Demand strong for Valley wine grapes

Central California wine grape growers from Lodi to Kern County can expect strong demand and decent prices for their grapes this harvest season.

Unfortunately, demand is weaker for California coastal wine grapes, according to Allied Grape Growers President Nat DiBuduo.

“It’s the economy,” DiBuduo explained regarding the difference in demand. Consumers are buying down rather than up in the recession, DiBuduo told Allied’s annual meetings in Fresno and Santa Rosa.

Prices for those in-demand grapes should be at least at 2008 levels and maybe higher, depending on the variety.

And last year was a good year for Allied, the state’s largest grape marketing cooperative which sold 285,000 tons last year for its 600 members for a total of $82 million.

That breaks out into $50 million for wine grapes and $32 million for San Joaquin Valley Thompson seedless (raisin) grapes.

DiBuduo calls the 2009 crop “strong average” in size. He agrees with the official state forecast of 6.25 million tons, down 4 percent from a year ago.

Wine grapes account for 53 percent of California’s total production, raisin grapes account for 34 percent, while the remaining 13 percent are table grapes.

Wine grape production is forecast at 3.30 million tons, up 8 percent from the 2008 crop.

“Shatter and hot spells reduced the crop,” said DiBuduo. SJV Thompson bunch counts are off 25 percent from last year. However, the 2009 crop is considered closer to the historical average than last year’s large crop.

The only major uncertainty now is the fate of the large uncontracted Thompson crop for concentrate. DiBuduo says Allied will have a home for its growers’ Thompson grapes. The uncertainty surrounds uncommitted Thompsons and the field price for raisins.

Gallo and the other major wineries/concentrate buyers have not announced a Thompson price. Raisin packers and the Raisin Bargaining Association (RBA) also have not agreed upon a price, according to Glen Goto, RBA chief executive officer. However, Goto does not expect it to be significantly different than the $1,310 per ton growers were paid last season for their 2008 free tonnage raisins.

“We shipped 350,000 tons of raisins in 2007-2008 and it should be close to 340,000 tons this year. An average year is 300,000 tons, so we have had a couple of pretty good shipment years,” Goto stated.

A bigger uncertainty is the overall future of the California wine grape industry. Sales continue to grow, but there are few new vineyards being planted because wineries are sourcing surplus bulk wine offshore from places like South Africa, Australia, Chile and Argentina and not contracting for future California grapes.

“Wine imports are up 500 percent to 600 percent. Cheap wines from around the world are displacing California wines, at the expense of SJV grapes,” says DiBuduo.

He cited specifically Fred Franzia of Bronco Winery fame, the originator of $2 Buck Chuck and $4 Napa Valley wine. Franzia recently announced he will unveil a cheap Australian wine at half the price of Australia’s most popular label, Yellow Tail. It is surplus Australian wine and will sell for about $3 per bottle, half the price of Yellow Tail.

While Franzia’s bargain wines are labeled, much of the cheap, surplus world wine is not. It arrives in bulk, often to be blended with U.S./California wine and sold under an “American” appellation. This means up to 25 percent of wine carrying that appellation can be imported wine, a provision being challenged by California grape growers.

This global wine market is changing the California wine grape growing paradigm. California wine grape production and prices cycle up and down every decade with increased demand and typical overproduction. Now, however, as demand grows for California wine, there are no extensive new plantings to create the inevitable surplus that comes every 10 years.

Wineries are not responding to this looming California grape shortage with financially attractive long-term grape contracts to plant more vineyards.

“Decisions are not being made by winemakers. Decisions are being made by number crunchers, and it is holding back people from planting to meet future demand for California wine grapes. If wineries want California wine grapes, they need to step up to the plate,” says DiBuduo.

Along the supply/demand and labeling issues, DiBuduo cited other challenges facing the industry, including food safety issues, immigration and labor and heat stress training for workers.

Water is probably the biggest challenge facing all growers. So far the state’s water shortages have not significantly impacted Allied growers in the San Joaquin since most of them farm on the East Side of the Valley which has a plentiful water supply. The West Side of the Valley has seen land idled because of federal water delivery restrictions and Allied has few members in that area.

However, DiBuduo warned, “If you have water today it does not mean you will have water tomorrow” because California’s water crisis will likely get worse before it gets better.

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TAGS: Grapes
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