As winegrape crop develops, farmers gauge market outlook


Issue Date: July 24, 2019
By Steve Adler

At least one winegrape professional sees this year's crop equaling and possibly exceeding last year's record 4.3 million tons.

Jeff Bitter, president and CEO of Allied Grape Growers in Fresno, said "the question is whether it will be more, or a lot more, than last year."

"Overall, because the bunch counts are higher, we do see smaller bunches," he said. "If I had to take a stab at what this year's crop will be, there aren't a lot of folks who would say it will be smaller than last year."

Two weeks of low temperatures and a lot of rain during May—at a time when vines were in different stages of bloom—affected winegrape vineyards around the state in different ways.

"The vines were further along in the Central Valley than on the North Coast," Bitter said. "Some areas are reporting more shatter, which results in a looser, thinner bunch of grapes. In other areas, the bunches are strong. It just depends on where the crop was during that two-week period."

Growers throughout the state's winegrape-growing regions report the crop is 10 days to two weeks behind a typical schedule.

In Lodi, winegrape grower Bruce Fry pegs his crop at 10 days later than last year.

"The crop looks lighter, but the quality looks good. Mildew and mites seem to be at bay," Fry said.

On the Central Coast, grower Nicholas Miller said some varieties are about two weeks behind normal, and lighter yields are a possibility.

Because of last year's large crop and consumer shifts to higher-priced wines, the farmers said most wineries have large inventories and are slow to show much interest in the 2019 crop.

"We hope there is a home for all the grapes, but I don't know," Fry said. "It will be interesting to see what develops at harvesttime. It has been quiet for a long time. I've talked to several people, and it seems like everyone has something to sell, which wasn't the situation in the past."

Miller agreed, saying it is difficult to predict if there will be buyers for all of the grapes.

"The market in general has been quieter than normal, and everyone is waiting to see how the Constellation/Gallo acquisition plays out," he said.

Miller was referring to the pending deal between the two wine producers, in which E&J Gallo Winery, the largest wine company in America, seeks to acquire $1.7 billion in assets from Constellation Brands.

Bitter noted that a lot of wineries have yet to make their sales projections, which is causing the inventory buildup.

"We are still shipping wine; it is moving through the system, but the reality is that inventories are higher than what the wineries would like to see. So there has been no major market activity," he said. "In terms of marketing and pricing, particularly if you don't have a contract, there is no optimism among the growers. This is just one of those wait-and-see years."

Another development due to the tight market is a decrease in new vineyard plantings. Allied Grape Growers conducts a nursery survey at the end of each year and Bitter said he is already predicting a significant drop in new plantings.

"As far as vineyard removals, challenged vineyards will likely come out at the end of the year. Previously, the market had been strong enough to keep those weaker vineyards viable, but with the changes in the market, it is probably time for those vineyards to come out," he said.

Some of the removed vineyards will be replanted to grapes, whereas others will go into nut crops such as almonds and pistachios.

Bitter expanded on that theme by saying the Central Valley right now may be in a better supply/demand balance than other winegrape regions.

"The Central Valley has been suffering from a weaker market for many years because of consumer desire to move up to more expensive wines," he said. "The valley responded during that time by removing vineyards and bringing supply and demand into balance. The challenge is in other areas of the state, where new vineyards have gone in with the anticipation of increased markets."

During Allied's annual meeting in Fresno earlier this month, Bitter discussed trade and the chronic global oversupply of wine. Concerning the ongoing trade dispute between the U.S. and China, he said the China market for American wine is "not that big, less than 1% of our volume."

But, Bitter added, the high tariffs in China for U.S. goods does take away the opportunity to capitalize in that market with its huge population base. Other countries, such as Australia and Chile, are able to ship wine into China without tariffs, while the Chinese tariffs on U.S. wines double the price of those shipments.

"There is so much potential there because more and more Chinese are moving into the middle class with disposable income now. It is a travesty that we are in a position where we can't take advantage of that," he said.

Regarding the overall market, Bitter said, "For nearly every variety, and in nearly every category, value performance exceeds volume performance. Consumers may not be buying more wine, but wine prices haven't come down either—yet. Consumers are chasing quality."

On the positive side, he pointed to indications that restrictions against shipping wines across state lines are going away.

Looming challenges for winegrape growers include concerns about a pest called the spotted lantern fly, which is not yet in California but is a problem in Pennsylvania.

Then there's smoke exposure and "smoke taint" from wildfires, which Bitter called "a giant issue," along with litigation around the use of glyphosate and trade restrictions based on use of certain fungicides and their residues.

(Steve Adler is associate editor of Ag Alert. He may be contacted at sadler@cfbf.com. Reporter Dennis Pollock in Fresno contributed to this story.)

Permission for use is granted, however, credit must be made to the California Farm Bureau Federation when reprinting this item.