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CO VER S T OR Y Oak Barrel Pricing 2006-11 $1,000 $800 French $600 European $400 American $200 2006 2007 2008 In 2010 the average euro to U.S. dol- lar exchange rate was $1.33. The euro peaked in January 2010 at $1.45, only to see the U.S. dollar rally to $1.19 per euro in early June of that year. Phil Burton of Barrel Builders in Calis- toga, Calif., remarked, "I think that most people have gotten used to the exchange. What was horrible two years ago is now the 'norm.' Just like when gasoline went to $3 per gallon several years ago; now $3 is considered a bargain here in California." For those who have some liquidity and the desire to fight the norm, one sugges- tion for barrel price relief is to invest in euros when the U.S. dollar rallies. (See chart "Exchange Rate Dollars per Euro.") Todd Stanfield of Tonnellerie Remond in Sonoma, Calif., mentioned that some of his clients use foreign exchange services such as Commonwealth Foreign Ex- change (Comfex) in Oakland, Calif. Other 2009 2010 2011 wineries elect to pre-purchase euros with forward contracts to lock in favorable euro rates when the dollar rallies. Stanfield said, "Not many people do it. Some lock in half their barrel budget to cut their risk a little." Comfex founder Wil Krekel said, "Comfex specializes in middle-market companies, so our rates of exchange are always lower than the traditional foreign exchange providers. Buying forward contracts allows winemakers to lock in a euro exchange rate. They pay 10% down to hold the right to pre-purchase their euros at a specified rate for delivery when they're ready to purchase their barrels." The minimum total amount required for a corporation to purchase a forward con- tract is $10,000. Krekel explained, "We deal with approximately 800 wineries for euro exchange. Of those clients, 80%- 85% just want direct exchange from U.S. dollars to euros, which is debited via ACH 1.4% average increase 1.6% average increase 2.8% average increase Exchange Rate Dollars per Euro $1.50 $1.40 $1.30 $1.20 2006 2007 2008 2009 2010 (Automated Clearing House) to pay Euro- pean coopers. Approximately 15%–20% will actually buy forward contracts." Comfex is familiar with the wine busi- ness and all the major cooperages in Europe. "It's very rare that I come across a cooper in Europe that we haven't paid," Krekel said. Comfex has seven offices across the U.S. and has been in the foreign exchange business for 13 years. order early Stanfield at Tonnellerie Remond also sug- gested that the best way to save money is to place barrel orders early to take ad- vantage of lower pricing. "Early delivery, early price," he said. "You could poten- tially save approximately 40-60 euros per barrel." Early purchasing yields savings rewards due to coopers not getting over- loaded, rushing to build a sudden influx of barrel orders at the last minute. "There aren't enough ships, contain- ers and manpower to get barrels built, shipped and distributed all at once in a short time," he said. Waiting to purchase barrels at the last minute, aside from the possible loss of savings, is not without the potential risk DARGAUD & JAEGLE Tonnellerie Barrel Associates and Dargaud & Jaeglé both use high standards of excellence to craft barrels of distinction. Discover our unique combination of Wood, Water and Fire to help you obtain wonderful textures and flavors that only a great barrel can deliver. NOW OFFERING: Polypropylene Barrel Racks and BiBungs Please consult our sales associates: Mike Elliott, Ed Schulz or Eric Mercier (800) 227-5625 • info@premierwinecask.com • www.premierwinecask.com Wines & Vines FeBRUARY 2011 27