This year’s Vineyard Economics Seminar last week at the Napa Valley Marriott & Spa raised many issues of concern to grape growers and their lenders.
What will be the impact of bulk wine imports on California growers?
Will wineries have enough grapes to meet rising consumer demand?
Can wine grapes compete with other crops in the Central Valley and Monterey County?
David Freed, who founded the seminar and the Wine Industry Financial Symposium, pointed out that according to research firm Gomberg, Fredrinkson, California wine shipped to the U.S. market actually dropped last year (from 216 million cases in 2011 to 208 million in 2012).
This was in spite of the total U.S. wine market growing. Imported wine, much in bulk, made up the difference, rising from 107 million cases to 133 million (wine from other states was up slightly to 29 million cases).
Imports now represent 35 percent of the U.S. market, up from 22 percent in 2001, statistics show.
Part of the reason for this is that California wine grape acreage actually dropped from 570,000 acres 2001 to 546,000 acres in 2012, and non-bearing (new) vines have dropped, boding ill for the future, records show.
Grapevines for planting have been in short supply, too, with concerns over viruses like Red Blotch-associated virus discouraging some growers from replanting tough many vines planted in the wave of a phylloxera attach two decades ago ready for replacement.
Another speaker, Nat Du Buduo of giant grape marketing cooperative Allied Grape Grower, said that since the official California grape acreage report is voluntary, and known to be inaccurate, what’s the actual acreage? The apparently largest grower, the Franzia family, doesn’t report its estimated 45,000 acres, for example.
The state reported it at 480,000 acres total (20,000 non-bearing) but then estimated the real number was 546,000 acres (38,000 acres non-bearing).
Allied Grape Growers estimates 590,000 acres (70 non-bearing) and pesticide reports are even higher at 600,000 acres.
It could make a big difference. About 5 percent need to be replanted just to keep even, and 20,000-25,000 acres would do that, but 70,000 acres would provide for growth.
Early last year, everyone expected shortages, but it was a record grape crop. Napa tonnage was up about 50 percent over the year blow (admittedly a poor year), but statewide, the crop wasn’t up much in the Central Valley, which produces about half the state’s wine grapes.
Most people seem to think the industry is OK for the near term, but long-term demographic trends suggest growing demand, and it’s not clear where the supply will come from, at least in California.
One thing is clear: Acreage has been dropping in the San Joaquin Valley, though not in the coastal areas.
In the Central Valley, nut orchards are displacing wine grapes because of higher return on investment, while vegetables and fruit are tough competition in the Salinas Valley of Monterey County, officials said.
Du Buduo suggests letting imports take the bottom of the market and encourages his growers to produce higher-quality grapes, but that normally takes more labor. Labor is tight because of the hostility to immigrants, even legal ones, in parts of the country.
Many growers are tip-toeing into mechanization to save labor, such as mechanized pruning and leafing, and changing trellises to require less handwork.
Here in Napa Valley, growers who brag about their handwork in the vineyards may have painted themselves in a corner, yet modern mechanical harvesters often include sophisticated sorters and deliver excellent fruit.
All in all, this year’s vineyard seminar was more about big producers, less about Napa Valley’s typical grower or winery. They’re sitting pretty with seemingly adequate supply, high grape prices for growers and recovering markets for high-end wine.
Everything is fine unless they want to buy vineyards. Big and well-financed wineries like Gallo and Jackson are buying up the land to ensure supply, and little additional vineyard acreage is available in premium areas like Napa and Sonoma counties.
Email Paul Franson at firstname.lastname@example.org.