.bodytext {float: left; } .floatimg-left-hort { float:left; margin-top:10px; margin-right: 10px; width:300px; clear:left;} .floatimg-left-caption-hort { float:left; margin-bottom:10px; width:300px; margin-right:10px; clear:left;} .floatimg-left-vert { float:left; margin-top:10px; margin-right:15px; width:200px;} .floatimg-left-caption-vert { float:left; margin-right:10px; margin-bottom:10px; font-size: 10px; width:200px;} .floatimg-right-hort { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 300px;} .floatimg-right-caption-hort { float:left; margin-right:10px; margin-bottom:10px; width: 300px; font-size: 10px; } .floatimg-right-vert { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 200px;} .floatimg-right-caption-vert { float:left; margin-right:10px; margin-bottom:10px; width: 200px; font-size: 10px; } .floatimgright-sidebar { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 200px; border-top-style: double; border-top-color: black; border-bottom-style: double; border-bottom-color: black;} .floatimgright-sidebar p { line-height: 115%; text-indent: 10px; } .floatimgright-sidebar h4 { font-variant:small-caps; } .pullquote { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 150px; background: url(http://www.dmbusinessdaily.com/DAILY/editorial/extras/closequote.gif) no-repeat bottom right !important ; line-height: 150%; font-size: 125%; border-top: 1px solid; border-bottom: 1px solid;} .floatvidleft { float:left; margin-bottom:10px; width:325px; margin-right:10px; clear:left;} .floatvidright { float:right; margin-bottom:10px; width:325px; margin-right:10px; clear:left;} The next time you toast with a cold craft brew in hand, be thankful you even have a beer to enjoy – even if you paid a slightly higher price for it.

Brewers worldwide are facing a shortage of hops and an increase in barley prices, making it difficult to get necessary ingredients and more expensive to make beer. However, though local breweries may have to increase their prices to cover the rise in costs, most claim they are prepared to weather the storm, which could last at least another three years.

“Demand (for hops) is larger than the supply (last) year,” said Raccoon River Brewing Co. brewer David Coy. “It’s the first time I’ve ever seen anything like this; I’ve been brewing at Raccoon for 11 years now.”

After years of hops surpluses, the world’s supply has been swallowed up, sending hops soaring from around $5 per pound last year to above $30 per pound, Coy said. Eric Sorensen, brewmaster at West Des Moines’ Rock Bottom Brewery and senior brewer with the company, said he has seen prices jump 300 to 1,000 percent.

Though the hops supply tends to be cyclical, with high and low periods, many brewers are calling last year’s shortage the result of a “perfect storm.” A series of events contributed, including bad weather in Australia and England that destroyed part of the crops, bigger beer orders from China in preparation for the 2008 Summer Olympic Games and a decrease in hops and grain acreage caused by farmers planting more corn in response to the biofuels boom.

Craft brewers could be especially hard hit, because they tend to use more hops than the industry giants, such as SABMiller plc, Anheuser-Busch Cos. Inc. and Molson Coors Brewing Co. The large brewing companies also signed contracts with hops suppliers last year, capturing more of the “exotic hops” market in an effort to appeal to growing consumer interest in specialty beers. Cascade hops completely sold out last year because of these contracts, creating a waiting list hundreds of breweries long, Sorensen said.

“They certainly have the clout and the size that they could do that to small breweries,” Coy said.

Forewarned by their hops suppliers that a shortage was ahead, Greater Des Moines’ brewers signed three-year contracts last year rather than ordering only a year in advance.

“I think we’re all positioned to be OK,” Coy said, “but we’re all going to be seeing that increase in price too.”

Court Avenue Restaurant and Brewing Co. increased its prices by a quarter a pint, and Rock Bottom’s pint price increased by 20 cents last year. Raccoon River’s prices increased by a quarter a pint eight months ago in response to higher fuel costs, which also affected production costs, and Coy is trying to hold off hiking prices again. “We’ve been able to absorb right now the extra costs coming in with this year’s crop,” he said.

A rise in barley prices is also affecting production costs as grain acreage decreased last year. Malting barley prices were $4.52 per bushel in November 2007, compared with $2.98 per bushel in November 2006.

As a result of these factors, Scott Carlson, owner of Court Avenue Restaurant and Brewing, predicts his beer production costs could be up 20 percent or more this year.

Rock Bottom may not be as hard hit, Sorensen said, because the West Des Moines business is part of a chain of craft breweries. The company sends five of its brewers to meet with farmers and buy hops for all its brew pubs each year, which allows the company to develop strong relationships with farmers and have more clout in getting needed ingredients.

“We’ve had to absorb some of the higher costs for hops,” Sorensen said, “But we’re also lucky to group all Rock Bottoms and, with good connections with farmers and brokers, we’re able to secure everything we need.” But, he added, Rock Bottom does not have a lot of storage space, so it’s difficult to preorder large shipments of hops.

Contracts with suppliers also do not guarantee that local breweries will get as much hops as they need. Under Court Avenue’s contract, Carlson said the brewery will receive hops when available. “This year is going to be an interesting year,” he said, “to see what gets delivered and what quality we get.

“We’re doing all we can to make sure there’s no interruption of business, but obviously that will change if we don’t get a shipment.”

Coy contracted for 100 percent of the hops he predicted Raccoon River would need this year. Next year, the contract goes down to 80 percent and decreases yearly. “I’m hoping after three years the market catches back up. I don’t want to be too aggressive to the point that I’m paying more,” he said. “That’s all a gamble.”

Local brewers get their hops worldwide, including from the northwest United States, England, Australia and the Czech Republic. No hops are grown commercially in Iowa.

Most of the contracts are for brewers’ staple beers, meaning seasonal beers, which tend to be more experimental and use more exotic hop varieties, could be dictated by what kinds of hops brewers can obtain on the spot market. Sorensen said he tried to get an organic New Zealand variety but couldn’t. This kind of situation may lead to more fruity beers or lighter kinds that require fewer hops.

But brew pubs, which often just sell their beer on the premises, have the luxury of experimenting more and talking with customers about the changes. “If we had to change profile and explain what’s going on, I think the consumer would be fine,” Carlson said. “They would embrace the change as long as we do it well, which we would.”

Local brewers have not heard of any breweries going under yet, but expect those without contracts could struggle the most.

“Some breweries out there didn’t know this was coming,” Sorensen said. “They didn’t have contracts in place. Breweries were told they couldn’t get contracts a year ago of certain varieties, so this year they didn’t bother trying.” He has seen message boards with brewers begging for hops and said a friend in California needed 5,000 pounds of a certain variety, but could only get 2,400.

Coy believes the shortage could limit how many new breweries come on line as people new to the market struggle to get hops or pay exorbitant prices for them. Carlson believes that microbreweries that sell their beer through a third-party vendor could also struggle to compete with the larger companies.

The shortage will likely encourage more sharing between breweries, a practice that’s already common, but could become more frequent as Iowa brewers organize under the Iowa Brewers Guild.

“It’s now a little meaner and leaner, but breweries always have had a good relationship with each other,” Carlson said. “So if we can help, we will.”

As farmers see the huge increase in hops prices, some may resume planting the crop, but Sorensen said it takes about three years for a hop plant to mature, delaying the turnaround.

“It’s not just Iowa; it’s going to be the whole world,” Carlson said. “Everyone makes beer and we’re having a pinch. The U.S. is a big supplier, too. This is going to be an issue. It will be interesting to see what occurs, who falls out and who can handle it. We’re small enough to be able to change a little easier.”