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Sunday, 07 August 2016 12:55

As Michigan adds hop acreage, concerns of oversupply emerge

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Hop Head Farms in Hickory Corners, shown here, is among the growing ranks of hops producers in Michigan that have added production and processing capacity. The company plans to harvest 130 acres of hops this year and will open a new processing facility in Baroda. Hop Head Farms in Hickory Corners, shown here, is among the growing ranks of hops producers in Michigan that have added production and processing capacity. The company plans to harvest 130 acres of hops this year and will open a new processing facility in Baroda. Photo by Joe Boomgaard

Craft brewers’ increasing appetite for local ingredients has translated into a budding opportunity for Michigan hop growers. 

After several consecutive years of growth, Michigan continues to lead the country in hop production for regions outside of the traditional strongholds in the Yakima Valley and Pacific Northwest, according to a recent report by Hop Growers of America

Michigan added approximately 250 acres of hop production last year. The state’s total acreage for hops in production now stands at 650 acres.

Mi Local Hops LLC contributed roughly 200 acres this year in what will be the Traverse City-based grower’s first season. The company has no intention of slowing down from there, with plans to expand to 800 acres of hop production by 2018, said Mike Moran, sales and marketing manager at Mi Local Hops.

“We are the largest hop farm east of the Rockies and we want to be the most technologically advanced,” Moran said. 

In addition to adding acreage, Mi Local Hops also recently completed construction of a 30,000-square-foot processing facility on its property, the site of a former golf course, along M-72 in Acme Township.

The hop yard was founded in early 2015 by Mi Local Investment, a Traverse City-based investment firm. 

Mi Local Hops is just one of a handful of growers expanding in the state. 

In Southwest Michigan, Hickory Corners-based Hop Head Farms LLC will harvest 130 acres of hops this year and plans to expand that to 200 acres by the 2017 growing season, said Vice President and co-founder Jeff Steinman. 

Much of that growth has been fueled by the company’s sale in December 2014 to a fund operated by private equity firm Ceres Partners LLC of South Bend, Ind., as MiBiz previously reported. 

Hop Head Farms, which has plans to develop about 500 acres of hop production, started in 2012 with 40 acres and a processing facility, and currently works with a network of independent growers around the region. The company is in the process of doubling its processing capacity with a second facility in Baroda, located in Berrien County. A third facility is also in the works for Paw Paw in 2017. 

Currently, Hop Head Farms serves more than 200 breweries in more than 40 states and exports hops to clients in China and Taiwan.

With Mi Local and Hop Head Farms on the larger end of the spectrum, some smaller growers and processors have also invested in new facilities. 

Citing increased demand for processing capacity from its 50 or so independent farm partners, which average 1-5 acres of production each, family-owned Hopyards of Kent Co. LLC in Greenville is also expanding with a 6,000-square-foot commercial harvesting center in Montcalm County’s Eureka Township. 

Partner Pam Miller said the German-made equipment will be in place in the next couple of weeks and ready for this year’s harvest, with an event with growers scheduled for September. 

“We’ve been processing since 2012, but we’ve outgrown our farm facility,” Miller said. “We needed to have a commercial facility.” 

Miller declined to disclose the investment the company made in the equipment, citing the highly competitive nature of the hops processing business. 

OVERSUPPLY AHEAD?

Michigan growers’ bullish attitudes toward the hop-growing industry seems to echo those of farmers nationwide. Overall, U.S. hop farmers added 8,303 new acres in 2016, a 18.5-percent increase over the previous year, according to the Hop Growers of America report. 

Despite the overall air of positivity among hop growers, some farmers have struck a less optimistic view of the industry. 

Brian Tennis, owner of Omena-based New Mission Organics LLC, questions Michigan’s ability to absorb unchecked growth in hop acreage before issues of oversupply and pricing take hold. Tennis predicts that Michigan can safely handle about 2,000 acres of hops before the market becomes saturated. 

“I don’t know if the state will absorb that hop capacity — there’s been a lot of expansions,” Tennis said. “Hops are still risky. It’s an agricultural crop and it depends on what the price is at.”

New Mission Organics will harvest 65 acres of hops this year and plans to plant another 100 acres next spring, Tennis said. Ultimately, Tennis hopes to maintain around 200 acres. 

Hop Growers of America President Kevin Riel cautioned against the “fine line between ample and over-supply, which causes instability in supply and prices,” in a statement from the organization. 

Cascade hops comprised the most-planted variety again this year, with Centennial overtaking the so-called CTZ variety for second place, according to the report.

Increasingly, farmers are needing to choose between growing hops such as Centennial, which behave more like commodities, or growing proprietary hops that are the intellectual property of hops breeders, Tennis said. 

“That’s very dangerous,” Tennis said of the industry moving toward growing more proprietary hops. “We can’t even get the rights to grow that stuff. That’s where the industry is going. At that point, you’re growing for a corporation. You’re not farming for yourself, you’re just a hired grower.”

Proprietary varieties of hops comprised 70 percent of the 7,482 acres of new production planted in the Pacific Northwest, according to the industry report. 

Instead of focusing on either proprietary or more widely used hop varieties, Tennis prefers to grow unique varieties from around the world. 

“Our focus has always been planting the weirdest shit we can find,” he said. “We put in not only what no one is growing in Michigan, but what no one is growing in the country.” 

DIVERGENT STRATEGIES

Given the addition of hop acreage this year, Rob Sirrine of the Michigan State University Extension said “2016 will serve as a telling year” for whether the state’s processing capacity can keep up. 

Sirrine, an expert on Michigan hops, has frequently cited the lack of processing facilities as a major constraint on the industry in the state. Although many of the larger producers have invested in new processing equipment, they’ve also ramped up acreage simultaneously, he said. 

“I think after this season we will be able to determine how things look moving forward,” Sirrine said in an email to MiBiz. “I don’t see every 5 acre grower being able to process their own hops in a cost effective manner.”

Rather than continuing to add more acreage at New Mission, Tennis plans to focus more on brokering hops from international markets and the Pacific Northwest. He also hopes to establish a brewery in Northern Michigan as a long-term growth strategy for the company following a January deal in which Southeast Michigan-based Streetcar Management Partners LLC acquired a controlling stake.

For its part, Mi Local Hops plans to focus on growing legacy hops such as Cascade and Centennial, as well as native hops like Michigan Copper to supply brewers in the state. The company has already sold out of its Centennial crop as many farmers in the Pacific Northwest experienced issues this year, Moran said. 

“(Oversupply) is not really a worry whatsoever,” Moran said. “One of the best things we have here is our location. East and Midwest breweries like buying hops from farms in the Midwest.” 

MiBiz Editor Joe Boomgaard contributed to this report. 

Read 5866 times Last modified on Sunday, 07 August 2016 13:51
John Wiegand

Staff writer

jwiegand@mibiz.com

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