Why Oregon’s hop production is on the decline

Oregon hop growers will be harvesting their crops next week, but at a much smaller yield than last year. The acreage for the plant has fallen by 18% this year in Oregon and nationwide. The driving factor is declining beer sales and changes in consumer habits. Michelle Palacios is the administrator for the Oregon Hop Commission. She joins us to share more on the future of the industry.

Note: This transcript was computer generated and edited by a volunteer.

Dave Miller: This is Think Out Loud on OPB. I’m Dave Miller. For the second year in a row, an iconic Northwest agricultural product has seen a major decline. Last year, Oregon hop production was down 12%. This year, it’s down 18%. Michelle Palacios is the administrator for the Oregon Hop Commission. She joins us now to talk about what’s happening and what it could mean for the future of this industry. Michelle, welcome to the show.

Michelle Palacios: Hi. It’s great to be here. Thanks for the invite, Dave.

Miller: Why has there been such a drop – about 30% in two years – in hop production?

Palacios: Your statistics were unfortunately very accurate. Yes, we have seen a decrease in acreage for hop production in Oregon. This mirrors what is happening with our neighbors who grow hops in Washington and Idaho as well. So this decrease in acreage is in response to a lower demand for beer. So we are seeing a decrease in demand for beer. And as a result, our hop growing industry has responded by adjusting our acreage accordingly.

Miller: Are hop farmers glued to beer production estimates?

Palacios: So hops are used primarily for beer. The vast majority, 99% of hops are used for beer. A very small percentage is used in pharmaceuticals and health and beauty products. But when we think about hops and what they’re used for, it is absolutely tied to beer, beer production and beer consumption. So it goes hand-in-hand. That is our market. Our market is for brew. Hops are used for brewing beer.

Miller: I just imagine hops farmers getting together and railing against, I don’t know, White Claw, and LaCroix, and Red Bull, and Vodka.

Palacios: No, I’ve never been in that conversation. We certainly do track trends. Can you hear my train in the background?

Miller: We cannot. You have a great mic. We cannot hear the train in the background.

Palacios: OK, good. We do track those because that is our market, but that is not usually the conversation around the table. It’s more how to brew great beer. And our stance is if you’re gonna choose an adult beverage, we help you choose beer and choose a hoppy one at that, because it supports Oregon farmers and Oregon hop farmers specifically.

Miller: Hops are perennial, right? You can plant them and then year after year they will go up those huge trellises?

Palacios: Correct. Yes, hops are a perennial crop and they have the ability to stay in production for 20-plus years. So it’s really equivalent to even an orchard situation. With new hop varieties, especially in the last 20 years, we’ve seen a lot of acreage transition to new varieties. The consumer really loves new and exciting hops that have different flavors and aromas. So we have seen new varieties that have been developed and have been accepted in the brewing market and by the consumer.

We do see acreage switching out as new varieties are developed. But they very much are perennial crops. And that is why acreage adjustments are so challenging because they have the ability to stay in production. It’s difficult to switch them out year after year because of their perennial growing pattern.

Miller: It almost seems more like we’re talking to orchardists as opposed to different kinds of row-crop farmers. But it does make me wonder – if we say that acreage is down something like 30% in two years, does it mean that growers ripped out almost a third of their plants?

Palacios: In some cases, we’re able to idle acreage. The acreage, instead of it being trained to grow on those 18-ft trellis systems that you referenced, we’re able to just let the hops idle and just grow on the ground but not produce a crop. So that maintains the root stock in the ground.

Depending on the outlook, there are some instances where the hop plant is completely removed. The contract with the merchant or with the brewer has ended, it’s not being renewed and we know that there isn’t going to be a market for that field, then we will completely remove the root stock. It just depends on the circumstance.

So if your listeners happen to be driving down the Willamette Valley, hops are grown in Oregon, in Marion and Polk counties. They will, right now, often see what we call open trellis. So they’ll still see the poles and wires in place, but there’s no hops growing on them or the hop plants are just idle on the ground. In some cases, we’ll try and produce a field crop in between the poles before we make the final decision to remove the trellis system as well.

Miller: I know that fresh hops, wet hops, have to be used within a day or two or they can just spoil. How long do dried hops last?

Palacios: Dried hops, if they’re harvested and put into cold storage – so just under freezing, about 28°F – they’ll maintain their brewing value for about a year in just the whole cone form. If we continue to process them into pellets and they’re stored, again, in ideal conditions, they can last and maintain their brewing value for up to five years. But then we also have the ability to further process and extract or other downstream products and those have a very stable decades-long shelf life.

Miller: I feel like I’ve seen more, on certain very hop-forward beers in recent years, fine print about various extract additives – New Zealand things or whatever. When I Googled, it seems like you can buy, as a brewer, little bottles of supercharged hop flavors that are based on processed hops. Has that changed the market in a significant way or is that just a super niche product?

Palacios: Right now, we’re not seeing that change in the market significantly. That is just a very small percentage of the market. The consumer is still demanding the flavor that comes from good old fashioned grown hops, which is what we would love to see continue. There’s certainly a place for those downstream products and they can be used very efficiently. But right now, we’re not seeing that as an impact on our acreage, just overall beer demand.

Miller: If dry hops, before you even get to the more processed versions, can last for a year or so, how much is there right now in Northwest warehouses?

Palacios: Between growers that maintain ownership of the hops that haven’t sold – so between growers, merchants and brewers – we have about 185 million pounds in storage and that can be in various formats. So those may have already been processed into pellets or extract, but the equivalent of 185 million pounds, which is a year’s worth of hops based on current demand. As we look at how our growers have responded to their acreage and their acreage reduction, that is really an effort to not continue to contribute to that amount in storage and instead try and get this market to be more in balance.

Miller: Wow. So the thinking being that they want to be able to actually sell some of the year’s supply that’s already there so that there’s a market for the stuff that’s growing right now?

Palacios: Correct. Yes, we want to use up what’s in storage and not contribute to that additional surplus. And also that going forward gives us the ability to adjust our varieties that I had mentioned previously, because the beer consumer is very educated and over the last 10 years especially with how the craft beer industry has evolved. Beer consumers have become very educated on hops, which has been really fun for our industry to have this really great appreciation from the end consumer, but they also want new and different flavors from the hops. So that will allow us going forward to be able to incorporate some of those new varieties if we can get the a that get our acreage back in line with demand.

Miller: Is the industry used to dips this big? I mean, are there regular boom and bust cycles in the order of one-third over a two-year period, or is this a real anomaly?

Palacios: I have been in the hop industry for 25 years. During that time, I have seen a couple significant acreage adjustments similar to this and it has rebounded. So hops are like any other ag commodity. It is cyclical. It follows a market.

I think what’s different this time around is that the adjustment is because of a change in beer demand, which has not been the case before. It’s been more just some missed market reads. But this time around, it is a little different in that we are seeing a decrease in beer demand and we have about a 30% decrease in the demand for draft. And we’ve seen closures with breweries, taprooms and pubs. So all of that makes us evaluate this downturn a little bit differently than we have in the past.

Miller: Evaluate differently because you’re wondering if this is not just a blip but a different and sort of permanent level of decreased beer drinking?

Palacios: Right. As we evaluate the current demand for beer, yes. Is this trend going to continue? Is it going to level off and plateau? That’s exactly right. We’re just trying to evaluate where it goes from here. And from a hop standpoint, we’re just doing our part to not contribute to our surplus. That’s exactly what we’re doing, trying to evaluate where a consumer ship can go forward.

Miller: With the trellises and other specialized equipment that’s really just either primarily or exclusively used for growing hops, not to mention the fact that we were talking earlier that this is a perennial plant, what would it take for a hop grower to switch to another crop?

Palacios: Well, most of our hop growers, I could even almost venture to say all … all of them are diversified into other crops. So hops harvest mid-August to mid-September. So many farmers will have crops that harvest before and after that. As an example, they also grow grass seed which harvests in July, then moves into hops, and then ends with hazelnuts. So there are other field crops, row crops and certainly other crops that they’re diversified in.

But hop growers do have, as you referenced, a lot of infrastructure that goes with being a hop grower. So they have very specialized harvest equipment. They have a kiln system that doesn’t transfer over to other crops. It’s just specific to hops. So although they’re diversified and they could continue to diversify, they do have a tremendous amount of capital invested in their harvest equipment and the trellis system that does make it very difficult to to move away from hops. So in most cases, they will diversify into other things, but they certainly want to continue to be a hop grower going forward.

Miller: That’s going forward. What about going back? I mean, how far back do some hop growing families in the Willamette Valley … how long have they been doing this for?

Palacios: Our hop growers currently on farms right now are either 4th, 5th or 6th generation hop growers. So this is very much a family legacy that all of them are continuing as they grow hops. Many of them started in the late 1800s to the early 1900s where their families have been growing hops for many generations. So there’s a lot of legacy and family history and family pride that goes in with being an Oregon hop grower.

Miller: As you noted, hop harvests are about to start. Meanwhile, once again, there are wildfires burning in many places around the state. How has smoke affected the industry in recent years?

Palacios: Our first big experience with smoke was during the 2020 harvest and there was a lot of smoke in the region as we were harvesting. And that was our first experience of having hops with what we call smoke taint. So because there was so much smoke in the environment during that time, the hops were harvested, dried and then ended up going to brewers with this smoke taint, as we called it.

It’s been an interesting experience the last few years because we’ve invested as an industry quite a bit of research dollars into evaluating that smoke taint and to what level can hop still be used without there being that smoke flavor. So it’s certainly been a topic that’s been on all of our minds from the hop growing perspective, that we do have to be able to kind of evaluate hops that might have smoke exposure and how they can be used still in the brewing process.

Miller: Michelle Palacios, thanks very much.

Palacios: Yeah, thank you for having me.

Miller: Michelle Palacios is the administrator of the Oregon Hop Commission.

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