From Reuters:

Winemakers in drought-hit parts of the United States are predicting a smaller and earlier 2012 harvest but see an upside in higher-quality production because of the high heat and lack of rain.

Emerging wine-producing areas such as the Midwest and South -- California is the top U.S. wine area -- could see output cut by up to half from the worst U.S. drought since 1956, researchers and winemakers said.

(For more, see: Thompson green price reaches $325 per ton for short crop)

"Everybody is looking for a really great harvest (for quality) ... but a smaller harvest," said Cary Greene, chief operating officer for WineAmerica, an industry group in Washington.

The drought also has battered corn and soybean crops in Illinois and other states, leading to larger losses than expected, the government said on Friday.

But for grapes, the dry weather has meant concentrated flavor and sugars and a reduction of pests and disease, translating into higher-quality fruit.

Whether higher wine prices will follow is too early to say, Greene said. But wineries hit by drought might opt to put the higher-quality 2012 grapes into pricier brands, such as reserves.

For more, see: Extra-dry weather a bittersweet harvest for U.S. winemakers