Increased harvest could affect commodity's supply and demand structure
By Carol Thompson
Traverse City Record-Eagle
TRAVERSE CITY, Mich. (AP) - A recently announced project is set to double Michigan hops production by 2016.
A Traverse City investment group that typically invests in commercial real estate, MI Local Investment, is prepared to break ground on a 400-acre hops farm in Williamsburg once the ground thaws. The sign is posted, the poles are waiting in the snow, according to the Traverse City Record-Eagle.
MI Local Investment President Jason Warren said the project is big for a reason. It follows an agriculture business principle he learned growing up in a cherry farming family on Old Mission Peninsula.
"It's all about economies of scale," Warren said. "If you're going to do it in a meaningful way you have to set yourself up for this size of a farming operation."
The new farm, MI Local Hops, will be larger than most Michigan hops farms, which Michigan State University Extension hops expert Rob Sirrine said typically come in at five to 10 acres.
The state's hops harvest could double along with the swelling acreage, changing the commodity's supply and demand structure and potentially the price.
But Joe Biermacher, a partner at Empire Hops Processing who tends four acres at Biermacher Farms in Grawn, isn't worried about dropping prices. He said the plentiful demand for Michigan-grown hops is enough to keep growers busy.
"If Founders Brewing Company in Grand Rapids said 'We're going to buy all Michigan hops from here on out,' we couldn't supply them," Biermacher said. "If you grow a quality product you'll be able to sell it, no problem, for years to come."
Tony Hansen, head brewer at Short's Brewing Co., said a large farm could supply the Bellaire brewery with enough hops for a large batch of locally sourced beer.
"They might have a modern, state of the art processing and packaging method that maybe smaller local farmers are not able to have," Hansen said. "That would ensure a better quality hop."
The Brewers Association, an organization of professional brewers, reported nearly 8 percent of beer sold in the U.S. in 2013 was craft brewed. The association aims to represent 20 percent of beer sales by 2020.
Sirrine said craft beer requires far more hops than mass-produced brews, putting even more demand on hops farms.
He recommends smaller hops growers partner with small brew pubs as more big hops farms rise in the state.
"It's a lot easier for those brew pubs to raise the cost of a pint to offset the price of local hops than it is for a Bells or a Founders to raise the price of a six-pack," Sirrine said.
Brian Tennis, co-owner of New Mission Organics, is less sure. He said MI Local Hops will be able to offer lower prices that could hurt smaller growers. Tennis grows certified organic hops, so he's not concerned about his operation.
"I think it's definitely going to push some smaller guys out of business, some of the smaller, conventional guys," Tennis said. "They're just not going to be able to compete on price."
Another Michigan hops farm, Hop Head Farms in Barry County, recently consolidated with Ceres Hops and Grains and plans to plant hops on nearly 100 more acres by summer 2016.
Warren said he intends to sell to large Michigan brewers, but declined to name those currently negotiating with MI Local Hops.
Michigan could be poised to supply a national or international market. Warren and investment partners Mark Johnson and Keith Stelter were approached by international hops brokers at a national hops convention in California in January. Most U.S. hops are grown out west, but forecast water supply issues make Michigan an attractive place to build the industry.
"Our intent is to be a partner in bringing Michigan back on the map for growing hops," Warren said. "We intend to reach out to other operations, other growers, other processors in the state to try to work together to make that happen."
That's what Biermacher likes to see - more industry investment, even from competing farms.
"I love it when other people spend money on infrastructure in the same area, because it helps me in case something goes wrong with our stuff," he said. "The more the merrier."
A team from Empire Hops will manage MI Local Hops, planting 200 acres of vines this year and 200 in 2016. Warren expects to have a full crop in 2016, and said the initial investment should be paid off in seven to 10 years.
The new hops farm will have a research and development facility for breweries and research centers to use for experimenting with new varieties.
Warren plants to start with five varieties, with most acres hosting centennial and cascade hops.
Craft brewers' increasing demand for hops could change the look of existing hops farms, Sirrine said, as farmers convert some acres to more expensive aromatic hops instead of bittering hops.
Sirrine sees a future where hops growers set prices for their harvests, rather than bending to the will of mega brewing companies.
"Once the investment groups start getting into it, you know it's a good bet," he said.
Published: Tue, Mar 03, 2015
