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52 WINES&VINES December 2016 OAK BARRELS J ust as the 2016 West Coast harvest came in closer to normal than the pre- vious year, it seems the market for new oak is closer to normal, too. But like so much else in 2016, it's getting harder to define exactly what "normal" means. Demand remains strong for American oak, so it is less of a bargain. As for French oak, one can count on it always getting a little more expensive, but it's hard to say by exactly how much. The effects of the so-called "Brexit" on the value of the euro against the dollar could mitigate some of those potential increases. Eastern European oak including Hungarian remains more affordable than French oak, but it is not discounted as much as it used to be since it has become a popular complement or alternative to new French oak. Coopers report that sales for 2016 were a little off as wineries were able to use new bar- rels held over from the lighter than normal 2015 vintage. Orders picked up near the end of the 2016 harvest, however, as some yields proved larger than expected. For the past few years, the demand for American oak has grown because of the popu- larity of craft spirits and bourbon in particular. The supply of logs (and thus stave wood) had not grown in pace with that demand, however, resulting in higher prices for wine barrels. That trend appears to be stabilizing, as wine barrel companies say the increases in prices for stave wood have moderated. American oak supply more stable One of the largest barrel producers in the world is planning to increase its production of bourbon barrels. TFF Group, which owns Ton- nellerie Francois Freres, Tonnellerie Radoux, several other cooperages and barrel brands as well as stave mills and barrel alternative prod- ucts, is planning a major cooperage expansion to serve the bourbon market. According to the company's annual report, TFF is enlarging its Kentucky bourbon cooperage to reach 130,000 barrels by the end of fiscal year 2016-17. The company hopes its new white oak barrels will account for 5% of the entire bourbon barrel market. The cooper then expects to increase that production over the next five years to reach 400,000 barrels per year. The company is counting on the increased production to help supply American oak barrels to winery clients and provide a source of used barrels for Scotch whiskey producers. In the first quarter of fiscal 2016, the company reported sales of 53 million euro (nearly $60 million), with wine barrel sales growing by nearly 13% to 36.3 million euro (more than $40 million). Chris Hansen, sales manager for Seguin Moreau Napa Cooperage, said the difficulties in securing American oak have eased up. "There are so many variables in the wood situ- ation, but we see the availability of (American) staves is strong, and the pricing isn't jumping up every three to four months like it was in previous years." Seguin Moreau is part of the Oeneo Group that includes cork supplier DIAM and barrel alternatives company Vivelys. Hansen said KEY POINTS The article examines the outlook for new and used barrel prices for the 2017 North American vintage. The upward pressure on American oak from spirits producers appears to be stabilizing, but American barrel prices are expected to rise in pace with French oak prices. French oak price increases were moder- ated this year by the dollar-euro exchange rate but could resume growth for 2017. Oak Prices Poised for Increase Euro-dollar exchange could provide some relief, American oak supply more stable By Andrew Adams The favorable exchange rate could prove to be an unexpected bonus when wineries purchase new barrels for 2017.