The challenge of feeding a burgeoning, increasingly hungry world in the future is a recurrent theme with agricultural leaders these days. All of them cite U.S. agriculture as playing a prominent role in feeding a world population that is projected to double in less than four decades. This bodes well for the economic future of American farmers and ranchers.
California Department of Food and Agriculture Secretary Karen Ross told members of Allied Grape Growers at the grape marketing cooperative’s annual meeting in Fresno, Calif., that California, the most productive agricultural state in the nation, will be a major contributor to meeting those food demands.
There has never been a “better or more challenging time” for highly diversified California agriculture in meeting not only global food demands but consumer mandates for locally grown food in a state of 38 million people, she said.
This is particularly true for producers of so-called specialty crops like fruits and nuts meeting the changing dietary demands of a growing world middle class, as well as local consumers. California is the prime U.S. supplier for many of these commodities such as almonds, fresh market grapes, walnuts and pistachios.
It would seem that the future is here this year for Allied’s San Joaquin Valley wine grape grower members who are likely to hang out 'sold out' signs on vineyard gateposts by the end of July, well ahead of harvest, according to Nat DiBuduo, president of the marketing cooperative.
Those grapes could bring Allied grape sales revenues to the highest level since 1987, according to the chief executive officer.
Allied represents almost 600 growers and more than 31,000 acres yielding more than 285,000 tons of grapes in the San Joaquin Valley and the North Coast. Sales should total more than $80 million this season.
This season is the turnaround DiBuduo and others have been predicting for several years, but not realized until now. DiBuduo’s bullishness for the future of the California wine industry also comes with a caveat: “Be careful what you ask for.”
DiBuduo’s offers his admonition because the California wine grape market for growers has proven it can be as fickle as a Hugh Hefner girlfriend. This is not the first time in recent years DiBuduo and others have been bullish only to be rebuffed by winery buying tactics — like going offshore to buy foreign wine instead of paying California growers profitable prices.
“We appear to be heading in the right direction for the California wine industry for both the vintners and growers,” said DiBuduo, explaining that wine sales are up domestically, exports are strong and demand for California's quality wines is much improved and “reaching exciting profitable levels for wineries and, hopefully, growers as well.”
Nevertheless, exports continue to flow into the U.S. with as much as one-third of the U.S. wine sales being foreign wines, encouraged by the federal government’s “duty drawback” program, DiBuduo said.
The majority of imported wines are now coming in bottled versus bulk wine as in past years. Some wineries are bottling foreign wine in U.S. wineries before going on to retail shelves.
“We cannot sit back and whimper about it, but must take the challenge head-on and produce the best quality wine grapes and wine while promoting the consumption of California wine.”
The oversupplies of wine and wine grapes are gone not only due to increased sales, but largely because more than 100,000 acres of vines have been ripped out, mostly in the San Joaquin Valley.
This year’s improved prices are no doubt due to a sharp decline in the projected grape crush, largely related to spring frost crop losses on the Central Coast and smaller crops expected from the North Coast due to shatter and other weather related issues. The latest USDA crop report projects a wine grape crush of 3.4 million tons, down 6 percent from last season. Wine grape bunch counts are reported to be down significantly from last year.
Demand for San Joaquin Valley wine grapes far outpaces supply.
“The increase in wine sales at the $10 and below prices has caused a tremendous interest by wineries to buy more grapes at higher prices,” DiBuduo said. Cabernet Sauvignon, Red Zinfandel, Sweet Red, White Zinfandel, and even Merlot have been bought with strong interest and stronger pricing. Demand for all generic reds to be used as blenders has been good at higher pricing. SJV Chardonnay prices are also higher and “demand will consume every available white grape produced this year.”
Statewide, demand is good for red wine grapes like Cabernet Sauvignon, Petite Sirah and Zinfandel. Sauvignon Blanc is seeing a “slower than desirable play” by wineries at this time. However, DiBuduo anticipates demand will reappear later in the season (hopefully before harvest) as wineries see the lower availability of Chardonnay, Pinot Gris and other whites.
“One of the varieties we represent that is in very strong demand is Muscat Alexandria or other floral types that make up some of the new ‘sweet wines,’ such as the various ‘Moscato’ type wines,” he said.
Allied annually markets between 100,000 and 145,000 tons of Thompson seedless for the concentrate, brandy, sparkling wine and generic white wine markets. Prices have dipped to just $65 per ton over the past decade for Thompsons. This year DiBuduo believes it will reach $250 per ton, largely due to the loss of thousands of acres of Thompson vineyards over the past decade. This has bolstered the raisin market, which for the second year in a row will gross growers about $1,500 per ton.
Last season when the Thompson price reached about $225 per ton, Allied released about 30,000 tons requested by growers to make raisins. This year that went down to 16,000 tons, a reflection of the stronger green price as well as the fact that the crop is two weeks late, increasing the rains risk for field dried raisins.
North Coast premium wine grapes are not faring as well this season as the central valley and its value priced wine grapes. However, interest and prices are up over 2010, according to DiBuduo.
“We are not back to prices we saw in the 1990s and early 2000s, but we are definitely seeing buyers ‘buying’. We are also seeing competition once again for some varieties but at different price points than last year. We are confident that all of Allied's growers’ grapes in the North Coast will be sold and at better prices than in 2010 prior to the start of harvest,” DiBuduo said.
Fly in the ointment
At Allied’s North Coast annual gathering, keynote speaker Steve Smith, vice president of operations for Constellation Wines U.S. agreed with DiBuduo that the valley is rebounding, but the coastal areas are still struggling.
In an interview with Western Farm Press, he acknowledged that U.S. wine grape consumption is growing at a “healthy” 3 percent. However, the “fly in the ointment” is that the average per bottle cost of wine has not come back and wineries are struggling on the top end of the wine pricing scale.
He also agreed with DiBuduo’s point that grapes for value priced wines are in a strong position this year.
There has always been a quality separation between the hotter interior valleys and cooler coastal growing regions. However, that separation is narrowing with “substantial” quality improvement in valley grapes. He applauded the work of the San Joaquin Valley Wine Growers Association in giving more visibility to SJV wines.
He also said nurseries are taking increasingly more orders for vines for new vineyards in the valley in the wake of improved grape prices.
He suggested more of a “team effort to work together” as vintners and growers strive to be profitable. “We need to leverage our knowledge by working together to maintain and grow our business.
“With any commodity it is really incumbent upon us both to have open lines of communications and for growers to understand the margins we are working under,” he said.
Nevertheless, he also recognized the wine market is now globally competitive and that “increased imports are coming in to cover the shortfall of California grapes and satisfy the increased interest from millennials.”