On the eve of this year’s California grape crush, the state’s largest wine grape grower cooperative still has grapes to sell.
This is not unusual for the Fresno, Calif.-based 600-member Allied Grape Growers that expects to sell 300,000 tons of grapes this season valued at more than $70 million. It has for a decade or longer had grapes without homes at harvest time because there were no buyers.
The difference this year is Allied wants prices to go even higher before committing all its member grapes to wineries. Wine grape buyers have aggressively returned to the market with the best prices in seven years.
The long-awaited and oft-predicted turnaround in California wine and concentrate demand is finally at hand.
Nat DiBuduo, president of Allied, told the cooperatives at two grower meetings this year in Fresno and Santa Rosa that wineries were wanting to buy grapes earlier than at any time during his decade-long tenure as Allied’s president. This initial demand was for quantities larger than in 2007.
“Wineries are offering better prices than any of the past seven years, and they are offering term contracts,” DiBuduo said.
There are many reasons for the turnaround, including the point that supplies are down, primarily due to the fact that 135,000 acres of vineyards have been removed from the San Joaquin Valley since 1998 and replaced with almonds, pistachios and even pomegranates.
Drive from Bakersfield to Modesto, and there are a few new vineyards, but many new orchards. That is not the case on the coast where hundreds of acres of new vines are going in, especially on the Central Coast.
Even though wine grape prices are the best they’ve been in a decade, DiBuduo continues to raise the warning flag of not wanting the industry to repeat history. When the future looked bright in the past, over-planting and subsequent oversupplies resulted.
The “future thinkers,” DiBuduo warned, are again saying plant grapes to meet future demand or lose market share to imports.
Until now DiBuduo has resisted the call to plant more grapes. “My message (now) is plant with contracts,” to meet winery needs at an economic return equal to almonds. Grape growers are in the best position in a decade to do so, said DiBuduo, because:
– California wine sales are increasing.
– Exports continue strong.
– 2008 first quarter imports were down.
– The concentrate business has been bolstered by the highest price ever for Thompson Seedless ($225) per ton due to a long term contract between raisin packers and raisin producers.
– Bulk wine inventories are lower.
– Wineries that did not want grapes in the past are back in the market.
– Winery buying is statewide.
– Growers who crushed their own grapes for bulk sales are now more interested in selling the grapes rather than crushing them.
– Growers continue to deliver better quality grapes.
“Demand is good while the supply is short for the market,” he said.
This year’s crop will likely be smaller than last year due to an array of weather problems ranging from a dry spring, frosts, strong winds, and early heat waves along with a lack of irrigation water.
All this good news is being tempered by the fact that farming costs are going up, according to DiBuduo, faster than this new wave of higher grape prices.
“The costs of production will challenge even the best growers,” he said.
Regardless, DiBuduo predicts a “better year for the California wine grape grower in 2008 and our winery partners.”