2012 Winegrape Bounty Ushers in Balanced Market

Sonoma County forum assesses grape, bulk wine market for the coming year; Nick Frey announces retirement

by Andrew Adams
dollars and $ense
The Dollars & $ense Seminar presented by the Sonoma County Winegrowers Commission included a tradeshow.
Santa Rosa, Calif.—The 2012 grape harvest may set an all-time record for California, hitting the 4 million-ton mark.

That bountiful harvest appears to have balanced the grape and bulk wine market that had slipped to a short position by winter 2011-12, said Glenn Proctor a partner with Ciatti Co. wine brokerage. “When we look at the market today, it’s balanced,” he said.

While the state’s official tonnage count won’t be released until next month, Proctor said Ciatti’s own records and estimates indicate the 2012’s harvest will weigh in at 3.85 million tons. (The figure could shift down to 3.7 million tons or as high of 4 million tons.) The strong harvest comes after a few years of “turbulent” market conditions resulting from a sluggish economy and adverse weather.

Proctor’s comments came during the Dollars and $ense seminar held Thursday afternoon at the Wells Fargo Center for the Arts in Santa Rosa and organized by the Sonoma County Winegrowers.

During the conference John Balletto, chair of the Sonoma County Winegrowers Commission, announced that the group’s executive director Nick Frey would retire this year. He said Frey would continue to work part time to help the group find his replacement and ensure a smooth transition.

Balletto said the winegrower’s group, Sonoma County Vintners and the tourism board are committed to continuing their cooperative efforts to build and market the county’s wine industry. He added that the groups plan to all pass resolutions codifying that cooperative effort. “The cohesion we have today will be set in stone,” he said.

A reverse in the market
Proctor said the grape and wine market reversed from a few years ago, when growers struggled to find buyers; then, in 2012, the grower took the driver’s seat. Improved market conditions also coincided with optimum growing conditions. “They won’t tell you it was a good year, but they sure smile a lot,” Proctor said of the state’s winegrape growers.

The large harvest came through better yields on the state’s existing acreage. Proctor used Sonoma County’s Pinot Noir harvest as an example, saying he’d heard from growers who usually harvested 4 tons per acre, expected to pull in 7 tons and ended up with 9 tons per acre.

Proctor said Sonoma County growers produced 36,000 tons of Pinot Noir, 40,000 tons of Cabernet Sauvignon, 19,000 tons of Merlot and 15,000 tons of Zinfandel. He remarked the strong Merlot harvest came from just higher yields and good berry size. Chardonnay totaled 70,000 tons, and Sauvignon Blanc rebounded from 2011’s weak harvest with 13,500 tons.

The county’s grape prices saw good growth from 2010 with the high price for Chardonnay rising $1,400 per ton to $2,500, Cabernet doubling to $3,000 on the high end, and top-end Pinot Noir increasing from $2,800 to $3,800.

Growers also enjoyed being in a strong negotiating position for 2012. Proctor said many reported a very early and competitive purchasing season with “desperate and unprepared” buyers, long-term contracts and planting contracts for Cabernet Sauvignon. “The sellers controlled the market dynamics through most of the season,” he said.

A survey of growers by Ciatti found that most expect grape prices to stay flat or see modest growth, and about half are getting interest in planting contracts. They reported the most-needed variety is Cabernet Sauvignon, with Pinot Noir a distant second and the two least-popular varieties are Syrah and Zinfandel.

Chris Welch, who is also a partner at Ciatti, said the market is largely balanced, although Chardonnay could be a bit long. He said he’s also unsure how the bulk market for Pinot Noir may play out because of the state’s strong harvest.

So far in 2013, he said he’s seeing interest in from parties looking to get a deal on some of the excess premium chardonnay that wineries may have made expecting to sell as bulk.

Prices for bulk wine have generally slipped from where they were in 2010-11. Sonoma County Pinot Noir has slipped from $26-$32 per gallon to $14-$22, and Napa County Cabernet Sauvignon went from $30-$50 per gallon to $24-$35.

Welch said the custom-crush option for growers is here to stay. Because there are so many negoçiant and private label companies these days, Welch said growers can easily find a buyer if they decide to hang on to their fruit and make wine. He said making quality wine can help them demonstrate that they know what’s best for their vines, and it gives them a comparative option when evaluating an offer for their grapes.

Imports a growing challenge
But just as California pulls in what could be a record harvest, the state is awash in a flood of foreign wine. The equivalent of 40 million cases of imported wine came to California in 2012 as major producers adjusted their supplies to meet strong demand and a short California bulk market.

With the domestic demand for wine expected to outpace California’s potential supply, Proctor said the market share of imports could increase. He said France has just allowed producers to put a vintage date on wine with just a France appellation.

He also identified Chile as a country that is poised to be a strong importer to the United States, saying the Chileans have a strong infrastructure for producing bulk wine of popular varieties like Cabernet Sauvignon, and they trade in U.S. dollars. Chile grew 1.97 million tons of winegrapes in 2012 and was selling Cabernet Sauvignon at around 75-94 cents per liter ($2.84-$3.56 per gallon).

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