Glut Fogs Outlook for Hops Growers
In the dense, low-lying fog that has sealed in the Sacramento Valley for more than a week, the wooden trellises, barren of fruit, etch skeletal patterns into the mist. This bleak scene marks the last stand of California’s once-prosperous hops industry.
In a rough outbuilding he uses as an office, Peter Rooney of Rooney Bros. Ranch tells why he and his Sloughhouse neighbor, George Signorotti, are the only hops growers left in the state--persisting even though the crop now is produced mostly in the Pacific Northwest and neither Californian currently has a contract for a brewer to buy what hops they do grow.
The sale of hops--a crop whose primary use is as a flavoring agent in beer--hit a peak in 1981 but has been on a downward spin since a glut combined with changes in the international market to pull the price down.
“It’s just impossible to grow them at today’s market price,” Rooney said.
Investment in Trellises
“But,” he added, “being a believer in the cycle, I think it will turn. It’s just a question of whether we’ll wait for it.”
Gesturing to the network of nude trellises, he explained that the major investment required in growing hops already has been made, substantially reducing his production costs.
Hops growers were flush as the 1970s ended: West Germany had a bad crop, the Soviet Union, Brazil and Mexico briefly became major U.S. customers and, in short, demand increased substantially, boosting prices.
But then, growers worldwide responded to the same prospect of future hops profits by stringing many more trellises. That sent domestic production soaring from 54.9 million pounds in 1979 to 75.6 million pounds in 1980, before peaking at 78.6 million pounds in 1981.
“It went berserk,” Rooney said. “Everyone and his brother planted hops.”
Even as hops flooded the market--accompanied by plummeting prices--domestic growers saw themselves pushed out of the international market by the strong dollar. Their new customers in Brazil and Mexico were caught in their countries’ credit crunches.
“The bubble burst,” Rooney said. “We just don’t have the business anymore. We just lost the business.”
In the resulting downturn, U.S. hops production fell below 50 million pounds. Hops plantings shrank to 28,000 acres this year from 43,000 acres in 1981.
State Production Falls
And California’s plantings--which once lined the American River on the outskirts of Sacramento and the Russian River near Healdsburg and Santa Rosa--have dwindled so low that the remaining acreage is simply lumped in with Washington state’s by the U.S. Hops Administrative Committee. Rooney now has just 176 acres of the more than 800 acres in current production devoted to hops, and he grows such row crops as field corn and squash between the hops trellises.
The Hops Administrative Committee, which is based in Portland, Ore., keeps the industry’s records and administers a grower-financed hops “marketing order.”
That order, authorized under 1937 federal legislation, seeks to keep supply and demand in balance by restricting entry into the industry. The current marketing order was voted in by the growers in 1966--the third version since 1937. At that time, growers were awarded production allotments and the committee each year calculated what percentage of those allotments could be produced to meet estimated world demand.
Over the years, these allotments themselves became commodities that could be rented or sold as the individual fortunes of hops growers changed. Many of Rooney’s neighbors sold their hops allotments over the years to growers in the Pacific Northwest and turned to other crops.
It was this feature of restrictive entry that apparently caught the eye of some so-called free-market advocates within the Reagan Administration, who drew a bead on the hops order earlier this year.
Miserable as their recent economic record has been, hops growers like Rooney support the marketing order as a means of maintaining their relatively small operations in the face of a market dominated by half a dozen brewers. The attraction of growing hops is that in good times their sale can yield $3,000 to $4,000 an acre, he said. That margin--which is substantially higher than for such commodities as wheat (which Rooney also grows), corn and rice--helps make small operations profitable, he said.
Supporters of the marketing order believe that, by restricting entry into the field, the order protects these small holdings from possible abusive practices by the few large hops buyers.
About the only good news to penetrate the gloom of this shrouded valley last week was passage by Congress of a farm bill that--among its 1,397 pages of provisions--saved the hops marketing order from the chopping block.
Rep. Sid Morrison (R-Wash.), whose district covers the nation’s present major hops growing region surrounding Yakima, sponsored protection of the marketing order. He was concerned, he explained in a telephone interview, that the hops order was being singled out from among the 47 federal marketing orders covering crops from citrus to grapes.
The end of the hops order, Morrison said, would lead to elimination of many smaller growers, leaving the field to a handful of large growers serving the brewers.
Marketing Order Saved
The farm bill that President Reagan is scheduled to sign into law this morning contains a compromise. Although saving the hops marketing order from its scheduled Dec. 31 termination, it preserves the mechanism by which an abusive marketing order can be terminated.
“I don’t think the hops industry has behaved badly,” Morrison said. “They really screwed up in the late ‘70s and early ‘80s, when they made the decision to expand dramatically and try to knock West Germany out of the international hops picture. . . . Business has been bad.
“But if they can make a profit (under this order), more power to them. I just didn’t want to have the rug pulled out from under one of my industries. They need to regroup and rebuild.”
