Ontario Grape Prices Steady for 2013
As the two-year price agreement ends, what does the future hold?
The first two-year pricing agreement was a pilot program used to establish prices for 2010 and 2011. It was successful to the point of continuing an agreement for another two years, which expires in 2013. Debbie Zimmerman, CEO of the Grape Growers of Ontario, told Wines & Vines that negotiations for 2014 and beyond are likely to begin this fall, and she believes that long-term pricing has been successful.
Allan Schmidt, chair of the Wine Council of Ontario, told Wines & Vines, “Long-term pricing is working only because we don’t have to negotiate every year. It provides stability but doesn’t allow for fluctuations in grape availability.” He expressed a willingness to start negotiations this fall but pointed out that there is no requirement to do so until next year.
The minimum price for ice wine grapes remains at 125% of the price based on normal harvest. Ice wine juice prices are unchanged, with hybrid juice at CA$9.05 per liter at 35° Brix and vinifera juice at CA$19 per liter at 35° Brix. Late-harvest hybrid and vinifera juice stays at CA$4.58 per liter at 26° Brix.
In Ontario, labrusca varieties are considered to be juice grapes and cannot be classified as wine grapes. Separate negotiations determine prices for juice grape varieties, and these negotiations will be held Aug. 15. Prices for labrusca grapes have been on the rise for a number of years and are expected to increase again this year, primarily because of demand by a large company. Concords were priced at $330 per tonne in 2007, $410 in 2008 and $473 in 2012. During the same time period, Niagara increased from $315 to $449 and Catawba and Delaware from $499 to $543.
Plateau pricing for in-demand varieties
Plateau pricing, which covers Chardonnay, Riesling, Cabernet Sauvignon and Cabernet Franc, began as a pilot program in 2010 as an attempt to reduce a substantial grape surplus. The program has worked well for both wineries and growers since it was implemented. By setting lower prices for lesser quality grapes, wineries can purchase the four varieties of grapes most in demand at a price competitive with what they would pay for imported grapes from another country. Growers, who are freed of tonnage restrictions for plateau varieties, are able to grow more tons per acre of these varieties, thereby increasing their income.
The base price has been established at $1,200 per tonne for the white grapes and $1,300 per tonne for the red. Only grapes within a certain Brix range are eligible for plateau pricing, and this year’s upper limits, based on a five-year rolling average, are 20.4° for Chardonnay, 18.4° for Riesling and 20.9° Brix for both Cabernet Sauvignon and Cabernet Franc. Grapes delivered at a higher Brix are subject to the regular negotiated prices.
According to Debbie Zimmerman, the 2012 crop was an exceptional one with 66,000 tonnes harvested. Grapes sold under plateau pricing accounted for 8.4% of the crop, up from 6.7% in 2011. The outlook for 2013 is for a similarly large harvest. Allan Schmidt points out that while plateau pricing has reduced the surplus, another cause has been an increase in the sales of VQA wines.
A change in legislation may affect the amount of grapes sold under plateau pricing. Ontario legislation that is mandatory until 2014 requires that 40% of a winery’s overall blended content has to be from Ontario grapes with a 25% minimum within each bottle. The 40% requirement will not be renewed, although the 25% minimum will remain in effect. Most of the grapes sold under plateau pricing are used by wineries for producing International Canadian Blended wines (formerly called Cellared in Canada wines), and the removal of the 40% mandate will mean that fewer Ontario grapes will be required. Also unchanged will be federal tax relief that takes the form of an exemption from excise tax for all wineries using 100% Canadian grapes. Zimmerman estimates that the value of the excise tax exemption is worth approximately $460 per tonne for wineries using 100% Ontario grapes.