The 2020 hop harvest report has been released and it was a mixed year for HPA, with some varieties, including Galaxy up significantly, and others such as Vic Secret down.
For this BreweryBro Deep Dive we discussed the report with Hop Products Australia’s Sales and Marketing Manager, Owen Johnston.
We talk a lot in the brewing industry about beer being an agricultural product, and this hop harvest demonstrates that. So we wanted to discuss with Owen the 2020 harvest, what led to the result, but also the development and evolution of the Australian hop industry since we first spoke with HPA on our podcasts almost 10 years ago.
It’s an interesting deep dive into hop growing and the vagaries of a growing season, what the results mean for brewers in terms of availability and a look back over ten years of growing hops.
Listen to the full conversation.
Transcript of the BreweryPro podcast discussion about the 2020 Hop Harvest.
Matt Kirkegaard: Owen Johnston, welcome to Beer Is A Conversation.
Owen Johnston: Thanks Matt, great to be back talking about the 2020 crop year and the harvest results.
Matt Kirkegaard: Mate absolutely. It’s our annual conversation about how things are going down at Rostrevor and Bushy Park, but I guess before we get into the harvest just check in with how things are going. This year is a little bit different given the circumstances you were harvesting in.
Owen Johnston: Yeah absolutely. Even taking a step back from the impacts of the Covid situation we had the very serious bush fires around hop farms in the High Country Victorian area and the farms were impacted. I think our Buffalo River sites were evacuated three times in early January, there was a level of anxiety and uncertainty kicking’ around that it was just palpable. It was really affecting people and was really nice to come out of that and say that our people and our infrastructure and our crop were unaffected. Well, undamaged. People were certainly affected.
But we were able to push through that pretty traumatic episode and then bringing the crop to its conclusion and entering harvest and then getting hit with more uncertainty as this Covid situation really kicked off. Navigating our way through harvest with the additional hygiene procedures and the impacts on scheduling, movements and all the consideration around how we navigate through harvest whilst trying to look after the health and safety of our people was really outside of my previous experience. It was really quite a challenging period of time.
Matt Kirkegaard: Did the bush fires, I know you weren’t directly affected by flame, but certainly Buffalo River was very affected by smoke. Did that have any impact on the hops themselves?
Owen Johnston: Yeah, both the Ovens Valley and the Buffalo River Valley were chock-a-block full of smoke. As the crow flies they’re just over the ridge of Mount Buffalo and three-quarters of Mount Buffalo itself was on fire there at one point. It was really close to home. We’re so lucky, so fortunate that hops do not seem to be smoke affected. We’ve got really comprehensive precedent around the world in other growing regions where they’ve had significant wildfires: Yakima and the Czech Republic and whatnot. They just don’t pick up any sensory impact from smoke, and I really feel for some of the neighbouring industries, whether it was wineries or others that were affected in that way. We’re exceptionally fortunate that we came through that unscathed.
Matt Kirkegaard: Let’s turn to the 2020 hop harvest report, do you want to give us the headline figures?
Owen Johnston: This season’s really redefined what I think of as a successful harvest, and I say that because we did face such challenges on the personal fronts and the growing season itself was pretty challenging. Throw in a couple of world-class calamities with big fires and a pandemic and the fact that we’ve got our people and our crop through that is, simply right there that’s the definition of successful harvest for me.
By the numbers, and I think no-one’s going to disagree with that, but by the numbers it’s also a pretty good news story. We continued to build our overall volume, again 5.5% increase on the previous year for total production. In a headline hop Galaxy, you know a really solid almost 13% increase year on year for Galaxy itself. Bit of the subtext there is the mixed bag behind that and I’m sure we’ll talk to that down the track.
Matt Kirkegaard: The headline figure when you said it was up 5.5% in terms of tonnage, it was up to 1.554 metric tons. I did have a little bit of looking back for this chat I dug out the 2010-2011 Bath Haas report, and just casting an eye down to the hops that were grown in Tasmania for example, Super Pride, Pride of Ringwood, Millennium and then “other”. I guess Galaxy was hidden in that “other” category and there were 66.4 metric tons of “other” hops grown. Galaxy was 908 metric tons alone this year.
Owen Johnston: Yeah that’s incredible, isn’t it? The business was a different beast back then, and in that “other” cast your minds back to Helga and Summer, may they rest in peace, and Galaxy would’ve been in that bag as well. So a tiny quantity of “others” as business, really really trying to, at that point, making those decisions to pivot, trying to get some oxygen into products that fitted what we saw and what we knew was the new trend toward hop-forward beers.
The Australian craft beer industry was very different looking back then, and wow, that’s really excellent. And that’s not even the lowest point at which we hit. Our lowest production was I think 2014 at about 700 tons in total, and that was a very deliberate transitional year, really important year for the business in the move away from alpha and into flavour. As you can imagine, as we grub out varieties that are ceasing and we plant new varieties, so let’s say we’re grubbing Millennium because there’s a contract to supply alpha to a global brewer that ends and we want to bring more Galaxy to the market, we drop a year of production and then we say like a 50% discount or a 25% discount on the second year’s production. So we lose this momentum momentarily as we tune out old varieties and in with the new. It’s a nice snapshot, thanks for digging that out.
Matt Kirkegaard: I’ll link to it in the notes, but I also will link to, I dug out the chat we had with Tim Lord back in 2011 that goes for about half an hour and talks widely. He mentions Summer and how that was a, it was Summer and another hop that had an apricoty sort of taste and he had big hops for it. But of course gone the way of the dodo as well. But then we have seen hops like Galaxy just explode and Victoria Secret and Ella really emerge over that time. I will link to that chat with Tim and will also come back to a little excerpt from that chat that we’ll talk to a little later in this conversation, but let’s talk about the production volumes by variety.
Owen Johnston: Galaxy was up 12.9%, but then we also saw some backwards movement on Vic Secret, Ella and Enigma. Talk us through that, was that yield was down or you reduced the plantings of it?
There’s a couple of things I’d like to really talk to here. It’s really important for us to acknowledge what agricultural variation really means. And that means that most years we will see some varieties post negative results, which is a nod of the hat to the fact that different varieties respond differently to different seasonal conditions, and so let me give you an example of that.
Let’s say Enigma and Cascade are our first varieties to mature and come off the paddocks in Tasmania here. Now if we have a cold spring, some adverse conditions in spring, and those two varieties get a slow start, it really impacts on their opportunity to mature into a big crop. It’s less significant for a later maturing variety, they simply get more days on the string to come into their window. We saw a bit of that, seasonal responses in different varieties.
The other point here is that what we did not do was grub out any of these varieties. We are not pulling our backing from these varieties that are showing as coming in under budget. We’re under last year’s production. Vic Secret plays a really significant role in our future and we’re backing that variety with expanded quantities, new land, and the fact that it’s 9.7% down year on year is not in any way an indication that we’re taking wind out of its sails. It is simply a seasonal effect, and we need to acknowledge that that is the reality of farming.
I am somewhat lucky enough to occupy a space between an agricultural business and fitting an agricultural variable product into manufacturing, and manufacturing just loves certainty and consistency. So I’ve got to navigate some of these results, and one of the ways in which we navigate negative year on year, or under expectation, is that we’ll only contract up to 85% of what we think that year’s production is going to be. And what you’ll see running down the list there, Ella got pretty close to 15% down but it didn’t get there, and for me this is a really important point because our contracts out there are our promise. And we were able to fill every contract that we hold this year, and for me both personally and professionally a really important point to make. It doesn’t put any less emphasis on the fact that we’re gonna have very small short-term availability for some of these hops. And so inherently some people are going to miss out.
Not every brewery business wants to fit with HPA by contracting and we have to acknowledge that the short term availability plays a really important role in the proper function of the marketplace in that some brewers and some business models rely on different ways to ensure their supply. Not taking anything away from those that miss out, it is the reality of the system, but we do have mechanisms in place to try our very best to fulfill our promises on the contracts that hold, and I’m pleased to say that we’ve done that this year.
Matt Kirkegaard: But if you’re a small brewery that doesn’t have contracting in your model and you’ve got your number one flagship beer based on Ella for example, you’d be staying up at night, I’d imagine.
Owen Johnston: Yeah, yeah, that could a serious source of concern. And I’ve been banging the drum now since day one working with HPA and it is, it’s get in touch, stay in touch, book your hop supplier, whoever they are, and let them know what’s important and let them know if you’re long or if you’re short. It is literally our job to connect those that need with those that have, and what we’re doing right now is the whole HPA sales force is focused on going through our wait listed customers and quantities. So these are the people who, when a variety has hit the 85% contract mark, we take their demand, we’re in conversation with them, they tell us what they need, we’re not at liberty to contract because we’ve hit our 85% mark, we take them to what we call the wait list and now we’re actively going to the wait listed customers and filling their needs.
And it’s a really tough time to be doing that. I’m personally really challenged by this element because I’m going out to my friends and colleagues out there and asking them to support me and contract their wait listed quantities now in the middle of this Coronavirus crisis and the hospitality shutdown, and it is really challenging although it feels a little bit tone deaf, I think, and it feels very uncomfortable sometimes. It is our opportunity to actually fulfill their stated needs. In the natural cycle of things if people are certain of certain volumes, maybe hops and recipes are stable etc., then they can contract with confidence for what I couldn’t offer them a few months ago previous to the harvest.
Matt Kirkegaard: It’s surprising, you said Galaxy was up 12.9%, was that growing season or was that the increased acreage?
Owen Johnston: That’s mainly acreage based. Overall yield on Galaxy was actually pretty much bang on to our forecasts, and acreage increases, and maturity of recent plantings has all contributed to that result.
Matt Kirkegaard: Most brewers think of hops in terms of the brewing attributes: the alpha acids, the aromas, the things that make their beers what they are, but they don’t tend to think of the varieties as being impacted by exactly the same growing conditions can have different outcomes for different hops.
Owen Johnston: Yeah so it’s one of those things that, at some point brewers need to focus on their job and that’s running a plant, making beers, running the brewery efficiently and effectively. Certainly when I was running breweries I had to draw a line in the sand somewhere where I just didn’t need to know about plant biology at a certain level. You know, I just had other chemistry I needed, I had ferment chemistry to get my head around, I didn’t need to be worrying about agronomics and I completely understand that.
And that is absolutely central to why we want our customers, our brewing customers, to come on farm just for a morning or day or afternoon in the middle of harvest and go deep with us. Let me just unload everything I know about hops and hop farms and processing and impact on beer and what we can do to assist brewers get the bang for their buck and let me try and not just turn you into an HPA convert but also leave your head spinning with heaps of new information and insight into what it takes to stand a crop up and get it to a brewery in excellent condition. Because it is fascinating.
Like I say, brewers have got their priority focus right there in front of them in stainless steel and beer, and I think harvest time visitors, which we had more planned this year than ever before, unfortunately we shut the farms to visitors just as harvest was, I think we were 10 days in or something and we shut the form. All non-essential personnel were promptly uninvited. Unfortunately. But we really do look forward to hosting our brewers back on farm next year.
Matt Kirkegaard: The reason I ask that question is because whilst brewers need to know how to use hops in their beer, when they’re thinking about their business it helps to understand the hop growing business, for example, because Galaxy has a certain harvest window. You guys can’t just suddenly throw in, even if you could get acreage on the hope, the harvest window is very small and you can’t just suddenly scale up all of the downstream processing capacities to cater to that production because of the agronomics of a hop like Galaxy?
Owen Johnston: I agree on all points there. To the first comment, I think it is really important, as much as possible, for brewing businesses to understand the businesses that supply them. And that’s a supply chain and a procurement perspective, where if you understand your supplier’s pressures and what their capabilities are, you can make smart decisions for your own business. And whether that’s decisions about splitting supply between a couple of suppliers, or planning MPD and you know that your glass manufacturer is only capable of this supply lead time or that bottle shape or colour, these are important nuances in your supplier that will, or should, influence the way you approach running your own business. So definitely an understanding as it relates to the hop farm and understanding of how our business operates and what our capabilities are is really important.
To your second point about harvest window, in the crop report we’ve got a forecast production total and splitting out Galaxy individually, and you’ll see that Galaxy tops out, under the current expansion plans, it basically tops out at about 1250 tons in 2023, and that really is an acknowledgement to the capability and capacity to responsibly manage that harvest window. With our configuration of three picking complexes all running pairs of Danhauer pickers we can service a certain amount of total acreage and in that is a responsible harvest window for Galaxy. That ensure that we’re delivering a product to the market called Galaxy that performs as expected and is perceived as good value because you get great impact in beer. And we need to be really mindful of the things that we can do on farm to achieve that, and a responsible picking window is one of them.
That’s not to say that as we get further down this expansion path another farm, another picking complex, another set of acreage serviced by new pickers, and therefore another harvest window that we can fill up with Galaxy could become a reality. I certainly hope so and I can honestly see a post-Covid world where great beers are hammering through taps all across the country and the outlook for consumption and therefore hops is once again bright and shiny.
Matt Kirkegaard: That’s a good chance to play the excerpt from the chat I had with Tim Lord back in September 2011 when we were talking about that report, because I asked him the question, whether the growth that we’d seen in the demand for hops was going to see more players come in, and he basically said, “Well look, we’ve still got excess capacity.”
So I’ll just quickly play that, and then we can have a chat about it on the other side:
Listen to the full September 2011 conversation with HPA’s Managing Director, Tim Lord.
Tim Lord: The industry here in Australia, it’s been in a state of decline for decades. Australian growers were producing Australian varieties which were, for example, supporting breweries overseas when Foster’s had interests overseas and when other breweries were having beer made under license overseas, and with the sale of overseas interests and with the reduction in the amount of beer that’s being made under license overseas, that has been contracting for a period of time. So it’s been a combination of reducing bitterness levels, reducing demand, reducing beer volumes being drunk, so the industry’s been in decline for quite a long period of time, so there’s quite a lot of infrastructure in place which would handle increased area under trellis here already.
In terms of opportunities for others to come into the industry, we still have quite a capacity to expand within the bounds of existing infrastructure. By existing infrastructure I mean existing farms, existing trellising systems, existing ability to harvest, pick and dry the hops. That’s of course what we’re trying to achieve. We’re trying to transition Hop Products Australia from being predominantly a grower of high-alpha hops for sale to predominantly commercial brewers both domestically and overseas, and we are riding that decline, or if you like, that decline is actually creating the space for us to expand into these other areas. I see that that decline will continue and so our expansion of these varieties that we spoke to, Galaxy, Stella, Summer, is something that we’ll be pursuing. And we’ve still got quite some capacity to expand these varieties significantly.
I guess while I mention it, the other thing we’re doing is increasingly growing areas of varieties such as Cascades and Willamettes, and we’re seeing a good demand there for basically import-replacements for varieties that are growing in popularity here in recent years, so we’ve put in quite an area of Cascades over the last few years and we’ll be planting more of those this year. What we’re doing here is a combination of import-replacements and also growing up these new varieties and it’s targeted more so at the craft sector.
Matt Kirkegaard: There you go. It’s kind of a bit of a time capsule, isn’t it? You hear some old friends.
Owen Johnston: What a fabulous little snippet. I record Tim Lord comes second to Matt Kirkegaard for loving to talk. Second only to Matt.
Matt Kirkegaard: I actually had to cut that section down just to get those relevant parts in there, but it went on for a bit.
Owen Johnston: Perfect.
Matt Kirkegaard: I’ve put the whole interview into the show notes, so you can go back and listen to it.
Owen Johnston: What was that, 2010?
Matt Kirkegaard: That was 2011, September 2011.
Owen Johnston: 2011, fantastic. The commentary there around, there’s a couple of things that really stood out. The commentary around declining alpha creating the space for HPA to pivot into flavour, and the import-replacement side of things didn’t quite come off for us. And we’ve charted our course in fully unique differentiated varieties like Galaxy.
There was no import substitution in mind when Galaxy was commercialized. And the other one that stood out to me there was that under utilization of existing trellising and other hop processing assets in the industry. By the time we got to 2014 we re-invested in our farms and spent in the vicinity of 30 million dollars between 2014 and 2017, the majority of which went into reinvigorating farm asset infrastructure and processing capacity and updating the farm. It was a really necessary spend at that point, because the industry had been in decline for so long it was getting mission critical to allow up to keep standing the crop up to reinvest in the business.
Obviously some acreage got bolted on as well and shortly thereafter we’ve moved into this still-current second round of expansion, which is another 35 million dollars and that is more oriented on brand new land, brand new trellising and brand new picking facilities. I’d say that the guys responsible for that inside of HPA have just done a magnificent job and some of the feedback from some of our brewing visitors on farm up there in High Country Victoria before the shutdown was general astoundment in how far we’ve come in the Buffalo River complex and associated land. So it’s a really pleasing turnaround from Tim’s insightful commentary back in 2011.
Matt Kirkegaard: Even when the photos were sent through, including the one we’ll run as the cover as this chat, we look at that beautiful historic Text Kiln down at Bushy Park that goes back to the early days of hops and I was struck with the aerial photo, you look across in the background, and that’s all under trellis. The first time I went there was probably about 12 or 13 years ago and that was basically just, I’m not even sure what they were using it for, they might’ve been using it for cattle at that stage. And now it’s suddenly all under trellis.
Owen Johnston: Yeah it’s been an amazing turnaround. And I think just prior to my start with the business we, maybe we got down to something like 85 hectares under trellis at Rostrevor in Victoria and it might’ve been down to 150 hectares at Bushy Park. You know, Bushy’s now 260 and the Victorian valleys total up to something like 450 and increasing year on year. So those two photos, and I look forward to actually seeing the shot you mentioned. What a great juxtaposition of the industry and of the fortunes of HPA in a couple of photos like that. It’s fabulous.
Matt Kirkegaard: Let’s get back to the hop harvest. Looking at the numbers, you’ve got supply, some of them you don’t have as much for the spot market as you would like, what’s your advice to brewers looking at the numbers?
Owen Johnston: I think the advice remains pretty consistent, especially given the uncertainty around at the moment. It’s be in conversation with us, understand your outlook as best as possible, and look to us for assistance with things like suggested flexibility in recipes if we do come up with a hard stop on something, if we do actually run out of a variety, we are not out of options. I would say that we’ve deliberately structured our team of brewers to service our brewing customers’ needs. We have great resource in technical and great horsepower in supply chain. I would say it’s not all doom and gloom. Short-terms tightness of supply around a single variety I hope would not be the end of a beer or end of a relationship between one of our hops and that beer. I would say stay in touch and we’ll navigate this situation together.
Matt Kirkegaard: One other thing that jumped out in the report was the experimental variety HPA-016. 24 metric tons harvested this year, how close are we getting to a name for that one?
Owen Johnston: Oh very close. Very very close. We had planned to name this up at Good Beer Week this year, we’ve sort of just put that on the back burner for the moment. And I think I might be the only person in the whole business who doesn’t feel pressure to name this thing, because for me the reality of it is that I want to see it in brewers’ hand regardless of name or number, I want to see it stand up in beer regardless of what we’re calling it. And nothing stops us from doing that, and we’ve got a great result. The harvest came in well over expectation, the quality in terms of average alphas and oils looks fantastic. We’re gonna go hell for leather getting that in peoples’ hands and into their beers and I look forward to some really great conversations and some good feedback about that hop, and frankly the more people see it, the more we understand performance in beer, the better.
I think there’s absolutely nothing holding us back from making the most of that great harvest result.
Matt Kirkegaard: The one question, and this is gazing into the crystal ball a little bit, one of the big issues that people are talking about when we’re not talking about Covid-19 is sustainability, environment, global warming. What’s your read on how changes are affecting hop growth?
Owen Johnston: It’s a tricky one, and I think we’ve got some advantages here in Australia in our regions that we’re growing in. I think for me climate change is sort of being boiled down to more frequent extreme events, and that’s definitely a threat. It’s definitely, you know we had a 15-minute hail storm in 2016 that cost us something like 40% of our Vic Secret crop. It was very localized, very micro-climatic. Those sorts of things, as an example, might become a little more frequent. Bush fires is on everyone’s mind. How do we plan for that? How do we mitigate risk in supply chain around that?
Well, we have a diversity of growing regions. For instance with Galaxy we grow it on all three valleys now. If one takes a knock we’re not knocking the entire supply chain of Galaxy, so hopefully there’s some resilience built in there. We have, in terms of helping brewers continue along with their beers, we have this idea of recipe flex. Now it might not be ideal and the puritans out there will be looking to string me up, but the idea that you could, say, pull 20% of your Galaxy out of a recipe and we could navigate a satisfactory flavour outcome, extend your Galaxy that you have got available and slip in a mix of others to bolster that hop [inaudible 00:31:42] and still get a great product out the door, I think that’s part of what we can offer in terms of business continuity there.
Matt Kirkegaard: So there’s no real concern, we read stories about grape varieties that have never traditionally been grown in Tasmania growing in Tasmania, that’s not a concern? Those sorts of climate impacts aren’t a concern for hops? They’re more day length, which isn’t gonna change?
Owen Johnston: Let’s tick off a couple of major items there: one is day length and latitude is a very strong determinant of success for the hop crop. And of course water availability is as important as always. Australia’s basically a big dry country in the most part, and it’s no accident that all of our three main valley floors have their own river systems. Bushy Park is bisected by the Styx River and bordered by one of Tassie’s big four rivers. There’s no accident or chance in that, that’s very deliberate through the foresight of some very early people. Shoobridge himself back in 1860s planting the first block of hops in the junction of the Styx and the Derwent, very fortuitous and sensible choice.
And in terms of the creep of average temperatures, I think, and I’d have to defer to bigger brains than mine and Dr Simon Whittock would have an opinion on this for sure, and we can circle back on it at a later date. I think as long as we get the adequate seasonal shifts in diurnal temperature different, that is as long as the days are warm and the nights are cold, the plants’ll pick up signal and they’ll progress through their life cycles and maturity will come on and we’ll go into harvest in the proper sequence.
I don’t think that the shift up of the average temperature is going to be disastrous to a hop variety, especially one bred and selected, cross-cultivated, you know, selected in the local climate. We run breeding programs both at the Tasmanian location and in Victoria so we’re getting a really good inherent protection from creep, if you like, temperature creep at that point. Nothing that’s not heat-tolerant will get selected in Victoria, let’s put it that way, because we know that those heights of summer temperatures in Victoria will top 40 degrees three or four days in a row typically, and the plants have to be able to withstand that or they don’t make it through the program.
So you know, I think the increase in average temperature isn’t a game changer necessarily for us. We have mechanisms by which we can navigate that. We’ve got the inherent natural advantage of latitude and water availability to see us through. I definitely don’t mean to sound blasé about it, but I think we’re positioned as well as we can be at this point.
Matt Kirkegaard: Terrific.
Now before I let you go, is there anything else that brewers need to know about the 2020 hop harvest? Or anything that you’d like to share with them?
Owen Johnston: We’ve been through quite a few details on it, and one thing we haven’t really talked about is predictor of impact in beer. While yield numbers are up and down and whatnot, what I can say is that on the main we have some outstanding alphas and oils and I, in my crystal ball, I see some really good flavour outcomes in beer from the outcomes of our 2020 crop, and I’m really looking forward to getting that out there and getting that in peoples’ hands.
Matt Kirkegaard: So am I. I’m looking forward to getting out and having a beer, but to try some made with the 2020 hops even more so.
Owen Johnston: That’s it mate, stay connected to your local. Support local and have that conversation with your local brewers. When’re you getting that 2020 crop in? Tell me, I want to come down and drink it.
Matt Kirkegaard: Just on that, was there much of an impact on the green hop program this year?
Owen Johnston: No, not specifically. We average about 50 participants a year, that was pretty steady. We’ll look to modify how we roll out the 2021 green hop program. We just see this big wide country of ours presents some real logistical challenges as far as that particularly perishable product that is green hops go. We’re gonna go back to the drawing board for next year, so I look froward to bringing that to the customers again and brewers again and see what they make of it.
Matt Kirkegaard: Terrific, well we look forward to covering that. Owen Johnston, thank you very much for joining us on this edition of Brewery Pro.
Owen Johnston: Thanks Matt, I really appreciate it mate.