Water issues dominate 2014 grape outlook

Issue Date: February 5, 2014
By Steve Adler

The day before California experienced a couple of teasing rain showers, the thing on everyone's minds at this year's Unified Wine and Grape Symposium in Sacramento was the continuing drought and the potential impact it may have on California farmers and ranchers.

Nat DiBudio, president and CEO of Allied Grape Growers in Fresno, brought the point home when he listed the three biggest concerns among growers in the state: "It's water and it's water and it's water."

DiBudio was one of three featured speakers at the symposium's annual "State of the Industry" presentation. Other panelists were wine experts Jon Fredrikson of Gomberg, Fredrikson & Associates, and Mike Veseth, University of Puget Sound professor and author of the Wine Economist Blog.

DiBuduo said despite reports last fall of a wine shortage, the wine market worldwide remains in balance, with continued growth projected for the foreseeable future. According to an Allied Grape Growers analysis, there are 590,000 planted acres of winegrapes in California, of which 530,000 acres are bearing. Another 35,000 to 40,000 acres of new vines will be planted this year, DiBudio said.

"We are still planting here in California," he said.

Cabernet sauvignon accounted for nearly 30 percent of the vines sold by California nurseries in 2013, followed by chardonnay with 13.7 percent and pinot noir with 12.5 percent. Zinfandel/primitivo made up 10 percent of the sales and a number of other varieties accounted for the rest, with none totaling more than 6 percent.

But it is California's drought that is the major concern among winegrape growers this year. Viticulturally, a continuing drought could affect vines in several ways, DiBuduo said, including:

  • Functional root zone reduction.
  • Potential for bud necrosis.
  • Restricted spring growth.
  • Nutrient deficiencies and/or toxicities.
  • Potential lack of frost protection.
  • Vine stress, increased pest and disease pressure.
  • Water quality concerns.
  • Potential canopy/crop load reduction.

Veseth emphasized the global market during his presentation and pointed out the continuing shift among wine-producing countries.

"The global wine market is shifting from the Old World (Spain, France, Italy) to the New World (U.S., Australia, Chile) to the new, new world (Sub-Saharan Africa, China, Asia and Australasia, Middle East and North Africa)," he said. "The tide is rising. Prices are rising in key markets as new consumers, new competitors and new wines take the stage."

The challenge for wineries is that the farther one gets from where the wine is produced, the more difficult it is to sell. He used the examples of a retail wine display in California compared to a retail wine display in New York. In California, the shelves will be dominated by California brands and in New York, there will be a heavy emphasis on wines produced in Europe.

Fredrikson noted how wine continues to grow in popularity in the United States.

"U.S. wine consumption advanced tremendously since 2001—up 118 million cases or 50 percent—as wine gained traction among American consumers," he said. "Nonetheless, wine sales growth slowed in 2013. It was a tough year for economy wines, and their sharp declines offset premium wine gains."

Fredrikson said wine inventories have been restored with two consecutive large grape harvests, and this should bring about an increased interest in California wines.

"The good news is that winery tanks are brimming with fantastic wines from the highly rated 2012 and 2013 California vintages," he said. "The impact of the abundant 2012 wines is already showing up in year-end results for some producers.

"With industry inventories more than restored, we can expect a competitive market in 2014, which will drive up sales results. The level of competitiveness will depend to a certain degree on the amount of rain California gets this winter," he said.

In presenting his final thoughts, DiBuduo said he foresees a continuation of economic progress currently being enjoyed by California winegrape growers and wineries.

"The future looks bright for California- and American-grown grapes and wine but, as always, we need to be cautious and plan diligently to match the future growth potential," he said. "The opportunity for grower and winery profitability stays with us. A balanced supply will underwrite the ability for all in the business to continuously achieve profitability."

He went on to say that sustainability continues to be a high priority among winegrape growers.

"We all need to work together to assure the success of our industry, our workforce, our communities and the reasonable protection of our environment, but most of all we have to stay focused on those things that create economic sustainability," DiBuduo said.

(Steve Adler is associate editor of Ag Alert. He may be contacted at sadler@cfbf.com.)

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

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