Wine grape growers in California's San Joaquin Valley are learning a tough economics lesson the hard way, causing them to pull out vines, turn to other crops, sellout, or retire.
They are learning that the wines their grapes have produced for years are now in low demand, and the price wineries pay, if they buy their grapes at all, doesn’t cover their cost of production.
But wineries and grape buyers see an improving national economic trend and an increasing demand for higher priced wines made from grapes grown in cooler regions, supposedly with better taste and overall quality.
They do better producing $18 a bottle wine than turning out volumes of “two buck chuck,” or whatever the current low-priced brand is.
In the multi-tiered California wine industry, it has long been accepted that grapes grown in the restricted wine grape production areas such as the Napa Valley command a higher price, in several cases a much higher price.
Grapes grown in the Central Valley have gone to lower priced wines and for blending to help the wineries achieve volume.
Even though Central Valley growers in recent years have planted some of the tastier, more popular varieties, tradition dictates that the area’s intense summer heat, although similar to prime growing areas around the world, and perhaps some of its soil characteristics, relegate its wine grapes to the bargain basement.
Drought conditions have not helped.
Enthusiastic efforts in the past eight to 10 years to promote wines made from grapes grown in the Central Valley have allowed some local wine producers to establish substantial reputations among local wine connoisseurs.
But they have not overcome the strong traditions of the greater wine industry and preferences of the sophisticates for what they call premium wines.
One of the painful paradoxes of this economic puzzle is that the American wine industry is experiencing increasing sales. Consumers are buying more medium- to higher-priced wine, and grape growers in the areas that produce grapes for that produce range are doing well, along with the wineries and winemakers.
Typical of growers, especially in California, those who produce the less desirable grapes have turned to their grass roots organization for help. Allied Grape Growers is the primary one, a strong cooperative that has been in existence, battling for the growers’ interests, since 1951.
Behind President Nat DiBuduo, Allied has mounted a vigorous campaign to enhance the reputation and demand for wine grapes grown in the San Joaquin Valley. Its educational, promotional, and marketing efforts, however, have not held back the overwhelming economic pressures prevailing in the industry.
A dominant issue has been the influx of wine grapes grown in Australia and in traditional European vineyard districts. Either because of generous subsidies from their governments or lower, less regulated production methods, their grapes can be exported to American grape buyers at prices that undercut the home grown product. Wine importation is encouraged by the U.S. government through its “Duty Draw Back” program.
The losing battle for better wine grape prices has gone on long enough that many growers have decided that life is too short to continue.
Allied personnel estimate that in the last year about 25,000 acres of producing wine grape vines have been bulldozed and burned. They check burning permits issued by air pollution executives carefully, and overview real estate sales figures constantly. And they communicate with their growers.
With wine grapes in their rear view mirrors, growers are evaluating other crops that might promise better returns.
They discuss the economic issues with their neighbors who are nurturing new plantings of almonds, pistachios, and walnuts. None of the alternatives offer immediate relief or income, and all require years of uncompensated care and development.
Their most persistent objective, of course, is overcoming the bad taste left in their mouths by years of wine grape production.