craft beer).  In 2008, the production was around 11,700 kMT.  Shift to 2010, when production fell to just around 8,200 kMT.

So here's my question to the craft beer world: When will the bottom drop out?  There has to be a limit, and for years we all speculated that the ultimate factor would be the consumer, where they would simply stop trying new beers and stick with the few brands they enjoy today.  But more and more it seems likely that the new growth will be governed by the availability of resources - namely malt and hops.

And here's a question to the homebrewers out there: we are already limited on our selection of barley an hops (though you don't know that) due to contracts signed by craft brewers extending for years and totaling into the millions of dollars.  So what happens when the almost 250 breweries that are waiting in the wings in California alone come online, demanding their share of two crops that have been in steady decline for the last 3-5 years?  Will homebrewers see a rise in prices - again?  Look at the trends - large breweries opening second brew houses - not just expanding, building new facilities.  Sierra Nevada alone is doing a pint night at a bar where 55 taps will be SN beers. Think about that.  Really think about how much malt, how much hops it takes to make 55 batches of individual beer styles, on a scale like that.  And you think you are worried now about not finding Amarillo ...

Just some thoughts I had while on the phone with my buddy Sean Paxton, talking about new emerging styles of beer and the future of craft beer.  I give it 5 years and then, if you don't have your contracts etched in stone, or your brewery isn't in more than 4 markets ... you're out.

I've had a few sources of info for this stuff, but the two I found most useful were the following:
This is just my interpretation of the numbers.  I could be wrong. 

This post written under the influence of Hank III


  1. I'll play devil's advocate. All they need to do is replace some of the MILLIONS of acres of corn and/or whet we overplant in order to make the rest of the world sick for our own benefit with barley/hops and you're good for decades. I haven't checked, but I would think farmers would make as much or more on barley/hops per acre than corn/wheat - no?

  2. How much of this shrinkage is due to the fact that the overall beet industry is shrinking? Does this mean you don't think brewpubs will exist anymore since they are in only one market

  3. I was at a tasting with Summit's Mark Stutrud last night and he was discussing this exact point. Barley is 5th in line for cash crops behind corn, wheat, soy, and sugar beets. The entire bio-diesel and alternative energy using corn products will not help the breweries either, another reason to hate hippies!

  4. Barley you may be able to make that argument, but hops isn't quite true if you go up to Yakima you see acres and acres of land that has been used for hop growth and still has all the necessary lines in place to start growing tomorrow, but farmers are holding off until prices are higher.

    Time will tell...

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  6. JP,
    Let me calm your concerns. We will not run out of barley at anytime in our lifetime. Just like a few years ago there may be periods of short supply, but that will just create an incentive for farmers to make more. I farm 6000ac of mostly wheat in Montana. But as prices got better we planted a lot more barley. Also don’t worry about a land shortage. Right now there is about 20 million acres of farm land in CRP. That is a program where farmers are paid to leave the ground in grass. If the price dictates this land could be farmed. Because of good prices we have about 1000 acres right now in CRP that will soon be making wheat or barley. Also if prices increase poorer land becomes cost effective. I bet we have another 800ac of hillside and poor ground that could be farmed if the price was right. Finally yields will improve. Barley farming in the UK has been a main focus for centuries and they are getting yields near 200bu per acre. We have that potential here, but barley isn’t a main focus for most farmers in the US who might average about 120bu per ac. If needed yields will increases.

  7. Small batch farming. I helped run a homebrew shop for a moment and had one customer that was growing and malting his own grain. Hop farming on a small scale isn't a big deal. If the money is there they will come.
    Boutique meat farming is booming, if brewers can keep the drinkers interested, the ingredient farmers will continue to grab up portions of the market imo.