What is in this article?:
- Grower prices below break-even point in all areas of California.
- Napa prices $2,700 per ton lower than what it cost to produce them.
- SJV grapes closest to economic sustainablity after 100,000 acres pulled out.
- Demand for California wine continues to grow as grape shortages loom.
One of the more common methods of explaining the multi-definition term “sustainable” is with a three-legged stool illustration.
One of those legs is always economic viability.
In California’s wine grape industry, that money leg is so short that the sustainability stool is tilted like the Leaning Tower of Pisa. It is so far from a break-even point for some growers that the term winery subsidy comes to mind rather than sustainability.
Allied Grape Growers President Nat DiBuduo told a packed state-of-the-industry audience at the recent Unified Wine and Grape Symposium in Sacramento, Calif., that grape prices are “not economically sustainable” in all grape growing regions of the state.
“They are closer (to sustainability) in the San Joaquin Valley than they have been in years,” he added. One reason is more than 100,000 acres of vines have been pulled out over the past decade because of economic non-sustainability, and growers have planted more economically attractive crops.
Unfortunately, most other grape growing areas of the state do not have alternatives and are faced with taking whatever wineries will pay — or not pay in some cases. Grapes annually are unharvested in coastal areas.
“The grape industry would not be anything without wineries and the wine industry would not be anything without grapes,” DiBuduo reminded growers and vintners once again. There should be “synergism,” alluding to the often adversarial relationships between California growers and vintners.
Prices remain below break-even across the state; price discovery is still elusive at harvest time, even with contracts; harvest standards change often (hang time and changing Brix standards) and imports continue to cut into California sales, including bulk imports sold under an American wine label by California wineries.
“If it says American, it should be 100 percent American wine,” he said. Wineries are allowed to sell American appellation wine, if it contains up to 25 percent imports. Growers are challenging that.
While other states and countries like Australia are promoting their wine industries, California’s wine industry still does not have a mandatory assessment marketing promotion commission, a void DiBuduo continues to point out.
“We have to invest our own money in marketing and research and development." He calls the current voluntary investments in those areas “minimal.”
DiBuduo said the Allied staff did cost/return analyses for grape growing areas of the state with an average return of investment of 9 percent to come up with a “break-even” price per ton.
The break-even point and the average price growers were paid in Napa for grapes in 2009 was the widest in the state. It was a gulf. Napa producers were paid an average of about $3,300 per ton for grapes that season. They would have had to harvest 6 tons per acre to break even at that price. A more typical yield is 3.3 tons, which would put the true value of the grapes at more than $6,000 per ton.
DiBuduo acknowledged that a Napa wine grape vineyards can sell for as much as $300,000 per acre because of a shortage of developable land. Allied used an average value of $177,000 per acre to reach the $2,700 per ton spread. One reason for the high vineyard costs there is that the only source for a new vineyard is to buy an old one and redevelop it. He also conceded that paying high prices for productive vineyards in Napa may be a “lifestyle” decision by the wealthy.