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