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Hop Contracts: Navigating Change Together

We are increasingly facing the challenges of climate change, which put hops under stress and have a negative impact on yield and productivity. This has become evident, especially when looking at recent harvests. Heat and drought are particularly affecting old landrace varieties such as Hersbrucker, Hallertauer Mittelfrüh, and Saazer. Even the popular Perle variety is suffering significantly.

Breweries that have entered into hop purchase contracts are on the safe side. In times of scarce harvests, they are given priority in the supply chain. BarthHaas encourages breweries that solely rely on the spot market for their hop supply to secure their basic needs by signing contracts for the coming years.

Furthermore, the more unstable the yields of a specific variety, the more essential it becomes to build up stock reserves. We recommend maintaining a stock for the most vulnerable varieties for an entire year. Not all breweries have suitable storage space for this purpose. BarthHaas offers contract partners the additional option of depositing their hops in the company's refrigerated warehouse under proper and controlled conditions (temperature and humidity).

 

More than Supply Security

The advantages of hop contracts extend much further. With hop contracts, it is possible to align supply and demand and minimize risks in both hop cultivation and the brewing industry. The product cycles of these two sectors run extremely asynchronously: slow in cultivation, fast in beer production and marketing. Therefore, it is crucial for breweries to plan ahead as much as possible and incorporate their needs into a tailored contract. This signals to the hop industry what is needed, enabling growers to adjust their cultivation accordingly. There is no need to fear, as a contract is not a restraint but a partnership agreement that benefits everyone and sustainably stabilizes the entire industry.

 

Product Safety

Contract trading also enhances product safety. Plant protection and food law regulations are of paramount importance in this context. Since almost every country has legally established maximum residue levels for food and hops, our hop growers can adapt to these regulations and cultivate hops as needed only through contracts. Within the "BarthHaas Guarantee," we monitor legal changes worldwide and, in close collaboration with growers, ensure through raw material analysis and traceability that breweries can rely on the quality and marketability of the delivered products.

 

Sustainability

Hop contracts are indispensable when it comes to sustainable restructuring in hop cultivation. Due to climate change, there is an urgent need to replace old, heat-sensitive varieties with new, climate-resistant ones. Breweries play a key role in this transition. As is well-known, it takes 10 to 14 years from crossbreeding to the market introduction of new cultivars. The time frame extends from the planting of new varieties on farms to the first profitable yields, which can take up to four years. Contract partners who are willing to gradually replace parts of their reported demand with new varieties are an enormous support in structuring this necessary change in cultivation.

 

Price Stability

It is advisable to enter into a hop contract with a duration of four to five years. The projected demand, the staggered quantity of hops, and even the selection of varieties and products can be adjusted. Based on the current harvest situation and market conditions, we discuss possible adaptations with our partners year by year. In general, we recommend covering 10 to 20 percent of the hop demand through contracts annually. This not only provides supply and product safety but also ensures price stability. Over the long term, breweries ultimately achieve an advantageous average price, despite price fluctuations.

 

More Sustainability for All

In conclusion, hop contracts bring stability in various aspects: for one's own planning security, sustainable yield, and the survival of hop cultivation. This becomes even more significant in uncertain times like these. Therefore, we recommend all breweries to source hops through contracts. Only together can we navigate the transition to greater sustainability. Ultimately, everyone benefits from this.

 

Check this out: Hop Supply Risk - Time to Make the Switch!

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An article by

Marketing and Content Management Hops Academy

Sylvia Kopp

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