Christopher Columbus introduced Spain’s old world wine to the new world in the 15th century.

Spain is planning a second wine discovery tour in the 21st century, retooling grape growing and winemaking traditions that date back 3,000 years to create new world wines for the largest wine market on the globe, the new world Columbus discovered in 1492.

Spain is not the only country coveting a piece of the upstart new world wine market.

Every wine producing country in the world wants a chunk of the U.S. wine market, now the largest in the world with sales of $30 billion annually. The dollars are attractive, but what really whets the palate of European, South American and South African wine grape growers and vintners is that Americans consume just 2.5 gallons of wine per year. For Europeans it is 10 to almost 20 gallons per year. If Americans even approached European wine consumption levels, oil super tankers would have to be diverted from the Middle East to haul wine to the U.S. instead of oil.

Wine imports started with Columbus and never stopped. The new world’s premier wine growing region, California, has always had to compete with primarily European imports almost from the day Columbus showed up.

However, since the early 1970s, import sales have been steadily climbing. Sales skyrocketed after the famous 1991 French Paradox 20/20 broadcast when Americans learned wine was good for their health. Wine shipments have climbed by 142 million cases since that broadcast, an increase of 83 percent in just 16 years.

Last year almost 100 million cases of wine were imported into the U.S. representing about 30 percent of the total U.S. wine market.

Just as Columbus discovered the world was not flat, California wine grape growers and wineries are discovering wine is now a global commodity.

It has been a painful lesson of late with the importing of very cheap surplus bulk wine, primarily from Australia, Argentina and Chile by California wineries, for blending with California wine. It is marketed to unsuspecting consumers under an American Appellation — same wine label on the box or bottle. However, the fine print now says America where it once said California because by law wineries can blend 25 percent foreign wine with U.S. wine and call it American wine.

It is a legal loophole that has California wine grape growers worried, as they come out of one of the deepest economic downturns in decades.

Prices are strengthening for 2008 grapes with vines still in dormancy. It has been a long time since wineries were talking price before bud break. Last year when growers were anticipating stronger prices at harvest time, many wineries refused to pay improved price and instead imported cheap bulk wine. Growers are fearful vintners will go looking in the global market for the cheapest product available rather than pay higher prices for California wine grapes.

And it has not been all cheap bulk imports. Bottled wine from around the world is heavily promoted and marketed in the U.S.

Therefore, at the annual Unified Wine and Grape Symposium, the breakdown of the world’s bulk wine supply and prices was of major interest to grape growers who are struggling to come out of a deep economic depression that could be derailed by continued growth of bulk and bottled imports.

Growers have come to realize major California wineries will buy cheaper bulk wine in the world market rather than pay California grape prices they consider too high.

Glenn Proctor, partner in Ciatti Company, one of the world’s leading bulk wine brokers, provided his company’s overview of the current bulk supply situation at Unified, starting here at home where California bulk wine supplies are short of demand or balanced with demand, said Proctor. This should foster the higher wine grape prices for growers’ 2008 crop.

In the California bulk market, Proctor said the Central Valley market is “showing signs of recovery” with Chardonnay supplies balanced to short. The recovery has come on the backs of at least 125,000 acres of vines that have been plowed out since 1998 by growers to plant other crops due to low returns for grapes.

The Chardonnay bulk supply on the Central Coast is the same short position as in the valley. Pinot Noir continues to be in short supply. Buyers are returning to the coast but the volume is in older/inferior wine lots, said Proctor.

For Napa/Sonoma, the 2006-2007 wine inventories are quickly tightening with Chardonnay, Cabernet Sauvignon, Zinfandel and Pinot Noir supplies short to balanced. The only varietal in oversupply is Merlot and that is a statewide situation as well.

Australia was a major source for the American appellation wines over the past couple of years, but production there has dropped dramatically from 2.1 million tons in 2006 to 1.6 million tons last year and a projected crop of just 900,000 tons in 2008. All this was due to frost and drought. This has strengthened Australian grape prices, and those seeking cheap bulk are now looking toward Chile and Argentina.

Proctor said Argentina had a record 3.3-million-ton crop in 2007 and is expected to top that in 2008 with 3.5 million tons, about the same size as the U.S. wine grape crush.

Demand is high for Argentine wine. China, Australia, Russia and North America are the big buyers. The South American country is now considered the international value supplier.

Argentina is also after the U.S. concentrate business, exporting a record 40 million gallons last year, up 48 percent in two years. Sixty percent of that was to the U.S. in direct competition with U.S. concentrate producers.

The situation is similar in Chile where the harvest was 1.3 million tons last year, only slightly smaller than the record crop of 2006. The 2008 crop is predicted to set another record. Inventories of Chilean bulk wine are low as demand increases due to the lack of surplus wine from Australia, said Proctor.

South Africa’s 2008 crop is up 4 percent from 2007 to 1.5 million tons. Quality is good and that is creating good movement in both the bulk and bottled export market.

Wine consumption in Europe has dropped dramatically since the 1970s. The French government has grown weary of buying surplus wine, and the government there is now subsidizing vine removals.

However, the demand for French Pinot Noir and Italian Pinot Grigio in the U.S. market and elsewhere is easing the downturn in French consumption.

Crop sizes have fallen significantly in France, Italy, Spain and Germany with lowering consumption levels, and that has strengthened bulk prices there.

Old world style wines have lost favor internationally, said Proctor. The European governments are subsidizing efforts to increase quality to market wines internationally. Winemaking laws also are being liberalized to compete with New World wines.

A country all too familiar to producers of other U.S. commodities is now appearing on the wine radar screen. It’s China, which now produces about 4 percent of the world’s wine from an estimated 1 million acres of vineyards.

Proctor calls China “the country to watch.”

Like many have found with other commodities, it is difficult to get a firm handle on what is planted and produced in China. However, Proctor believes China has the potential to plant as many as 1.5 million acres of vines.

“It will not all be wine. There are obviously table grapes in the picture,” he said.

Proctor called China now a “major player” in the world wine market as a buyer. He expects China to become a major exporter of wine just like it has become with garlic, apples and other agricultural products.

“We all know China can be the low cost producer of just about anything,” he said, adding that it will take some time for China to gain that reputation for wine grape production because it is still a highly fragmented industry with growers typically farming only two or three acres of grapes.

Australian and European winemakers and viticulturists are in China working with the industry to improve it.

“I think it will be five years or more before China becomes a major world wine seller,” Proctor predicted. He added Ciatti has already sent some of its people into China to assess the market.

One of the things many expected to slow down or curtail wine imports into the U.S. is the weak U.S. dollar value. However, Proctor and others say it has not. Imports continue to take a bigger share of the U.S. market, even with the weak dollar making imports more costly.

His advice to California wine grape growers: “Don’t get complacent; focus on competing in the global market.”

He also heralded the cry of many others when he advocated expanding California wine exporting opportunities and building consumer demand for California wines.

“Focus on quality and value,” he suggested.

And he added his final caveat for the current outlook for the world wine market could turn the other way with a big 2008 crop in California or elsewhere in the world.

email: hcline@farmpress.com