A Tale of Two Winegrape Markets

Allied Grape Growers sees strength in California's North Coast, doldrums for San Joaquin Valley

by Paul Franson

Santa Rosa, Calif.—Allied Grape Growers, the marketing cooperative that represents more than 600 California grapegrowers from Kern County to Lake County, held its annual meeting to Santa Rosa on Thursday for its many members in the North Coast. The co-op members produce some 250,000 tons annually and received nearly $300 million over the past three yeas.

AGG President Nat DiBuduo (pictured to the left) reported on the market and summarized some steps the group is taking to deal with present challenges.

“Last year we sold fruit (for) as low as $150 per ton in the San Joaquin Valley (SJV), up to $6,000 per ton in the North Coast. We are currently in a down cycle in the SJV, but not in the North Coast. Wineries are not buying SJV wine grapes at this time, and if they are talking, it’s not at prices that are sustainable for growers to continue farming wine grapes. But demand for North Coast wine grapes has strengthened in both prices and tonnages needed.”

DiBuduo noted that demand for lower priced wines is declining, while demand and sales of wines $10 and above are increasing. “There is still a large base of consumers drinking wines under $10, but it is definitely getting smaller. In most cases, the SJV is providing grapes for this base, though some of the lower priced wines are being backfilled with imports.”

He also said that some wineries are trying to move programs to higher quality and priced wines. “Hopefully that will create better pricing and demand for some growers.”

Growers planted a few years ago when prices were high—most with but some without contracts. “Today we are seeing contracts expire and not renewed. Wineries are indicating they are still dealing with a backload of bulk wine and plenty of contracted grapes.”

San Joaquin Valley
In the San Joaquin Valley, old vine Muscat was a hard sell in 2014—even at prices that barely covered harvest costs. New machine-harvested Muscat vines may produce 22 tons per acre, and the old ones 8 tons. Many wineries did not renew their contracts for Grenache and Carignane after the 2014 harvest, he added.

The co-op also didn’t see a strong market and demand this year by processors or wineries for Thompson seedless for concentrate, alcohol or dry white wine. “Look toward the raisin industry as an alternative,” DiBuduo suggested.

Likewise, there is little interest in Ruby Cabernet, Syrah, Barbera and even perennial white blending favorite French Colombard.

As a result, many growers are selling or pulling out their vineyards.

There is interest in Rubired, Pinot Grigio and organic Thompson seedless. In the San Joaquin Valley, these are the only varieties of wine grapes growers are not pulling out.

One important factor is the strong demand for land suitable for nut crops in the San Joaquin Valley. DiBuduo said, “We believe up to 35,000 acres of grapes may be removed in 2015 for this reason, and two-thirds will be wine grapes.”

North Coast Cab is hot
The North Coast counties of Sonoma, Napa, Mendocino and Lake are another matter.

Allied Grape Growers has seen good demand for most wine grapes with strong, fair pricing—even if a few varieties in some areas are challenged.

Cabernet Sauvignon is hot. Pinot Noir in Sonoma was in demand but as of late has been flat. Pinot Grigio is desirable because there’s not enough supply for the current demand.

Alternative varietals like Trousseau Gris, Charbono and Chenin Blanc are selling strongly, but Sauvignon Blanc is difficult outside Napa.

Overall, the market was very active early in the season in Napa and Sonoma, but it has slowed drastically due to another potentially good crop. However, DiBuduo said, “As we see ‘set,’ our initial thoughts of crop load are actually looking lighter than initially anticipated. Throughout all North Coast counties, if the property is special (AVA, farming practices, hillside, etc.), the fruit has remained marketable.”

Sustainability is becoming important
DiBuduo reported that he’s seeing more interest in sustainability, noting that both Sonoma and Napa growers have pledged to become 100% sustainable. “I believe that all Allied Grape Grower members should be proactive in sustainability and would like to ask each of you to become engaged in the process. We know you are already farming sustainably. The major difference is all the paperwork that accompanies this designation.”

He said that the AGG is applying for a grant to hire someone to help growers navigate the process. “With this help I hope that someday soon we can say the value-added advantage of buying grapes from Allied is their sustainability program. It will be an extremely important factor in selling your grapes in the future.”

Business initiatives
Allied Grape Growers is taking a number of steps to address present conditions and address the future.

It is looking into the development of a raisin program for growers, considering expansion of its existing bulk-wine program and planning to expand business with wine grape shippers. Canada and some U.S. states are big buyers of California grapes and bulk wine.

Allied membership in the North Coast is expanding, so DiBuduo wants to hire a viticulture technician for the North Coast as well as one in the northern interior.

He also claimed there is a strong desire and need for the co-op’s services in the Central Coast, and AGG is looking for the right person to develop and manage the area.

Finally, DiBuduo acknowledged that it will be a tough year for many growers in the San Joaquin Valley, but he pledged to support them with “tenacity and commitment.”

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