End of harvest leaves winegrape growers satisfied

Issue Date: December 21, 2011
By Steve Adler

The biggest challenges facing California winegrape growers this year were weather related—early rains, an untimely frost and cool summer—but in the end, virtually all winegrapes were harvested and sent to wineries at prices that growers hadn't seen in quite a while.

"Winegrape growers have a little bounce in their step, finally," said Bill Pauli, a Potter Valley winegrape grower and chairman of the California Association of Winegrape Growers.

When all is said and done, the size of the state's winegrape crop will be off, with the final totals to be announced next spring.

"I think the crop will come in somewhere around 3.2 to 3.3 million tons statewide, which is off from the normal 3.6 or 3.7 million tons, and it could possibly be even lower than that," Pauli said.

Growers were fortunate to get everything harvested despite early rains, he said.

"The weather held at the end and everyone was able to pick late into the season to get everything in, and with firmer prices and strong demand, I think the growers overall did better than they have been doing for awhile," Pauli said.

Nat DiBuduo, president and CEO of Allied Grape Growers in Fresno, echoed Pauli's views regarding the supply-demand imbalance.

DiBuduo called higher prices for San Joaquin Valley grapes encouraging. Five years ago, vineyards were being pulled due to low demand. Now, DiBuduo said, he's not recommending any more removals.

"A few years ago, we were in an oversupply cycle and we lost a lot of grapes that were pulled out of the ground—and a lot of that was due to pricing," DiBuduo said. "Now, the wineries need the grapes and the grapes aren't there. So the demand was good and the pricing was stronger than last year by 10 to 20 percent, depending on the variety."

Production declined in all growing areas, he said. Rains hampered crop development on the North Coast, with production dropping 15 percent. Frost cut into the Central Coast crop for a 34 percent decline. The Central San Joaquin Valley crop was off 7 percent and the statewide total was off 10.4 percent at 3.24 million tons, DiBuduo estimated.

An Allied Grape Growers market review showed increased prices earned for all winegrape varieties in the San Joaquin Valley. Thompson seedless and other raisin types earned $265 a ton, up from $210 in 2010. Merlot increased from $381 per ton to $490 this year.

Observers suggest this is the time for winegrape growers to sign long-term contracts with wineries for existing vineyards and to plant new vineyards in an expansion move. But winegrape insiders cautioned that such moves should be taken with careful thought and planning.

At a recent winegrape forum in Fresno, E&J Gallo Winery President Joseph Gallo announced the winery plans to offer long-term contracts for 10,000 acres of production to ensure the juice would keep flowing. Gallo, who makes few public speeches, said the winery plans to add capacity at its three plants to handle additional grapes.

Vineyard and winery appraisal expert Tony Correia delivered encouraging news for growers, but with a few caveats.

Obstacles to new vineyard plantings include high development costs, environmental regulations, media oversight and local resistance, and water availability. Labor availability continues to be another challenge to growers, Correia said.

This year's shortage of winegrapes provides an indication of an opportunity to plant additional vineyards, Pauli said. For the right grower in the right area with the right variety, he said, wineries are certainly interested in offering planting contracts.

In the past, he said, growers had a tendency to overplant a particular variety in response to market needs, citing three examples: chardonnay, zinfandel and pinot grigio.

"This time it is more planned. People are asking, 'What is the right variety for a particular area and what does the winery need?' So there is a better match between growers and wineries on these new plantings this time around," Pauli said.

Winegrape grower and vineyard developer Brad Goehring of Lodi called planting a vineyard very capital-intensive compared to other permanent crops. In the past when there was a shortage of winegrapes, growers had few other profitable choices, but that has changed, he said.

"Now a lot of other crops—almonds, tomatoes, alfalfa—are doing extremely well, including some new crops like pomegranates and olives," he said. "What we are seeing is a competition for open land among these crops. That competition has caused open land to increase in value, so people aren't just considering planting grapes; they are considering planting a variety of different crops."

Value of existing vineyards and wineries in good locations is strong, Correia noted.

"Wine prices drive grape prices, which drive land and vineyard prices," he said, warning that intense competition for good land will continue.

John Aguirre, president of the California Association of Winegrape Growers, said the general feeling among growers is relief after a physically demanding year, given the challenges of weather and harvest.

"There is optimism about the direction of winegrape prices," he said. "But there is also concern about the availability of labor and in terms of public policy, a lot of people see that we are at a crucial point in time in terms of regulatory burden on businesses. There is question about whether we are going to continue on a path that is suffocating for business and the economy, or are we going to see people recognizing that we need to do something about reviving our economy and making sure we are competitive?"

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

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