Back-to-back 2000 and 2001 California grape crushes totaling more than seven million tons combined have filled the tanks of the state's wineries and as expected, prices are declining, especially in the spot market.
However, one of the California wine grape industry's most widely respected experts, Barry Bedwell, was not as much doom and gloom as those numbers would suggest when offering his analysis of this year's crush and what the future might hold at the recent Agribusiness Management Conference in Fresno.
Bedwell, general manager of Ciatti Grape Brokerage and former president of Allied Grape Growers, certainly did not paint a rosy picture for California wine grape growers. In fact, it was down right grim for the central and southern San Joaquin Valley, which accounts for 60 percent of the statewide tonnage crushed.
With production costs running $1,300 per acre and income only $600 to $700 per acre in those regions, Bedwell is concerned that growers will simply abandon vineyards next season because there are no alternate permanent crops that offer profit potential.
That may bode well for the supply side of the ledger, but it is not good news in the ongoing battle against the glassy-winged sharpshooter and the western grapeleaf skeletonizer. Abandoned vineyards would become a reservoir for those pests.
Bottom this year?
“Times are very tough in the central valley, but this year may have been the year when it hit bottom,” he said.
Overall, however, he called the short-term outlook for the state's industry “realistic, but long term optimistic,” especially for high value, premium coastal wine grapes.
His optimism is based on the fact that California wine grape exports are growing at a 16 percent increase clip. That compares to only 1 to 2 percent annual growth rates in the 1980s. Domestic wine consumption is also growing, however, imports are capturing a good portion that by virtue of their annual 23 percent increase rate.
Not surprising in light of recent heavy plantings, spot prices softened this season for most wine grapes. The industry's “spectacular success” of the ‘90s spawned unprecedented vineyards plantings. And still 19 percent of the state's 568,000 acres of wine grapes are non-bearing.
Most say a significant percentage of those grapes were established without long-term winery contracts, leaving them subject to the vagrancies of the spot market. That is a tough place to be with a fresh product in an oversupplied commodity. Certain varietals had tough sledding in the spot market this season and that is not expected to change next season with an average or above average crop. This will be the case even in the highest end of the wine grape spectrum, the North Coast and the Central Coast, predicts Bedwell.
There remain some economic bright spots, however. Zinfandel for both the red and white market is one and Merlot is another.
The rush to plant more Chardonnay and Cabernet Sauvignon spared Zin and Merlot.
At one time many expected Merlot to surpass Cabernet Sauvignon in tonnage and acreage, but that has not happened because many perceived Cabernet as growing faster that Merlot and therefore planted more Cab than Merlot. And with the Merlot crop smaller than expected this season there is a better supply/demand balance than with some other varietals.
Cabernet Sauvignon tonnage was down this year (340,000 tons versus 357,000 for last season), but the big crop in 2001 spiked the inventory. Referenced contracts netted Napa growers $3,500 to $4,000 tons this year, but the spot market was below $1,000 per ton in the same area as supplies increased sharply. In the Lodi-Woodbridge area the spot market was $200 to $300 and in the south valley only $100 per ton as a generic variety.
The same was true for Chardonnay where the 2000 crush filed the tanks with 107 million gallons of Chardonnay, up from just 35 million the year before. That increase represented 13 million more cases of Chardonnay from the 2000 crush vs. 1999, said Bedwell. That drove spot prices down in 2001.
“Zinfandel is in better shape than other varietals because it has not been overplanted. This is true for red Zin as well as well as the white market,” said Bedwell. This bodes well for the Northern Interior area of Lodi-Woodbridge.
The concentrate crush (primarily Thompson seedless) in the central valley was less than expected this season and that may translate into higher spot market pricing and may reduce pulled acreage this winter. Bedwell said concentrate crush estimates were as high as 350,000 tons earlier, but that has fallen to at least 320,000 tons.