Source: Allied Grapegrowers
The annual 2013 Vineyard Economics Seminar
held yesterday in Napa attracted 200 members of the wine industry and its suppliers, investors and lenders interested in learning where the industry is headed.
Among the many topics covered, the question of balance in winegrape supply and demand seemed to dominate. The president of Allied Grape Growers pointed to incomplete data from official sources as a major factor in the industry’s difficulty in analyzing the supply-demand situation.
The seminar started, as usual, with a summary of the findings of the 2013 Vineyard Economics Survey conducted by David Freed, creator of the seminar and chairman of Silverado Premium Properties
. Wines & Vines
provided a preview of those findings and Freed’s concerns May 6 (see "New Chapter for Vineyard Business
Freed did present some new information, however, including that 88% of respondents to his survey this year said they were more profitable than the previous year, down from 98% in the 2012 survey, which came after a very weak year.
Following Freed’s talk and a summary of the current grape and bulk wine market by Brian Clements, vice president of Turrentine Brokerage
came a panel discussion of important issues by five growers from around the state.
Each addressed a specific issue raised by moderator Craig Ledbetter, vice president of his family’s Vino Farms.
A question of acreage
Nat DiBuduo, president of Allied Grape Growers
, which represents both Central Valley and coastal growers, especially focused on whether the state has too many or too few acres of grapevines planted, a question complicated by 2012’s record crop.
He pointed out that the widely quoted figures on bearing and new grapevine acreage aren’t very accurate. Specifically, while the state reports 480,000 acres (20,000 nonbearing), those figures are voluntary, and DiBuduo commented that a large grower, who controls 45,000 acres, doesn’t participate. Others don’t either.
Knowing this, the state estimates 546,000 acres, 38,000 of them nonbearing.
DiBuduo pegs the number even higher—at 590,000, with 70,000 acres nonbearing—stating that an unnamed source said the Department of Pesticide Regulation uses figures from mandatory reporting to estimate 600,000. He also said that nurseries report selling 30,000 acres worth of stock last year.
DiBuduo believes that the actual nonbearing acreage is very important. Assuming the industry needs to replant 5% per year just to maintain production since vines now typically have a 20-year lifespan, the reported 20,000 acres wouldn’t be enough to maintain production. If the figure is 70,000 acres, that would provide significant additional tonnage in a few years, particularly since newer vines tend to be more productive.
That doesn’t mean to stop planting, he added. “We don’t think we’re in oversupply, but plant wisely.”
This variance underlines the difficulty in declaring whether the grape supply is in balance or not—and whether a shortage looms soon, as was predicted last year but evaporated with a large crop.
Bulk wine, labor and mechanization
Another speaker was Rodney Schatz, owner of R & G Farms in Lodi. Last year, because of concern about shortages, he like many growers left kicker canes on the vines. “We picked it all.” Fortunately, he had a place for the excess grapes. His company built a custom-crush winery a decade ago. “It’s become a real nice outlet for our grapes—and a hedge that smoothes out the peaks and valleys.”
Craig Ledbetter also got into the bulk wine market with his company’s grapes. “We had to learn a lot. It was hard to sell the grapes. You have to wait for your money, but if you can afford to do that, it pays off.”
Steve McIntyre, founder of Monterey Pacific
on the Central Coast, addressed labor issues. “We all know there’s a labor shortage. We started with 25 pickers on our crews and ended with 15 because of competition from strawberries, peas and other commodities.”
Recent legal changes are making him reevaluate use of labor contractors, too. “There used to be plenty of workers, and the contractors took care of legalities, but now we’re ultimately responsible for checking legal status, workman’s compensation and health care; plus there’s a shortage of people. The advantage of contractors is slim to none,” he said, adding, “We have to get involved in immigration reform.”
He added that mechanization seems a natural solution. “The problem is to get wineries to buy into it.”
McIntyre finds mechanical pruning a good start. All of his new plantings are set up for machine pruning and mechanical harvesting from the start.
The trellis system uses two wires: one for the irrigation tubing and one for the cordons. The pruners trim to a square or rectangular “box” extending the length of the row. “It’s a radical change from vertical shoot positioning, but it requires much less labor,” he said.
He added that the vine balances itself in a few years. “The clusters are smaller and looser, but there’s no leafing, pruning or positioning canes.”
He finds 8-foot rows too tight, but 9 feet is perfect. As the vines age, however, the harvesters knock off old wood, creating more MOG, but modern harvesters and sorters can remove that.
Ledbetter has used a similar system since 1998. He said that comparisons on wine from mechanically harvested and hand-harvested vines are inconclusive. “They’re 50/50, not a big difference in quality in any case.”
He added that it was hard to find equipment that worked well from the beginning. “It took a few years to work with it.” McIntyre said, adding that because of all the different crops raised in the Salinas Valley he was able to find mechanical shops to modify the equipment.
Water issues in North Coast
The other member of the panel, Bill Pauli, owner of Pauli Ranch in Mendocino County, Calif., covered water issues, especially proposed regulations on water discharge and water for frost protection.
It’s not yet settled whether discharge will be regulated for the industry or individual farms, he said, but “we will have limits. We need to find out how to deal with them”
He added that Napa and Sonoma were farther along, notably with Fish-Friendly Farming and other sustainability programs, but some environmental groups don’t trust programs monitored by industries and are calling for more state supervision.
Fortunately, this year didn’t have high frost pressure, so using water for frost protection wasn’t a big issue, but he predicted it will reemerge in the future.
Pauli addressed the possibility of expanding grape acreage in the North Coast, noting that most of the land available for planting in was in Lake County, with mostly smaller vineyards going into Napa, Sonoma and Mendocino counties. “The major source of more grapes will be to rejuvenate older vineyards. We will see both higher volume and quality.” He added, “We’re doing a better job of growing for different price points. We can do things when the industry needs more grapes,” as happened last year.
Pauli mentioned that he was very concerned about viruses including newly named red blotch, a subject others addressed during the day. “We don’t have any good answers yet, but we’re confident that we will find an answer.”
One issue of big concern is imports, especially bulk imports that have accounted for much of the rise from 22% to 35% import market share by volume in the past decade. DiBuduo said, “We can’t compete with cheap imports. I’d rather move up the market with better quality.”
The growers also predicted a good, solid harvest this year, but no huge crop like last year. They pointed out that 2012’s boom, which looked especially large after a small 2011 harvest, was on the coast, not inland, which was up little compared to Napa’s 50%.
Other speakers discussed disease and pests, political issues, accounting and legal issues, lending, who is buying and selling vineyards and a look into the grape market in 2030.