Once again, bulldozers are rumbling through Central Valley vineyards in California taking out thousands of vines, just as they did a little over a decade ago.
But the mood is different this time around after a year in which wine grape growers with long-term contracts fared far better than those without.
“This time, there’s not a lot of distress, not a lot of drama,” said Carson Smith, chairman of the San Joaquin Valley Winegrowers Association.
The reasons: Higher land values and increased equity put owners of vineyards in a better position. And other crops - led by almonds - afford growers of wine grapes better alternatives.
Several speakers made those points at a forum presented by the association in Fresno, where attendees also learned that the University of California has made or is in the process of making several significant hires in the viticulture research and advisory arena.
Jeff Bitter, vice president of Allied Grape Growers, said the number of dozers in the vineyards could simply be due to eagerness by some to switch to almonds or another crop. He said Allied estimates between 15,000 and 25,000 acres will be taken out this year.
Bitter and others said the Thompson Seedless grapes sold for concentrate took the sharpest hit this year as exports from Spain and Argentina undercut California producers, but they also pondered whether Argentina can sustain an export level that has dropped so low in the face of drastic currency devaluation.
This year’s grape and wine industry forum followed a different forum, with an emphasis on panels, with participants bouncing around often brief observations like ping pong balls.
The first panel looked at land values and investment strategies.
Ben Slaughter, senior appraiser with Correia-Xavier, displayed a comparison between what might be expected in the way of returns on an acre of wine grapes compared to an acre of almonds.
Bottom line: The net was $4,500 for almonds, $2,550 for grapes.
“We’re not talking about losing the farm, but maximizing resources,” Slaughter said.
Rory Robertson, executive vice president and CEO of horticultural crops with Westchester Group Investment Management, talked of strategies for maximizing returns. They included diversification: “Crops that are outperforming change with time,” he said.
A virtue of wine grapes grown under contract, he said, is price stability.
“It’s one of the few areas where you can lock prices in under a long-term contract,” Robertson said.
He fully expects almond prices will decrease, but admitted, “I’ve been wrong about that before.”
He noted both wine grapes and almonds have mechanized harvests and added that labor is a consideration, in part because of rising wages.
“There’s a risk in switching to a crop you don’t understand,” Slaughter said, adding there is also the cost of new equipment.
Robertson recommended getting “good quality advice if you’re going to make that conversion.” He pointed out another factor in weighing the switch is the fact almonds require more water than grapes.
Slaughter said questions about availability of water and how its use will be regulated continue to enshroud decision making.
Wine grape plantings
During a second panel presentation, Bitter said there has been a significant decline in wine grape plantings in the Central Valley for grapes in the under $7 per bottle category. It’s estimated at fewer than 5,000 acres in 2014 compared to 15,000 in 2012 and 20,000 in 2013.
“Planting contracts were not there; they dried up as quickly as the water,” he said.
Higher prices for raisins figured into a decision for some growers to get out of the concentrate or green market for Thompson Seedless, said Greg MaGill, a broker with the Ciatti Co.
“It was make raisins or go out of business,” according to MaGill. In contrast, he said Rubired saw a nice steady growth with long-term contracts.
Competition was particularly tough in the low-priced wine range of under the $3 a bottle or even $7, said Matthew Towers, chief operating officer of O’Neill Vintners and Distillers.
In that category, Towers said, “Consumers don’t care where a bottle of wine comes from.” That, he and Bitter said, makes it hard for California producers to compete with imports in that category.
“We need to find ways to insert our wine into bottles selling at higher price points,” Bitter said.
MaGill said California producers at the lower end of the market can best compete on reliability of sources and the lack of shipping costs. But it is hard to do so, he conceded, with a $2 differential on imports and wine or concentrate produced in California.
In a question and answer session, Bitter shared, “If you struggle to make sugar chronically, pull it (the vineyard) out. If you struggle to get color, pull it out. It’s not going to get easier.”
Bobby Koch, president of the Wine Institute, talked of lobbying efforts to strike down excise taxes on wine, beer, and spirits, “an easy target for money strapped state governments.”
He said that challenge will grow in 2015 since it is not an election year and those in public office will be more willing to raise taxes.
A final panel looked at wine import duty and excise tax drawbacks and their impacts on sustainability of wine grapes in California. Participants said the policy dating back to the late 1700’s is complex and has mixed results for California wine producers.
It hurts California wineries that process and export only California produced grapes, said John Aguirre, president of the California Association of Winegrape Growers. But it promotes exports.
“It’s not clear whether it helps or hurts grape growers,” Agirre said.
New UC hires
Those at the forum learned of some University of California hires coming after several years of advisor and research vacancies due to budget cuts. Those listed are either already on board or soon to be so.
Lindsay Jordan, UC viticulture farm advisor for Madera, Merced, and Mariposa Counties.
Ashraf El-Kereamy, UC viticulture farm advisor for Kern County.
Allison Ferry-Abee, UC viticulture farm advisor for Tulare and Kings counties.
Andreas Westphal, UC specialist on perennial crop nematology at the Kearney Agricultural Research and Extension Center.
Florent Trouillas, UC specialist in nut and fruit crop pathology at Kearney.
Kris Tollerup, UC entomologist at Kearney.
The farm advisors also serve other neighboring counties.
Two lifetime achievement awards were presented at the forum to Jim Duarte, founder of Duarte Nursery Inc. in Hughson, Calif.; a pioneer in the tree and vine nursery industry, and to George Leavitt, a longtime UC farm advisor in Madera County and a researcher who focused on insect pests and diseases in vines.