Beer, Wine & Spirits

Hop prices hop: Turns out beer and pot are 'cousins'

Hops prices hopping
Hops prices hopping

Higher food prices have Americans crying in their beer.

Beer prices may have them crying, too.

Craft beers continue to take market share from traditional beer giants, though they still having only about 15 percent of the overall market. These smaller companies which make batches of flavorful beer have seen demand grow so much, they're running up against a shortage of hops, the flower which flavors beer. Prices for some varieties of hops, especially those used in IPAs, are double what they were just a few years ago.

Blake Crosby, Managing Director of Crosby Hop Farm is a 5th generation hop grower, Woodburn, OR. Crosby says in the past 5 years hop prices have increased 30-50% and have now hit a 10 year high.
Harriet Taylor | CNBC

"Right now, hops are probably at the highest they've been in ten years, and we're at a place where growers can finally afford to make expansions and really grow their businesses," said Blake Crosby, a fifth generation hops farmer in Woodburn, Oregon. Crosby is managing director at Crosby Hop Farms, which has doubled its plantings to 300 acres and seen prices go from about $4 a pound to between $7 and $10. He's investing millions to expand his cold storage units and bring in a machine which turns hops into dried pellets for more efficient use. Crosby used to sell to only two or three large traditional American breweries. Now he has 600 customers, mostly craft brewers. "We're kinda busting at the seams."

Read MoreHop prices soar as US craft beer boom takes off

As a result of all this demand, farmers in Oregon, Washington and Idaho are planting more hops. "There is a lot of supply," said Crosby. "I think maybe that's the story that gets lost in this sometimes."

Crosby's cousin, Ben Smith, is general manager for B&D Farms in nearby St. Paul. Smith has pulled out some rye grass to plant 200 more acres of hops to add to the 500 acres he already has. He has presold all of it for the next three years. "The calls kept coming, so we kept planting."

However, could there be a beer bubble brewing? Crosby believes some of the craft beers on the market are getting very hoppy, using five to seven pounds per batch—"ridiculous"—and the fad could eventually lose its head. At the same time, more supply will eventually be hitting the market, and the price for hops might pop. "We always tend to somehow ruin our market, I think farmers are really good at that," said Crosby. "The farmers may very well glut this market before craft beer ever slows."

Read MoreAnd the best commercial beer in America is...

No glut appears in sight at the moment. In fact, as Washington state right next door prepares to issue its first licenses for recreational marijuana, the link between pot and hops may grow tighter. Watch the video, as Crosby explains that hemp and hops are "cousins."

Hop Grower Ben Smith with the next generation of growers, sons Ethan (17) and Adam (15).
Harriet Taylor | CNBC

—By CNBC's Jane Wells. Follow her on Twitter: @janewells