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July 2016 WINES&VINES 15 WINE INDUSTRY NEWS S a n R a f a e l , C a l i f. — Green clusters have formed on vineyards throughout California, and the early word is that while the 2016 crop won't be as light as last year, it also won't be any- thing like the large harvests of a few years ago. Prices for bulk wine from Cali- fornia's North Coast and Central Coast have increased dramatically while availability has decreased, and there are few remaining grapes for sale on the spot market. Any new acreage coming online is most likely already under con- tract, and the ongoing trend of consumers buying higher priced wines coupled with the short har- vest of 2015 have exhausted most excesses from the larger harvests of previous years. The changing market was a focus of the Vineyard Economics Seminar held in Napa, Calif., on May 25. Speakers at the seminar said there are few remaining areas that can support new vineyard plantings for premium grapes, and the availability of water and regu- lations will make it even more difficult to plant those with new vines. Given the enduring demand for quality wines at higher prices, grape and wine prices are likely to continue increasing. Turrentine Brokerage partner a n d b u l k w i n e b r o k e r M a r c Cuneo and broker Mike Need- ham delivered a presentation about the current market. Cuneo said buyers have come out "early and active" for bulk wine, and the 2016 crop is pretty much spoken for now. He said wineries should now be planning for 2017 and 2018. "If you don't like your position, what are you doing to change that?" he asked. Cuneo and Needham used a few key grape varieties from prominent regions to illustrate the current market. California produces more Chardonnay than any other wine varietal, and Cuneo said that's created a per- ception that there's always a lot of it available, prompting winer- ies to run their Chardonnay as a "just-in-time program." This year, however, the aver- age prices for Sonoma County Chardonnay doubled in some cases to $18 to $25 per gallon, and Monterey County Chardon- nay jumped from $5-$7 per gal- lon to the mid-teens. There's also little wine out there, with Cuneo saying prospective clients will now receive two to three wine samples rather than a case or two to choose from. Cabernet Sauvignon remains the "star of the market" and has enjoyed steadily rising prices since 2011. Bulk prices of Napa Cabernet have reached $45 per gallon or higher. "This is un- charted territory here," Cuneo said. "When does this price soften? There's a lot of buyer fatigue at these price points." In early June, Turrentine re- leased its annual Turrentine Out- look report that explored some of the recent trends of the grape and wine market in greater depth. For the short term, it ap- pears prices for grapes and wine will only increase because of the light 2015 crop. The current grape and bulk mar- kets from the North Coast are being pulled in two directions: Upward pressure on prices comes from the light 2015 coastal Cabernet Sauvi- gnon crop, retail sales growth and high prices for bulk wine and grapes in Napa and Sonoma. There is downward pressure on prices as buyers seek to con- trol cost of goods on their more expensive lines and continue to explore sourcing from compet- ing regions in the Central Coast and Lodi. In the short-term, the upward pressure on price is stronger than the downward pressure. The report also explored the "$9 divide" that has had a major effect on the California wine in- dustry, especially for low-price wine producers and growers in California's interior regions who supply those programs. Writing in the report, Tur- rentine president Steve Fred- r i c k s n o t e d s a l e s f o r w i n e s priced below $9 per bottle are flat or declining, and there's still some excess bulk wine for wines at this price point sitting in tanks from the large harvests of previous years. Yet he also noted that the strong demand for wines priced higher than $9 per bottle and the wineries making these wines that are often from coastal vine- yards are having to buy grapes from the Lodi AVA and Sacra- mento-San Joaquin Delta area to keep up with demand. Global production is also less than in previous years because of pulled acreage in Europe and Australia and a weak crop in South America this year. Grow- ers in California's Central Valley also continue to pull out vine- yards of less popular varieties and plant nuts that continue to offer higher returns than high- yield wine grape vines. The Allied Grape Growers, which is California's largest wine grape grower cooperative, esti- mated in a recent report that growers pulled 28,000 acres from 2012 up to the 2015 har- vest and may have pulled more than 20,000 acres after last year's harvest through spring 2016. Despite those pull-outs, the group still contends at least 36,000 acres more would need to be removed to help get the market back in balance for Cen- tral Valley wine grapes. New plantings in coastal areas appear sufficient to meet the indus- try's demands except for the most sought after varieties and AVAs. —Andrew Adams According to the CDFA's Grape Crush Report, the 2015 wine grape harvest was down sharply from the record high reported in 2013. Given the enduring demand for quality wines at higher prices, grape and wine prices are likely to continue increasing. TOP STORY Strong Demand Meets Tight Grape Supply 5,000 4,000 3,000 2,000 1,000 0 2012 2013 2014 2015 Tons of grapes crushed (thousands) Year 4,018 4,246 3,894 3,705 CALIFORNIA GRAPES CRUSHED FOR WINE, 2012-15