The USDA-ARS Hop Research Program – A Modest Proposal for Creating a Sustainable Funding Loop

Check out hops from the National
Clonal Germplasm Repository in
Corvallis, Oregon

Part 1 of a 2 part series

Public funding of hop breeding and cultivar development is hardly a political priority. The budget for the USDA-ARS hop breeding program has remained frozen since 2000, at a scant $750,000 per year. Of that, when you factor in inflation, mandated program cutbacks, cost of living adjustments, maintenance and other costs, the amount of money actually available to perform research is a paltry $25-30,000 per year.

The mission, however, remains the same. Since the 1960s, the goal of the USDA-ARS hop program has been “to develop hop germplasm and cultivars that incorporate superior pest and disease resistance, increased yields and enhanced brewing characteristics.”

That’s a mighty big challenge on any budget, let alone one that is radically shrinking with no hope in sight for a fresh infusion of new public money from a tea party inspired Congress that is hell bent on dismantling basic scientific research.

Assuming that the public even has a compelling interest in nurturing the US hop industry (we think, of course, that it does), the question arises: if we can’t count on federal money, and private money is becoming more scarce, what can we do to rebuild our once robust USDA-ARS hop breeding program? How can we insure a sustainable funding stream?

It’s time to think creatively. Let’s break it down. There are at least four major players: 1) the USDA-ARS, which creates the germplasm, 2) the farmers, who grow and test the new hop lines, 3) the brewers who analyze the experimental lines for desirable characteristics, and 4) the private breeders, whose goal is to obtain patents on new hop varieties, license their patents to select growers, and maximize profit.

Under the current model, the USDA-ARS “partners” up with trustworthy farmers to grow out it’s germ lines. Right now the USDA has about 40,000 seedlings from about 50 crosses. To save money, the USDA distributes those plants for testing among growers in Oregon and Washington. The farmers’ costs are generally reimbursed by the Oregon Hop Commission and the Hop Research Council. Instead of cash, private growers and brewers, at least in theory, are asked to pony up “in kind” support.

Under this model, the USDA at least on paper maintains control of the experimental lines. Their legal vehicle for doing that is a “Material Transfer Agreement,” basically a contract between the USDA and the farmer. The MTA is an interesting document. On the one hand, it smartly restricts the grower from transferring the new lines to third parties and from disclosing data from the testing. Parenthetically, there is no budget or staffing for monitoring, inspection, or enforcement.

On the other hand, the MTA acknowledges that new hop lines conceivably could be transferred or shared with third parties, i.e., private breeders, if the farmer negotiated a written deal with the USDA.

Hmmm. This is a new program, only a few years old, so we don’t yet have an instance we know about in which a farmer, either directly or through a proxy, sought to commercial exploit a publically owned experimental hop line. Could it happen? Possibly. Will it happen? Maybe.

So when it does happen, how is the public’s interest going to be protected? Here’s where we need to think about the same mechanisms the federal government uses to extract royalties from oil, timber, cattle and pharmaceutical companies. The idea is for the USDA to negotiate a royalty fee whenever a private breeder intends to market, sell, license or otherwise “own” a new culitvar that’s the direct result of the USDA program.

Think about it. The future of public hop funding is bleak. In the past 12 years, we’ve released two varieties (Newport in 2002 and Mt. Raineer in 2008). Meanwhile, private breeders have been churning out the big bread winners, such as Citra® and Simcoe®. I’m not saying that the breeders behind either of those “homers” had it’s snout in the public trough. They bred great hops, took a big risk, invested a lot of time and money, and won in the marketplace. They should be rewarded.

But what about the future? New and valuable cultivars will emerge from the present USDA/private farmer partnership. In my view, in order to build a sustainable funding loop, the USDA can and should negotiate a co-ownership interest that reflects the value of its contribution. Moreover, it can and should negotiate terms that will bind the private co-owner to license the hop with growers according to fair and transparent criteria.

How much money could this type of model generate? I’m just spitballing here, but the numbers look … meaningful. Take a look at the 2011 US harvest: about 65 million pounds of hops. Of that, about 14.6 million were proprietary hops (not counting Summit, Amarillo and a few others), or about 22% of all hops grown. If, and this is a big if, those proprietary hops emerged from publically owned hop germplasm, and/or were the result of some measure of public funding, and the average price per pound was set hypothetically at $5.00/lb, and we applied only a nominal 5% royalty, then the USDA would be looking at revenue of over $3.5 million per year. That’s almost 5 times more than the entire current budget.

Look, I don't know nothing about nothing, but it seems to me that the people should get a return on their investment. And, in turn, that financial return can and should be reinvested in a fortified basic and applied hop research budget. The US consumer’s appetite for new hops is growing. The demand is there, and so is the treasure. Now it’s up to the USDA to assert itself as a major stakeholder and get back at least some of what we give.

RGW
May 10, 2012

P.S. And by the way, in terms of the public’s interest, don’t forget that we’ve barely scratched the surface on the neutraceutical and cancer-fighting potential of humulus lupulus.