The results presented in this publication serve as a general guide for evaluating the feasibility of producing hops in the Pacific Northwest as of 2015, with a capital and machinery endowment suited to a 660-acre hop enterprise. Also discussed are the key factors to consider in expanding a hop operation. This publication is not intended to be a definitive guide to production practices, but is helpful in estimating the physical and financial requirements of comparable plantings. Specific assumptions were adopted for this study, but these assumptions may not fit every situation since production costs and returns vary across farm operations, depending on the following factors:
- Capital, labor, and natural resources
- Crop yield
- Cultural practices
- Input prices
- Prices of hops
- Management skills
- Size of the operation
- Type and size of machinery, and irrigation system
Costs can also be calculated differently depending on the budget’s intended use. To avoid unwarranted conclusions for any particular farm, readers must closely examine the assumptions made in this study, and then adjust the costs, returns, or both as appropriate for their operation.
Hop Production in the Pacific Northwest
The US commercial hop production is concentrated in the Pacific Northwest region (Idaho, Oregon, and Washington). As of 2014, the US harvested 38,910 acres of hops. Only 2% is outside of the Pacific Northwest states that include California, Colorado, Illinois, Indiana, Maine, Michigan, Minnesota, Nebraska, New York, North Carolina, Ohio, Vermont, Virginia, and Wisconsin (HGA 2014). Within the Pacific Northwest hops acreage is concentrated in Washington State which accounts for 80% of the three-state total based on a 5-year average between 2010 and 2014. For the remainder, 8% came from Idaho and 13% from Oregon (USDA NASS 2015).
Hops are one of the key ingredients in beer. There are a number of hop varieties and each variety has its own alpha acid (AA) rating, which is represented by the amount of alpha acid as a percentage of the total weight of the hops. The two
Hop growers contract with a merchant, and a merchant contracts with brewers. Hops are typically purchased through contracts as these are the best way to ensure the supply of hops needed by the brewer and to avoid the risky and expensive spot market after harvest. A brewer could contract for some years into the future especially for high-demand varieties.
Objectives of Study
This study provides information on (1) the variable and fixed costs required to produce hops in the Pacific Northwest and (2) the ranges of price and yield levels at which hop production would be a profitable enterprise. An Excel workbook is also developed, which allows the user to estimate production costs and examine the impact of different input assumptions, yields, and price scenarios.
Sources of Information
The data were obtained from the Hop Growers of America board members representing Idaho, Montana, Oregon, and Washington. Their production practices and requirements for labor and capital are the basis for the assumptions used in this study. While there are differences in practices and costs among growers and across the different states, current production methods are considered and a consensus was obtained on the average costs of various inputs in hop production.
Due to the method used to generate the enterprise budget, the values reported represent what growers can anticipate as their