Diversification: Hop to it

Anne Hardie
Cameron Ealam’s family has farmed near Nelson since 1856 and have been planning how to continue the business for the next couple of centuries, so they’ve diversified their dairy farm by planting hops.
This year they began spraying out a chunk of their Spring Grove dairy farm to dig in rows of 5.2-metre poles for their hop crop which will cost a small fortune to establish, but will return them in the vicinity of $50,000/hectare.
Just a short walk from the dairy, the farm has sprouted a hop kiln where the hop cones (flowers) will be stripped from the vines and dried for an industry on a roll as the craft beer market drives demand for the aromatic crop.
Beer needs hops and the New Zealand hop industry has 17 unique varieties and more to come that it can offer brewers around the world. A decade ago, the tiny NZ industry, which produces just 1% of the world hop crop, was wallowing in a dark hole due to an oversupply of commodity hops. So the industry of only about 18 growers at the time, transformed its crop from a commodity product to a higher-value craft beer product and is now reaping the rewards.
This year is the first time in generations that new growers are entering the industry and that’s simply because the returns from long-term contracts justifies the capital expenditure. The combination of kiln, machinery and garden establishment will cost the Ealam family about $135,000/ha and over the next two or three years they will establish about 35ha. Yet with those long-term contracts in place, Cameron says they expect between 15 and 20% return on investment which will give them a five-year payback.
“The good thing about the hop industry is the long-term contracts for stability and to smooth those cycles. Those long-term contracts are in place for the next five years, so it’s excellent for budgeting purposes and that was a massive tick for deciding on hops.”

It’s not the first time the family has grown hops, though none of the three generations involved in the property today remember as it was a century or so ago. Hops have been grown in Nelson for 150 years, ever since early settlers brought their bundle of plants and dug them into the newly cleared land so they could brew their own beer. Others tried to grow hops around the country, but the latitude-sensitive crop will only perform around 40 to 50 degrees from the equator where it can get the sunshine hours for the development of the flower, so at 41 degrees south and the right climate, Nelson is the sole region in the country to grow hops.

The aromatic hop flowers.

In a way, Cameron’s family is now returning to its roots. In the intervening generations, the farm has been split up, melded back together and expanded several times, but the core land holding is the original block bought 161 years ago. That history is important to the family and Cameron says they looked long and hard at different options to ensure succession for generations to come.
“Our family is quite risk-averse and with that comes quite measured decisions,” he says.”Hops are a bit less prone to risk than some of the horticulture systems. And whatever we do now, we want to be farming in a profitable, sustainable manner for multiple future generations to keep farming.”
The 118ha farm almost borders the small Wakefield village and lies on the edge of the fertile Waimea Plains that flare out toward the distant bay. Over successive generations the farm has expanded so that it now straddles two roads with an underpass linking the blocks and they lease an adjoining 50ha. On this mix they have been milking up to 260 cows at the peak on the flats and lower hills as well as running a small number of beefies on hillier country at the back of the farm.
Their dairy business is run on a predominantly grass-based system with silage harvested off support blocks and fed during the shoulders of the season. An in-shed feed system was installed mainly for drought mitigation and generally adds up to no more than 200kg barley/cow. The mix of country results in a range of production that Cameron puts at 1300kg milksolids/ha on the fertile flats, while the hills are capable of 750kg to 800kg MS/ha.

‘Hops are a bit less prone to risk than some of the horticulture systems. And whatever we do now, we want to be farming in a profitable, sustainable manner for multiple future generations to keep farming.’

Cameron has done the maths on their dairy operation and based on a payout of $6/kg MS, livestock sales at $0.35/kg MS and production averaging 1100kg MS/ha, it would return a gross income of $6985/ha. It will still provide that income, but on less land so that they can spread their risk by diversifying into hops.
Most of the surrounding land is lifestyle blocks and flat land is in short supply and pricey in a region dominated by hills and mountains. So expanding the dairy operation was not an option when they wanted to retain their generational links to the farm.
“We would have had to buy a whole heap of five to 10ha blocks and you’d end up with all their houses,” Cameron explains. “In the future we’d potentially look at purchasing somewhere else as well as this, but selling this was never on the cards. I’m pretty passionate about this place and so are other members of the family.
“Being at the top of the plains, the soil is pretty fertile and lends itself to most intensive farming options, so it was finding something that suited our needs and goals, as well as something that interested us. We could have gone into grapes, but weren’t interested – it had to be something we were passionate about.”
Until the hop venture began to take shape on the farm, Cameron worked as an ANZ rural manager dealing with investment and finance for agriculture and horticulture businesses, which meant he had a pretty good handle on various industries and their prospects.
Nelson’s productive land may be small, but its climate enables diversity, including boysenberries, pip fruit, grapes and hops. The capital costs required to invest in hops is huge, but the upside of that is it is prohibitive for small blocks which helps contain oversupply, Cameron reasons.
“The cost is quite significant which is a barrier of entry and in my mind that is a good thing in a lot of ways because it limits a lot of small landholders entering the industry and going down the path of grapes.”
A big factor in diversification, was creating a business where more family members could be involved. Alongside Cameron, his mother, Debbie, is now in charge of the plant nursery as she has previous experience in horticulture through her small blueberry business, while his father, Bruce, will achieve his goal of handing the milking cups over to someone else before turning 60 and he will have a new challenge in hops. An uncle, Bryce, will also be involved in the hop operation and has land that will be leased to the business. Along with Cameron’s grandparents, those family members will all be shareholders in the business.
At the end of February, the herd will be dried off while the family tackle their first hop harvest which entails the vines being harvested by machine and hauled to the hop shed, where the cones will be stripped from the vines with an imported picker machine, then dried in the diesel-fueled kiln. Multi-level louvres sit horizontally to allow the heat to dry several layers of hop cones before they are baled and sent to the New Zealand Hops facility near Richmond. There, the dried cones are processed into pellets and pressed into bales or repackaged as whole hops for brewers.

‘The cost is quite significant which is a barrier of entry and in my mind that is a good thing in a lot of ways because it limits a lot of small landholders entering the industry and going down the path of grapes.’

In the past decade the grower cooperative has focused on the development of quality aromatic cultivars through research with Plant and Food Research at nearby Riwaka. A small brewery takes that research through to the end product, using trained panels and focus groups to assess the brews. Today, the industry produces 17 varieties unique to NZ, specialty aroma hops sought by craft breweries, plus six Northern Hemisphere varieties. NZ has the added advantage of being able to market its hops to brewers as spray-free, as plants don’t suffer the bugs and disease of their overseas counterparts.
At just under 800,000kg of hop cones from an overall 442ha, the NZ crop is tiny, but sought after. Seven new growers including Cameron’s family plus former merino farmers and blackcurrant growers, are digging in poles and planting hops this year to reap the benefits of the small, but now very lucrative crop. Along with expansion from existing growers, that will still only increase the entire hop crop to about 650ha in the next few years. To get it in perspective, New Zealand Hops chief executive, Doug Donelan, says there are single hop gardens in the United States bigger than the entire industry here.
Small as the NZ crop is, it was worth $25 million this year, with the bulk of it exported to overseas breweries, especially in the US. Donelan says total beer consumption around the world is not increasing, but consumers are moving away from mass-produced, cheaper beers, toward craft brews and that’s where NZ’s specialty aroma varieties are sought.
It’s an industry on a roll, which is why newcomers such as the Ealams are investing heavily to grow the crop. Diversifying into hops means the dairy side of their business will decrease and next season they will milk about 170 cows and once the staged hop development is complete, it will drop to just 120 cows.
Though cow numbers will drop, Cameron says they intend to literally beef up calf numbers with intensive calf-rearing options, possibly on contract for other farmers. That will add another revenue stream to the business and likewise, a few hundred sheep will graze under the hop crop for several months.
Hop vines are cut down at harvest and remain dormant over winter so for many months only the bare poles remain in the garden. Come September when growth takes off again, the garden is restrung for the vines to climb. It means sheep can graze from the end of March through to early spring and then again as the vines reach their full height as they will just graze the bottom of the crop where there are no flowers.
Cameron acknowledges it has been a steep learning curve for the family which has been milking cows for about 85 years and the full-on activity of a hop harvest is still ahead of them. While family will fill all the permanent roles for the diverse industries on the farm, contract labour teams will train the plants on to string in spring and a mix of locals and travellers will assist with the hectic harvest when lanes on the dairy farm will bear trailer-loads of hops to the kiln.

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