Jun

24

I follow the California grape industry and I found this article (Grape Growers Prepare for a Difficult Market ) interesting:

It's a game of cat and mouse in California's winegrape sector this year, which can all be traced back to the worldwide economic downturn and the impact it is having on the wine-buying public. Growers in the state's major winegrape regions report an average to above-average crop. At the same time, though, they say they feel concern about a reluctance on the part of wineries to set prices and enter into purchase contracts to buy the grapes. Brian Clements, vice president of Turrentine Wine Brokerage in Novato, says there are three primary reasons for this hesitancy: Wineries want to have a good idea of future sales, they want to have a good idea of crop size and they want to have all of their finances in place. "I think in general the wineries want to wait as long as they can to figure out one or two or three pieces of that puzzle," he says. "Buyers want to buy and the sellers want to sell, but everyone is waiting to see who is going to jump into the market first. The market is slow and there will be plenty of opportunities for grapes when and if the wineries make the decision to come into the market."

Sonoma winegrape grower Richard Mounts agrees that marketing of the grapes is the big question mark right now. "It is still a pretty difficult market. I've had a couple talks with wineries so far and what they are doing now is bottom feeding. They are trying to get the grapes at a price that is way below the cost of production, but I don't think they are having a lot of luck," he says. On the Central Coast, Paso Robles winegrape grower and vineyard manager Dana Merrill holds a similar opinion. He notes that if one or two wineries started buying grapes, it would likely break up the logjam and turn things around. "Everybody is kind of jittery with the economic situation we have," he says. "But for growers, we don't know for whom we are raising these grapes. In fact, you might be raising them for yourself, so it can be kind of tricky not knowing who your customer is. That is a bit unnerving." Mr. Clements notes that wine inventories around the world are down and crops in other winegrape growing regions in Europe and the Southern Hemisphere are not as large as they have been in previous years. "I think that although the wineries have not come out and purchased grapes in most areas of California, the buying will occur starting around verasion (when grapes begin to ripen and change color)," he says. Culturally, vineyards throughout the state are flourishing as the result of the wet spring that has replenished the soil profile, leached away salt buildup in the soil and begun to recharge underground aquifers. "As far as growth, the vines love all this rain. Some of the leaves are the size of dinner plates," Mr. Mounts says. While Mr. Mounts and other growers make an early prediction that this year's winegrape crop will be average in size, in essence the recent average in California is a large crop. Last year's crop of 3.7 million tons was the second largest in the state's history behind the 2005 record of 3.76 million tons. Production in the year following a large crop is typically smaller, but growers say they aren't seeing that happening this year. And they are quick to point out that a lot can happen between now and harvest. Mr. Mounts says that the vines got a late start because of cool springtime temperatures and are still about two weeks behind average. At the same time, though, they are not showing any evidence of slowing down. "I'm sitting here in a zinfandel vineyard looking at tendrils that are a foot long and they are normally about 2 inches long at this time of year," he says.

In the Paso Robles area, Mr. Merrill says the vines have a nice look to them and have grown very quickly. "We are probably running a couple weeks late, but we will probably make up some of that. With all the rainy weather and the cloudiness, the maturity was delayed from normal. But in terms of the growth, the growth looks great," he says. "We are just coming to the end of bloom for most varieties. We have a pretty full panel of growth. We aren't going to need to push these vines a lot more to grow canopy, which is pretty nice. "This has been a year where we can lay off the wells. Normally, we are irrigating for 60 days or so before June and most of us this year haven't turned on any water at all until we were into June. So that has helped the aquifer and saves us on pumping costs," Mr. Merrill says. In the San Joaquin Valley, most winegrape varieties are through the bloom stage and the berries are growing. Fresno grape grower Ray Jacobsen says that the vines in his area are all about 10 days behind average, but all varieties look nice because of the moderate temperatures to date. "My zinfandel looks to be a nice, average crop, and the same for the cabernet sauvignon. The syrahs look a little light, and some of my older Thompson seedless for concentrate look fairly light," Mr. Jacobsen says. "I haven't seen or heard of any problems," says Hughson winegrape grower John Duarte. "The cluster counts are there and the vines look healthy. At this point we can count on an average crop. People farmed through the wet weather, using sulfur as needed after the rains. The warm weather that we have had in recent days has been very welcome. It sets the disease cycle way back and cleans things up quite a bit when it gets hot."

He also notes that there has been a shift in growing practices in the San Joaquin Valley because of wineries seeking more grapes from the region. "Wineries are coming to growers in the Central Valley and telling them that they need quality grapes at a certain price and they will take whatever tonnage a grower can produce of that quality in order to be globally competitive," Mr. Duarte says. "A few years ago, there was a lot of dialogue between growers and wineries about low input systems, low capital systems and ways to produce grapes cheaply. But what has actually happened is that growers have shifted toward high input systems, high capital, elaborate trellis systems, high vine density and pumping inputs to get maximum production," he says. "The high input-high output system is becoming the new norm, rather than the original strategy of trying to cut costs."


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1 Comment so far

  1. douglas roberts dimick on June 25, 2010 10:25 am

    State Transitions

    Stefan, knowing squat about the wine industry, I am curious about your cited quote: “Mr. Duarte says. “A few years ago, there was a lot of dialogue between growers and wineries about low input systems, low capital systems and ways to produce grapes cheaply. But what has actually happened is that growers have shifted toward high input systems, high capital, elaborate trellis systems, high vine density and pumping inputs to get maximum production,” he says. “The high input-high output system is becoming the new norm, rather than the original strategy of trying to cut costs.””

    In the study of finite state machine, one learns how state transitions are a primary issues for design of machine logic.

    Would the distinguishing concern here, between then and now, whereby there was a shift from low input/output to high input/output, be that market conditions forced an inversion of supply-demand parameters?

    Assuming the answer is yes, then what changed in the industry?

    dr

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