Market turns for grape growers(2)
Back in 2007 and 2008, 90 to 95 percent of the grapes in Sonoma County were grown under a contract with a winery that committed to buy the grapes, and many of those were multi-year contracts, said Nick Frey, president of the Sonoma County Winegrape Commission. In 2009 and 2010, the grapes under contract dropped to about 80 percent.
“We’ve had a declining number of long-term contracts for the past six to seven years,” Proctor said. “Wineries were unsure about what they needed in the future, and they were unsure about the price. You saw either contracts ending or (cancellation) notices being given to evergreen contracts.”
But after a 2011 harvest where the crop yield was down 20 to 30 percent, wineries are eager to secure their supply.
“All our grapes are sold moving forward with a waiting list,” said John Balletto, president of Balletto Vineyards and Winery west of Santa Rosa. “We’re at a magical turning point. The shortage that’s going to be upon us here, it’s here now. Wineries were calling us in December to try to contract grapes in December, and I haven’t seen that in seven years.”
At the same time, the short supply of grapes has led to higher prices for growers. In some cases, prices offered in multi-year contracts are doubling or more than doubling, depending on the varietal and region, said Vernon Crowder, vice president and agricultural economist at Rabobank.
“It’s changed very quickly,” Crowder said. “You’ve got the big wine companies that are really beating up on each other to secure the varietals that they need for their wines. They’re trying their best to retain their contracts.”
Beyond better prices and longer contracts, growers also are enjoying the return of planting contracts. For the most part, Sonoma County hasn’t been planting any new grapes since 2002 or 2003. The number of productive vineyards, which peaked in 2005 at 57,050 acres, is down about 3,000 acres, Frey said.
Pete Opatz, vice president and senior viticulturalist for Silverado Premium Properties, a grower that works with about 90 wineries, said he has recently secured contracts to plant 500 acres of cabernet sauvignon in Sonoma, Napa, San Luis Obispo and Monterey counties. He said his company began signing agreements right after the harvest of 2011, when everyone’s fears were confirmed about the diminutive size of the crop.
“It’s been kind of nice,” Opatz said. “Planting is a significant capital expense.”
The productivity of vineyards declines over time. If a grower decides to replant, he must take existing vines out of production. And it will take about three years for the vines to develop and produce a first vintage. That’s three years with no income from the vines, Opatz explained.
Another reason wineries are looking to secure supply is because inventories of bulk wine, which wineries sometimes use when grape supply is short, are down. Statewide, the stockpile has dwindled to 4 million gallons of wine, down from 20 million gallons four years ago, Clements said. And inventories are also down in the wineries.
