Supply and demand factors point to an improvement in the marketplace for California wine grape growers this season, according to Allied Grape Growers president Nat DiBuduo.
According to DiBuduo:
The crop statewide is average at best, and may be getting smaller as harvest approaches.
Overall U.S. and California wine sales continue to improve as the U.S. approaches being declared the largest wine consuming country in the world.
Uncontrolled planting has stopped, although there are about 46,000 acres of non-bearing vines listed on the USDA/NASS grape acreage report.
The tank-busting, huge 2005 crush is slowly disappearing.
However, there are still signs for concern. Wineries are not buying grapes, despite signs that there should be at least casual interest in buying 2007 non-contracted grapes. Allied, the largest wine grape marketing cooperative in the state, and others with wine grapes to sell, are awaiting the first run-it-up-the-flagpole prices. Unfortunately for growers, there is not even a flutter.
“I would like to tell you that the market is robust — that wineries are out buying grapes — but it is not happening. It is a very quiet time,” said DiBuduo at Allied's annual meeting gathering.
Allied is getting tired of waiting and being disappointed year after year. DiBuduo acknowledged that Allied is considering developing a “successful” grower custom program and investing in a bulk wine facility.
Last year, Allied sold more than 200,000 tons of grapes valued at more than $48 million. The tonnage represented 7 percent to 8 percent of the total California crush. Some of it was custom crushed, but only a small percentage.
Ever the optimist, DiBuduo said with the harvest at hand, “We are looking forward to doing business with the buyers.”
DiBuduo noted that “wineries are telling growers and the public that the wine industry is healthy and robust.
“The wineries need to make it healthy for the growers as well. The future of the wine grape grower depends on them (wineries). By the industry working together to produce and promote we can all prosper.”
These are tense times in the wine grape industry. As supply and demand near a balance, wineries are not renewing old contracts. Also, last season growers expected at least nibbles for grapes. But several large California wineries went to Australia and elsewhere offshore, and bought large quantities of inexpensive yet good quality bulk wine. They blended it with California wines, calling it an American appellation. This incited the ire of more than a few grape growers. However, it is legal.
Entering this season, there is considerable uncertainty about what will happen with this apparently small crop.
The uncertainty has spawned coffee shop rumors that Allied is releasing its Thompson seedless growers because Allied cannot sell their grapes.
“We have not released all of our Thompson seedless growers,” said DiBuduo, who added that Allied has long term contracts to cover Allied's tonnage and “there is sufficient demand for additional grapes we may or may not be able to provide wineries based on the spot market price.”
This price, DiBuduo stated, needs to be “at least as high as last year and actually higher if we are going to keep Thompson Seedless growers in production in the future. The alternative is it's pretty hard to make concentrate or alcohol out of almonds.”
Allied sends letters to its Thompson growers allowing them to opt out of Allied to make raisins. “We are waiting on our fieldmen's current crop estimate to determine if we are able to release additional tonnage.
DiBuduo described AGG as a “one-stop shop for grapes ranging from $150 to $5,500 per ton or higher.” It has 500 grower members growing grapes on California's North Coast, Central Coast, in the Lodi area, and the San Joaquin Valley.
If there are no buyers for the cooperative's member grapes, DiBuduo said Allied “will look to developing other alternatives to protect our growers' interest, including a successful custom crush program.”
If Allied does not see the “willingness of buyers to come to the table and pay economically stable prices, then we may need to look back to how this organization was started in 1951. Then Allied built alliances with wineries and others to custom crush and make wine.”
“This will not be an easy decision, but discussion of all options to the successful future should be looked at,” he noted.
With a dearth of new plantings, the word from people DiBuduo characterized sarcastically as “future thinkers” is to plant more grapes to satisfy future demand. These people, he said, are perpetuating fear that if California does not plant more grapes, “we will lose the market to those dastardly imports.”
DiBuduo has said for several years — new wine grapevines shouldn't be planted without a firm winery contract.
“How can we ask growers to plant grapes when we have excess 2005 and 2006 crops sitting in tanks throughout California?”
“How can we ask growers to plant grapes when we have growers who want to sell this year's crop with no buyers stepping up to the plate one month before harvest?”
Dibuduo said there is no justification for planting new vines when there are 46,000 acres still classified as non-bearing.
Before new vineyards are planted, DiBuduo believes there are two priorities. First, supply and demand must achieve balance. Second, wineries should offer reasonable contracts for the varieties they need.
Despite repeated setbacks from previous pronouncements regarding light at the end of the tunnel, DiBuduo is optimistic that the industry is “on the road to recovery.”
The big 2005 crush was a giant speed bump on that road. Last season some varieties were in demand. However, others continued to struggle to find buyers at decent prices.
This year will also be another challenge in a series of challenging crops, even with a smaller crop, he admits.
“Wineries are talking about a better 2008 and beyond. We need to get through 2007, and I honestly believe the future is bright.”