Hop Contracts are a relatively unknown facet of pro-brewing that I knew a little of, but became well educated on after interviewing MadTree’s Matt Rowe. What started off as a question for Matt developed into the following blog post.
Before I interviewed Mr. Rowe I asked my followers on Facebook and Twitter if they had any questions and got the following response:
What level of bureaucracy was most challenging to deal with?
It seemed like a harmless question that wouldn’t result in much, maybe some disagreements between brewers on what to brew next or what hops to use. It turned into a crash course on hop contracts.
The one thing that I was never privy too … was the hop culture in general.
A Short Hop History
There are indications that hops were used in brewing thousands of years ago, but we know that their use started becoming widespread around 1,100. Initially, they were used for preserving beer. Eventually, they were used for adding flavor and bitterness. In the past decade, their use has exploded with craft brewers featuring hops in their beer far more than Bud/Miller/Coors.
Hops don’t grow properly from seeds, so you have to clone leaves or split rhizomes in order to spread the hops and grow more of them. Each hop bine (not vine) takes two to three years to reach full maturity. These two facts mean that hops are slow to grow and spread, far slower than the demand for craft beer and subsequently the demand for hops.
Simply put a hop contracts is a contract to buy hops, usually years in advance. Hops take time to grow and spread so breweries signing a contract for how many hops they’ll buy allows growers to know how much of that variety of hops to plant each year. Hop contracts also help guarantee that breweries will be able to get X amount of Y hop down the road, something crucial for the highly sought after hops like Citra.
I know younger breweries are having a harder time getting hops, because the industry is growing so much and hop production isn’t where it needs to be so they’re paying insane prices for hops.
According to Matt, MadTree is contracting out 80-85% of their hops, that number varies by brewery and what school of thought they use on contracting vs spot market. As MadTree’s Production Manager Matt is currently working on hop contracts for 2021 and 2022; 2022 is farther away than double the years (six) MadTree has been open (three). That’s gotta be incredibly hard to predict how many hops they’ll need then considering they beat their 5-year plan in under 3-years!
The name of the game for a lot of breweries … is call dibbs on what you think you need and a little bit extra. Then sort it out later, because the secondary [spot] market is so huge.
The Spot Market
The spot market is whatever the hell is available at any given time and it could change in seconds or minutes … It’s gimmie, gimmie, gimmie I’m gonna hold a big bunch, then when I know I don’t need them I can sell them.
The spot market is just buying hops left over that were intentionally held back by brokers/farmers or another brewery is willing to let go of. Matt says that Lupulin Exchange is the go-to site for buying/selling hops on this secondary market. Poking around there it’s an interesting game of hunting through offers. Also interesting, Lupulin Exchange clearly advises against selling hops at a markup as your hop brokers may catch wind and take it unkindly.
All this talk of hops got me curious about one of the other major components of beer, grain. Matt says that MadTree contracts the 2-row they use as a base malt. For other malts, there is enough grown that there’s no need to worry about contracting it. Interesting to note that MadTree has reached the level of buying entire containers of specialty malt, 20,000 pounds of 50-pound bags.