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More winegrapes could go unsold, analysts believe

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With the amount of winegrapes that went unpicked in 2019, the message
to grape growers from marketers and vineyard managers is clear: Without
a winery contract, grapes could easily not have a buyer this year.

Winegrape experts such as Jeff Bitter of Allied Grape Growers; Duff
Bevill, a vineyard manager in Healdsburg; and Dana Merrill, a vineyard
manager in Paso Robles, all echoed the same message—there were more
winegrapes left on the vine in 2019 than ever before.

“Growers with contracts, which I would say is probably the majority
of winegrape growers, are probably in the black, and I wouldn’t be too
concerned about them,” Bitter said. “The growers that do not have
contracts and are on the spot market are going to be very challenged to
operate in the black this year.”

Bevill cited an example: A grower with 100 rows of high quality
grapes stopped picking after 86 rows, when he reached the winegrape
tonnage amount called for in his contract.

“If a winery had a contract for 100 tons, they told the grower to not
bring in 101 tons,” he said. “In 2019, there were just more grapes that
didn’t have contracts. The supply chain was full. Growers in certain
areas, like the Central Valley, had the option of taking out a vineyard
and planting something like almonds.”

However, in regions such as the North Coast and Central Coast, such
crop changes are not readily an option because of climate and
topography.

The three analysts noted that in many instances, wineries are opting
not to renew contracts and instead deciding to explore other options.
That means winegrape growers whose contracts concluded in 2019 need to
prepare for 2020 and beyond, they said.

“Of course, growers already knew that demand had diminished over the last two years,” Merrill said.

About halfway through last year, he said, it was pretty obvious the
market was slow and growers became more focused about where they were
going to have to make tough decisions.

“I don’t think that you can say a grape is a grape is a grape,”
Merrill said, noting that in some instances farmers in a certain
appellation or sub-region might grow a variety that “actually still has
some decent demand and wineries might have specific needs that they want
to fill.”

Wineries will pay higher prices for what they really want and need, but have become very selective, he said.

“If you have the right variety, vineyard, location and age of
vines—virus free is critically important now—it is much easier than if
you don’t,” Merrill said.

This year, he said, a number of farmers are deciding to step away for a year or two before deciding what to do next.

“So my message is that now is the time to pull diseased, old,
lower-quality vineyards with no buyer. It is like having a modern, new,
efficient factory versus trying to compete with an obsolete, inefficient
factory in now more competitive times,” Merrill said.

Providing a general overview, Bitter said it is important for
everyone in the business to realize the oversupply of wine is a
statewide challenge and not specific to any particular region.

“I’ve seen a marked increase in vineyard removal in the coastal
areas, but also in Lodi,” he said. “We’re estimating at least twice as
many vineyards will come out of the Lodi area than have been pulled in
recent years. In the Central Valley, we’ve been pulling at a pretty high
rate over the last few years, and that’s going to continue.”

Bitter said the current wine surplus did not result from a decrease in wine sales.

“I guess part of the misconception about the wine industry is that
people are maybe mischaracterizing what’s happening and thinking that
we’re selling less wine. That’s not actually the case. We’re not
necessarily selling less wine, we’re just not selling as fast as we have
been for the past two decades,” he said.

That, Bitter said, has created the imbalance in supply and demand, as everyone had anticipated the status quo to continue.

“We’re just kind of flat now, but we’re not actually losing shipments
year on year,” he said. “But the extra inventory that’s out there today
in grapes and wine is providing an opportunity for negotiation to come
in and purchase the supply cheap.”

He predicted that people will “see brands that you’ve never seen
before, and they will be very affordable and they’ll probably be pretty
good quality. But most likely, they’re going to be flash-in-the-pan
brands, because as soon as the extra inventory dries up, they may go
away.”

This year’s winegrape crop has just begun to develop, as growers report the beginning of budbreak on the vines.

With an early budbreak, another potential situation of concern looms:
a late frost that could wreak havoc on tender, young shoots.

“If we get freezing cold, that could set us up for some devastating
damage if we get a late frost with an early bud break—and that has
happened in the past,” Bitter said.

Bevill noted that frost in his region could materialize as late as May 15.

“So, if you start bud break in February and May 15 is your last
average frost, you may be losing sleep this spring,” he said. “It’s
definitely very early in the season, so we’ll have to keep our eye on
things, that’s for sure.

“And hopefully we get a lot of rain in March,” he 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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