Prospects of wine grape balance bring new challenges

San Joaquin Valley wine grape growers, buoyed by prospects of balanced supply and demand after removing perhaps as much as 90,000 acres, must now gain tightly worded contracts and deliver high quality at fair prices in a global wine arena.

That’s the essence of a message presented by Nat DiBuduo, president of Allied Grape Growers, at the 2004 Spring Ag Outlook Forum in Visalia, Calif..

Speaking at the annual event held by the California Chapter of the American Society of Farm Managers and Rural Appraisers, DiBuduo said growers and wineries are collaborating to brighten the elusive "light" at the end of their industry’s "tunnel." Location in the state, type of contract, and variety will determine an individual’s position in the tunnel.

"We’d like to see some miracle to make the industry turn around, but with all the miracles in the world, it will still take hard work and effort. I am positive we are working together," said DiBuduo, whose Fresno-based marketing cooperative represents 500 growers who produce 200,000 tons of wine grapes from Kern County to Lake County.

In setting the scene for his comments, he noted California contributes a mere 5 percent of the wine grapes in the global total. "We have to realize that imports in to the U.S. have increased to where one of four bottles of wine sold here is an import, and we’ve lost market share."

For growers in the SJV, a stark reality is that in 2003’s 3.4 million-ton crush they contributed 56 percent of the tonnage but claimed only 18 percent of the value. The all-time low in prices, such as $65 to $90 a ton for Thompson Seedless, in 2003 saw more acreage pulled and replanted to almonds or other crops.

Planting of grapes, except replants of table varieties, has stopped in the SJV, and estimates are that about 90,000 acres of grapes was removed from valley counties from 1998 to 2003. Industry estimates are that another 10,000 to 15,000 acres will be pushed out this year, he said.

By contrast, in the North Coast region, where 9 percent of the crush represented 39 percent of the income in 2003, some planting continues even as recently planted acres have yet to bear.

Although land prices and costs of production make it more expensive to farm, non-bearing hillside acreage there suggests, as DiBuduo put it, "they haven’t caught on there’s an oversupply."

He offered tips about winery contracts for growers and appraisers (who use contracts in setting valuations of properties) to consider as part of a list of new challenges appearing as the industry shakes off its depression. Growers need first to look at the term of the contract and what conditions would breach it.

Important too is whether it is a production contract or a tonnage contract. "In many cases growers have thought they had a production contract, but it had a tonnage element to it. For example, it might be for 200 tons from a ranch, but if it ran to 204 tons, the extra four tons was overage."

"Contracts have been introduced in the last couple of years that require certain aspects of fruit quality. Those are good things, but just make sure you understand what you are expected to do and whether it adds to your cost factor."

In one example, he explained, a contract vaguely allowed for the winery to determine whether the grapes at the time of harvest meet "the intended use" by the winery, without specifying levels of sugar, acid, or material-other-than-grape.

In another, a contract set a maximum sugar of 23. When the grapes reached that level, the winery ruled the flavor was not proper. Although the winery did not penalize for a sugar of 26 or 27, higher than allowed in the agreement, the grower lost because of shrinkage.

"We believe the quality of grapes has improved significantly throughout California, like it had to do to compete in global markets. Growers have to be compensated for that higher quality," he said.

DiBuduo said the acreage already removed by SJV growers is about equal to the crush of coastal vineyards from Monterey to Santa Barbara. "The SJV can only do so much and others will also have to adjust their supply or increase the demand side in other areas."

The state’s grape growers need to support efforts to promote and sell more California wines. "We need to tell our own story and get consumption up and recover our market share."

He called for better reporting procedures for acreage reporting, both bearing and non-bearing. Vineyard statistics now are compiled and released a year after the fact. The reporting is now voluntary, and steps are being taken to make it mandatory.

Touching on the increasing role of grape concentrate, he said the concentrate business is here to stay, as seen in a shift from cola beverages to fruit based drinks.

However, concentrate utilization has suffered from the removal of Thompson Seedless, whose neutral flavor and color make it well adapted as a sweetener. Thompson Seedless competes with concentrate from apples or pears, and its prices were quite low last year.

Noting that much of the Thompsons that formerly went to concentrate wound up last year either made into raisins or removed, DiBuduo said he now reminds processors seeking white concentrate they offered too little for it last year. In many cases, he added, "I told them those vineyards were now called almonds."

French Colombard and other white varietals grown in the SJV were once made into concentrate, but after acreage was reduced, the remaining production was diverted to wine use.

The concentrate business even drank from red wine grape production when they were in surplus, an example being Zinfandel concentrate filtered to remove its color. Now wineries are again looking for tonnage for White Zinfandel, DiBuduo said.

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