2. International Market for Hops

2.1 Characteristics of International Hop Market

Hops are grown in relatively few countries throughout the world. Due to hops' latitudinal sensitivity, production is restricted to those countries situated between the 35th and 55th parallel north and south of the equator. Hops are currently grown in about 30 countries world-wide, the majority of which are in the Northern Hemisphere. Only a small proportion of hops (about 5% of world production) are produced in the Southern Hemisphere.

There are only five Southern Hemisphere countries currently producing hops. As well as supplying local demand, these countries are able to supply "out of season" hops to the Northern Hemisphere markets. Australia is the largest Southern Hemisphere producer followed by South Africa and New Zealand. New Zealand contributes about 11% of the total Southern Hemisphere hop production and 0.6% of world production.

World-wide, the total area under hops is approximately 80,000 hectares (FAO 1994). Although there has been year to year variation, the total area in hops has changed little over the past ten years. Total world production of hops harvested in 1994 was approximately 121,000 tonnes (Table 1).

Table 1: Hop Production of Major Producing Countries and New Zealand (tonnes)
Country 1980 1985 1990 1991 1992 1994







USA 34,273 22,549 25,788 31,368 33,718 33,820
Germany 26,892 35,697 27,465 36,453 28,725 28,754
China N/a 5,000 13,000 13,000 13,000 17,500
Czech Republic 10,036 11,278 10,617 10,961 9,250 9,220
USSR 10,000 10,600 9,000 9,656 10,256 1,570*
England 9,749 64,497 4,581 6,106 4,818 4,412
Australia N/a N/a N/a N/a 2,500 2,707
New Zealand 281 439 426 454 587 765
Total World 118,939 120,986 110,049 130,060 122,379 121,323

* Russian Federation only

Source: 1994 FAO Production Yearbook; HMB.

The international market for hops is characterised by a few large players, and a large number of small players. World production of hops is dominated by two countries, Germany and the United States of America (USA), who jointly represent more than half of the world hop production (52%) (FAO 1994).

Other smaller, but significant hop producing countries include Czech Republic, the Commonwealth of Independent States (CIS), UK and, more recently, China.

2.2 International Trade in Hops and Hops Products

As the production of hops is confined to relatively few countries, a considerable amount of hops are traded internationally. Many varieties of hops are traded, with different regions having specific preferences for particular varieties, depending on consumer tastes and existing production. For example, the USA specialises in producing alpha hops and therefore imports large quantities of aroma hops. Germany specialises in aroma hops and imports large quantities of alpha hops. New Zealand specialises in alpha hop production, however several of the new hop varieties in New Zealand are aroma hops.

The volume of hops traded on the world market is about 50% of world hop production. Germany and the USA are the biggest net exporters of hops. The USA exports hops in three forms: extract 61%, pellets 26%, and cones 13%.

2.3 New Zealand's Place in the International Market

For the period 1980 to 1994, New Zealand's total hop production nearly trebled as new export markets were established, and market expansion occurred in existing markets. Nearly all of this increase has been exported. New Zealand currently exports about 80% of its total production, yet it represents only 0.6% of international trade. New Zealand's major export customers are North America, Asia, Western Europe more recently Japan.

2.4 International Market for Hops

The requirement of hops for brewing beer internationally is very specific in both quantity and quality, while the supply of hops is unpredictable. Therefore there is an extremely inelastic demand for hops with variable supply, which results in shortages and surpluses of specific hops in any given year. World hop production is cyclic and typically peaks every 7-10 years, followed by several years of world hop surpluses and depressed spot market prices.

2.4.1 Selling Hops on the International Market

The world market price for hops is largely determined by the German and American markets (60% of total consumption). Given their huge size in the world market these two countries are price makers, and any shortage or surplus production directly influences international hop prices.

To reduce the risk faced by both growers and breweries against fluctuating world prices, the bulk of hops produced world-wide are sold under forward contracts on a fixed price basis for 3-5 years, and sometimes up to 10 years, ahead. This means that up to 80% of a crop is sold, and price and buyer determined, before it is harvested. Between 80 and 90% of all hops are sold by way of forward contracts. Any residual quantities, the volume of which depends on the size of the harvest, are sold on the spot market where prices fluctuate considerably according to supply and demand.

2.4.2 International Beer Production

The demand for hops world-wide is dependent on beer consumption. In East Asian countries beer consumption is increasing but it is falling in Europe, America and Africa. Beer production in 1992 fell 15 million hectolitres to 1,147 million hectolitres and fell to 1,100 million hectolitres in 1994. With the beer market stagnating, the fight for market share is increasing and new beer products are being introduced onto the market. This expansion in beer products has created the need for more distinctive hop varieties.

Supply of hops is assured by the diversity of production centres, which specialise in certain markets. Bitter hops and high alpha hops continue to be the most widely produced varieties world wide, representing more than 60% of the total 1995 world harvest. The production of aroma hops is also expanding. While in 1992 aroma hops represented 24% of the total harvest, the market share of aroma hops has increased considerably since the early 1980s, and is expected to have continued to increase above 40% in 1995. However, some new New Zealand hop varieties are aroma hops and these have been planted to replace older hop varieties.

2.4.3 Demand for Hops

Since the 1950s the demand for hops by brewers in the world market has changed considerably. Improved brewing technology and changing consumer tastes have resulted in greater demand for hops with different types of brewing characteristics and since 1980 more than 80 new hop varieties have been released world-wide.

The importance of alpha acids has been recognised by brewers, and the international hop market has rapidly become a market for high alpha acid hop products. In response to this, more high alpha hop cultivars have been developed and planted, replacing many lower alpha varieties world-wide. The world's average alpha acid level in hops is now 6.2%. New Zealand produces some of the highest alpha acid hops in the world, with alpha content of up to 16%. These high alpha hops have enabled breweries to reduce the quantity of hops required for bittering beer.

Increased usage of hop pellets and extracts has also enabled brewers to use hops more efficiently, and contributed to a fall in the demand for hops by brewers.

2.5 International Breweries and Merchants

The international hop market is dominated by a small number of large international merchants. They are nearly all German based, with agents in the United States and other parts of the world. Some of the merchants are vertically integrated and own hop gardens to aid their control of the market.

2.6 Major Hop Producing Countries

2.6.1 United States of America

The USA is the largest hop producing country in the world. The marketing of USA hops was once under the control of the Federal Hop Marketing Order, which was set-up in 1937. The role of the US Hop Marketing Order was to collectively pursue orderly marketing programmes to stabilise producer prices and income, with the goal of improving producer welfare. However, this legis1ation was abolished in 1985, and the industry deregulated. US hop growers now arrange contracts and sales directly with merchants, who own all the warehouses and processing facilities.

2.6.2 Germany

Germany is the dominant hop-growing nation in Europe with 3600 growers cultivating 23,000 hectares of hops. The average farm size is 6.4 hectares, about half that of the UK and New Zealand.

The marketing of hops in Germany is under the control of large German hop merchants. There is no statutory organisation or Board to Control the marketing of hops either domestically or internationally.

The European Union (EU) has in place two main financial support measures for the EU hop sector. These include assistance per hectare granted to producers with unsatisfactory returns; and variety conversion grants to encourage growers to convert to varieties more suited to market requirements. Producer payments in 1995 were 444ECU/ha for aroma hops, 4l6ECU/ha for bitter hops (alpha acid hops), and 298ECU/ha for others including experimental crops. Variety conversion grants are worth 2SOOECU/ha (In January 1997 1 ECU was worth approximately $NZ 1 .75).

2.6.3 England

The marketing of hops in the United Kingdom (UK) was also once under the control of a marketing board, with functions similar to the New Zealand Hop Marketing Board, The English hop industry was deregulated in 1973, when Britain joined the Common Market.

Today there are three producer groups; one dominant group, owned by a German merchant, and two smaller groups struggling to survive. The EU producer payments apply to hops produced in England.

2.6.4 Australia

The production and marketing of Australian hops is undertaken by private organisations in Tasmania and to a lesser extent in Victoria. Currently a company called Australian Hop Marketers (AHM), a subsidiary of the American hop merchant J I Haas, which in turn is a wholly owned subsidiary of the biggest hop merchant in the world, Joh Barth Sohn & Co of Germany, produces approximately 70 percent of Australian grown hops. Australian growers have expressed concerns over the market dominance of AHM and perceived that the establishment of long term pricing arrangements with particular breweries placed growers at a price disadvantage. However, subsequently a Trade Practices Commission investigation found that the arrangements were not anti-competitive.

2.6.5 Japan

Japan is the only hop producing country, other than New Zealand, whose hop industry is not controlled by German hop merchants. In Japan in 1992, there were four brewery groups who bought the total hop crop of 1271 tonnes from 1248 growers. Since then the number of growers has declined, and this trend appears to be continuing. In 1995, there were 919 farms producing 955 tonnes (Hops 1995/96, Joh, Barth & Sohn).

Previous Page TOC Next Page

Contact for Enquiries

Rural Affairs Coordinator
Sector Performance Policy
MAF Policy
Ministry of Agriculture and Forestry
PO Box 2526
Wellington
NEW ZEALAND

Phone: +64 4 894 0675
Fax: +64 4 4 894 0745
Contact this person

 
Print this page Print this page