The current price rebound began last year and future prices appear promising. Bitter broke down his 2012 Central Valley price vision into the varietal, generic, and floral wine grape categories.

Bitter says Central Valley varietals are selling for a minimum of $400 per ton to $600 per ton on the spot market with long-term contracts offered at those prices as well. Specific varietal prices include Chardonnay in the $500 per ton to $600 per ton range, Cabernet Sauvignon from $550 to $600-plus per ton, and Merlot in about the same range.

Generic wine grapes for this crop year (Central Valley) can bring $300 per ton to $400 per ton; prices not seen since the late 1990s. Prices for several generics include French Colombard at $325 per ton to $350 per ton, Barbera/Carignane at about $400 per ton, and Ruby Cabernet at $400 per ton or more.
For floral (light sweet) wine grapes, Bitter predicts Central Valley prices from $400 per ton to $600 per ton. Muscat of Alexander grapes currently fetch $400 to $500 per ton, Muscat Canelli lassos $500 per ton or more, and Symphony grapes deliver $450 per ton to $500 or more per ton.

Floral wines are currently very popular with consumers; especially with the Millennial generation (Generation Y) – those born since the late 1970s. While the varietal Chablis wine was popular in the 1970s and 1980s, floral wines are gaining favor type with Millennials. About half of the Millennial generation is of legal-drinking age today.

“With 12 to 15-tons-per-acre yield potential, floral grapes can generate $4,600 per acre to $6,000 per acre in gross revenue to the grower,” Bitter said. “That’s certainly enough to make a profit.”

Typical grower-winery wine grape contracts are single year or three-to-five-year documents. Some wineries are pursuing production contracts where growers plant additional acres with prices locked in for 12-to-15 years including price minimums.

“Wineries want to lock in their needed supply of wine grapes into a contract to make sure they don’t lose the grapes to a competitor,” Bitter said. “This is the reason for longer-term contracts today with minimum prices. Many growers have five or six wineries bidding for their 2012 crop versus the traditional one or two wineries.”

Today’s prices compare to less than $100 per ton for some varieties from 2001 to 2003. Some grapes were left on the vine and never harvested.

“There were spot markets for $65 per ton to $90 per ton – prices one quarter of today’s prices,” Bitter said. “Those growers suffered tremendously during the three-year period. It didn’t matter if you grew grapes in Fresno or Lodi – that was the value. We’ve rebounded quite a bit today.”

Bitter says today’s higher prices translate to more economic sustainability for growers. “Wine grape prices jumped last year and this year. Current prices are now at the level which most growers consider sustainable. If California has a good-sized wine grape crop this year and re-fills the winery, we’ll probably see prices plateau a little bit."

Consumer demand for wine has jumped 10 percent to 12 percent so far this year. If this growth trend continues, Bitter says grape prices could trend higher.

Bitter says the premium grape industry shows signs of rebound after a decade of financial struggles. Growers and wineries increased Coastal premium grape acreage from 1998 to 2008 to offset consumers’ increased demand for premium wine.

This shifted total California wine grape acreage — estimated at about 525,000 acres today (bearing and non-bearing) — from traditional statewide production at 60 percent in the Central Valley and 40 percent in the Coastal regions to more of a 50-50 split.

Recent consecutive back-to-back years of short crops on the North Coast have helped reduce supplies to bring supply and demand back into sync.

“Now we’re getting back on track on the high end of the market through shorter crops and increased demand for premium wine,” Bitter said. “We hope consumers will continue to respond positively in premium wine consumption.”

Bitter predicts wine grape acreage will shift to 53 percent to 54 percent production in the interior areas and 46 percent to 47 percent in Coastal areas by 2014 or 2015.