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General Category => Going Pro => Topic started by: waylit on November 10, 2014, 10:32:17 PM

Title: Calculating Hop Contracts
Post by: waylit on November 10, 2014, 10:32:17 PM
I'm starting a 10 BBL brewery, and have a few questions about hop contracts.

1. Did you sign a 5 year contract?
2. How big is your brew house, and hop many pounds do you contract per year?
3. By what % did you increase your hop demand each year?


Title: Re: Calculating Hop Contracts
Post by: morticaixavier on November 10, 2014, 10:38:00 PM
you'll probably get better answers over at pro-brewer. but there are a couple pros on here who might chime in.
Title: Re: Calculating Hop Contracts
Post by: boulderbrewer on November 12, 2014, 05:54:37 PM
I have a single year contract, I think as a start up maybe a one year to get a read on what you are going to need then contract earlier for the following years so you don't get shut out. Some of the "in" hops you might want a longer contract if you can even get them on contract.

You should sit down and figure out how much you can brew taking account your fermenters, bright tanks, kegs, bottles and refrigeration space (you got to put that beer some where) and use that as a starting spot.  It all depends on what you are going to brew also, I have a beer that uses 1 ounce per barrel and others that can have pounds per barrel.  That said I brew on a 8 barrel system with 5 year round beers and 5 seasonals (more to be added) and a couple one offs.

In my second year I figured I would double what I did in the first year. I think I'm past the double but not quite triple. For next year I'm looking at going a bit past the triple mark of my first year. It may all come down to your packaging and how well your keg beer sells. ( I'm at the end of my second year.)

Title: Re: Calculating Hop Contracts
Post by: Thirsty_Monk on November 12, 2014, 10:24:56 PM
Hop contracts still confuse me.
Title: Re: Calculating Hop Contracts
Post by: Pawtucket Patriot on November 14, 2014, 04:31:19 AM
One of the first things I did when I decided to open a brewery was sign a hop contract. If you're relying on hops that are scarce in the market (i.e., newer experimental varieties like mosaic, el dorado, citra, etc.), you'd do well to contract. We did a one-year contract with a couple of brokers for our first year. Once we started to see our beer sell, we signed a few 3-year contracts to ensure that we would have the varieties we depend on for years to come. I think it's one of the smartest things we did as a startup. Good luck!
Title: Re: Calculating Hop Contracts
Post by: a10t2 on November 14, 2014, 05:37:24 AM
At our scale (we'll max out at 1100 bbl), I don't see the need for contracts unless it's large quantities of a rare hop. There's essentially nothing that can't be found on the spot market as long as you plan ahead. Case in point, my APA recipe uses some Citra, but at 150 g/bbl, two boxes will easily last us the year.

I do recognize their value to the hop growers, and once our product mix stabilizes I'll look at contracting again for that reason alone.

A contract doesn't guarantee you the hops you've contracted for, it just obligates you to buy them if they're available.
Title: Re: Calculating Hop Contracts
Post by: klickitat jim on November 14, 2014, 06:13:10 AM

A contract doesn't guarantee you the hops you've contracted for, it just obligates you to buy them if they're available.

Ouch! That seems a bit one sided.
Title: Re: Calculating Hop Contracts
Post by: 69franx on November 14, 2014, 12:46:11 PM

A contract doesn't guarantee you the hops you've contracted for, it just obligates you to buy them if they're available.

Ouch! That seems a bit one sided.
Very one sided, considering the co-dependance brewers and growers have with each other
Title: Re: Calculating Hop Contracts
Post by: klickitat jim on November 14, 2014, 12:56:32 PM
I cant imagine that the idea was invented by a brewer.  The scenario doesn't make sense.  Please buy my beer,  please sell me ingredients,  please tax the hell out of me, please let me blow out my back, please dont pay me anything... cuz I just like brewing that much. Nope, not me
Title: Re: Calculating Hop Contracts
Post by: narcout on November 25, 2014, 06:35:49 PM
The typical remedy for breach of contract is monetary compensation to the non-breaching party that puts him in the same position (or as close as possible) as he would be in had he realized the benefit of the bargain.  Specific performance is sometimes available as a remedy but only for particular types of contracts (e.g., contracts for the sale of real property).

I’ve never read a hop contract, but I would guess that failure by the grower to deliver the amount of hops contracted for is not a breach, provided the grower acted in good faith (though there may be some other applicable standard - reasonable efforts, etc.). 

Are hop contracts governed by the UCC?

Maybe Pawtucket will chime in, he probably knows most of what there is to know about the subject.

This would make an interesting blog post for someone with the time and knowledge to write it. 
Title: Re: Calculating Hop Contracts
Post by: klickitat jim on November 26, 2014, 06:33:13 AM
The typical remedy for breach of contract is monetary compensation to the non-breaching party that puts him in the same position (or as close as possible) as he would be in had he realized the benefit of the bargain.  Specific performance is sometimes available as a remedy but only for particular types of contracts (e.g., contracts for the sale of real property).

I’ve never read a hop contract, but I would guess that failure by the grower to deliver the amount of hops contracted for is not a breach, provided the grower acted in good faith (though there may be some other applicable standard - reasonable efforts, etc.). 

Are hop contracts governed by the UCC?

Maybe Pawtucket will chime in, he probably knows most of what there is to know about the subject.

This would make an interesting blog post for someone with the time and knowledge to write it.
It sounds like that person might be you, after a couple of phone calls to get the missing info. Maybe submit it ti zymurgy?
Title: Re: Calculating Hop Contracts
Post by: a10t2 on November 26, 2014, 07:41:05 AM
I’ve never read a hop contract, but I would guess that failure by the grower to deliver the amount of hops contracted for is not a breach, provided the grower acted in good faith

Contracts are generally with a broker, but that's the idea. They're pretty simple documents, 2-3 pages outlining quantities and prices, dates, storage terms, etc.
Title: Re: Calculating Hop Contracts
Post by: reverseapachemaster on November 26, 2014, 04:03:31 PM
The typical remedy for breach of contract is monetary compensation to the non-breaching party that puts him in the same position (or as close as possible) as he would be in had he realized the benefit of the bargain.  Specific performance is sometimes available as a remedy but only for particular types of contracts (e.g., contracts for the sale of real property).

I’ve never read a hop contract, but I would guess that failure by the grower to deliver the amount of hops contracted for is not a breach, provided the grower acted in good faith (though there may be some other applicable standard - reasonable efforts, etc.). 

Are hop contracts governed by the UCC?

Maybe Pawtucket will chime in, he probably knows most of what there is to know about the subject.

This would make an interesting blog post for someone with the time and knowledge to write it.

I can't believe you used UCC and interesting in the same thought.

Hop contracts are options contracts. Brewers pay a small price plus a promise to buy the agreed volume in exchange for the right to stand in the front of the line and buy the grower's harvest at a price less than what the open market may command. By its terms the brewer is committed to buy it is available under the contract but the grower is not obligated to grow. However, growers will grow hops to fulfill contracts because a predictable market, even at a reduced price, is better than trying to unload a harvest into the spot market with no assurance that anybody wants what was grown.
Title: Re: Calculating Hop Contracts
Post by: anthony on November 26, 2014, 04:12:34 PM
Quote
Force Majeure
Neither Buyer or Seller shall be liable for any delay or failure to perform under this Agreement if such delay or failure is due to any contingency beyond its reasonable control, including, but not limited to, acts of God, war, explosion, fire, bad weather, flood, accident, civil disturbances, strike, plant shutdown, major equipment failure, compliance with any applicable governmental regulation or order, or shortage or an inability to obtain (on commercially reasonable terms) any Product, raw material, equipment or transportation. The party experiencing any delay or failure in its performance resulting from the above causes shall give prompt written notice thereof to the other party. Shipments of any Product in transit to Buyer, however, must be accepted by Buyer.

This is the relevant section in the contract(s) we have.
Title: Re: Calculating Hop Contracts
Post by: bluesman on November 30, 2014, 07:12:51 PM
We're going to contract some hops in due time.  We're also going to purchase hops on the spot market for the short term. Contracts are pretty much dried up for this year and limited selections for next year, so we'll plan for 2016 then see how we progress through the first year with spot market purchase/usage. I think hop contracts can be very beneficial if you know what you want and how much you'll be using. YMMV.
Title: Re: Calculating Hop Contracts
Post by: anthony on December 01, 2014, 05:17:53 AM
Depending on where you are looking to contract, even a small contract can be useful because it can allow you to transfer part of other breweries' contracts to your contract. This allows you to lock-in the hops but delay delivery to more reasonable increments (i.e. a 11 pound box at a time). Exact policy and procedure for this varies with each supplier obviously.
Title: Re: Calculating Hop Contracts
Post by: Thirsty_Monk on December 02, 2014, 12:36:08 AM
There is a few smaller local hop coops that sell hops without contract. Look around if you can find them.
Title: Re: Calculating Hop Contracts
Post by: Black Sands Brewery & Supply on January 04, 2015, 07:13:07 PM
I'm starting a 10 BBL brewery, and have a few questions about hop contracts.

1. Did you sign a 5 year contract?
2. How big is your brew house, and hop many pounds do you contract per year?
3. By what % did you increase your hop demand each year?

We have 3 bbl opening this year. We have lots of contracts. Some big some small some 1 year others 3 or 5 years. In the end there are ways to get rid of what you dont need or want.

1. Sign a 5 year on the hops you absolutely must have to make the beers you want
2. 3 bbl system. I bought 500 + lbs of spot hops then contracted 11# up to 100# on other verities for 3-5 years out. Plus a bunch of other stuff in low qty to experiment with.
3. 10-15% but depends on what you are brewing or if you plan to expand or add tanks. Then it could be higher...

My advice: Contract what you need for sure what you can't live w/o. There are a lot of spot hops and breweries who will sell/trade if you need something you can't or didn't contract for. Make friends w/ other local brewers see what they have on Hand and I bet they are long on a few varieties.