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BARRELS Euro Deflates Price of French Oak P rices for new French barrels are expected to see a slight increase this year as cooperages try to keep pace with the rising cost of oak. However, economic discord in Europe has pushed the euro down in value against the dollar meaning that for the time being American winemakers could see an overall price decrease in new French oak compared to 2011. Knox Barrels owner Mel Knox, the U.S. representative of François Frères and West Coast representative for Taransaud, said he expects a price bump in the range of 2%. "The price of oak just keeps going up, and the coopers went through a period where they could not raise their prices," he said. Knox added that he expects the next year will be better for everyone— cooperages and wineries. Prices for American and other kinds of European oak are expected to stay flat in 2012. Crunching the numbers Jason Hinde, senior relationship manager for Mechanics Bank, said that while a more favorable exchange rate could make French oak relatively cheaper, it's still one of the biggest capital expenses wineries incur. As a result, wineries are likely to be considering the amount of new oak they'll need or complementing new barrels with some alternative oak products. Hinde added that while he offers the option to establish a line of credit and leasing for wineries to purchase without using cash, he has not seen much change in the number of wineries utilizing those methods. Jim Boswell, owner of The Boswell Co., which sells new barrels as well as oak barrel alternatives, bungs and winemaking tools, said he expects to see a small bump in the price of new French oak barrels, meaning the $1,000 barrel will continue to be the rule. "It's kind of a harsh reality that a lot of people don't particularly care for," he said. Boswell said he expects to see growing interest in barrel alternatives as well as quality American and Hungarian oak, although French cooperages now have a significant stake in those oak industries as well. "The big guns continue to dominate," he said. While it would be great if French cooperages were to offer discounts—just as wineries have had to absorb steep bottle Oak Barrel Pricing 2007-12 $1,000 French $800 $600 $400 $200 European 0.0% increase from 2011 6.7% decrease from 2011 American 2007 2008 2009 discounts in the past few years just to move inventory—Boswell said, "Cooperages just can't get raw materials for a lower cost." He noted that the French oak forests are essentially owned by a government monopoly. 2010 2011 1.4% increase from 2011 2012 Exchange Rate Dollars per Euro Fewer clusters, fewer barrels Winegrape yields in the United States have been lower than average in recent years, and that has led to reduced demand for new oak. The lack of fruit has meant that some wineries have ended up sitting on new barrels that were purchased for early harvests and then never used. Boswell mentioned one Napa winery that was left with more than 600 new, unused barrels this vintage. The reduced demand and increasing costs mean that while many wineries may have scoffed at oak barrel alternatives in the past, it's an option worth another look. "My thinking is people are going to give that more of an opportunity," Boswell said. "Of course they're going to look at that; it's just good business." —Andrew Adams $1.50 $1.40 $1.30 $1.20 '06 '07 '08 '09 '10 '11 '12 ON SENECA WINE TRAIL WINERY & VINEYARD GREAT BUSINESS OPPORTUNITY! Working Winery, Restaurant, Vineyard. Tasting room, boutique, restaurant, banquet room, party terrace with a view of Seneca Lake. 18A Fully productive grapes. 17A suitable for more planting. Good retail & wholesale distribution. $995,000 Call for our latest inventory! Mel Russo Licensed Real Estate Broker/Owner Office: 315-568-9404 Cell: 315-246-3997 website: www.senecayuga.com e-mail: senecayuga@aol.com 32 Wines & Vines FeBRUARY 2012 97 Fall Street, PO Box 386 Seneca Falls, NY 13148