Quantcast

North Bay Business Journal

Monday, December 10, 2012, 6:20 am

‘Goldilocks’ conditions produce ideal 2012 harvest

By

Print Friendly Print Friendly    

Share this item

    “Wow!” is just one of the superlatives used to describe the 2012 winegrape harvest after two difficult years for growers, said Nick Frey, President of the Sonoma County Winegrape Commission (sonomawinegrape.org), at the Moss-Adams LLP Wine Industry Financial Roundtable.

    [6681] Nick Frey (left), president of the Sonoma County Winegrape Commission, and John Wilkinson, director of the Napa Valley Grapegrowers, gave an update on the 2012 harvest and prospects for the future.

    Other adjectives found in wine trade journals include “ideal, excellent, outstanding, fantastic, amazing, concentrated, balanced and bright,” said John Wilkinson, managing partner of Bin to Bottle, and a director of Napa Valley Grapegrowers (napagrowers.org). 

    More than 100 wine industry representatives attended the roundtable, held Nov. 15 at the Hyatt Vineyard Creek Hotel in Santa Rosa.

    According to Mr. Frey, 2012 grape yields are expected to top 220,000 tons in Sonoma County, up from 166,000 tons in 2011, resulting in revenues $100 million higher than last year.

    Early estimates for Napa County in 2012 are between 160,000 to 180,000 tons. In 2010, crop size was 139,000 tons and in 2011 it totaled 122,000 tons.

    “The quality of the harvest was superb due to ideal weather conditions that produced balanced fruit and great flavors,” Mr. Wilkinson said.

    Overall, average grape prices increased in Sonoma County. Early buyers were paying prices above those seen in 2011 and demand for pinot noir and cabernet sauvignon grapes was strong, while chardonnay price increases were more limited. 

    Higher prices weakened as the unusually large crop size became apparent, Mr. Frey said. Base contracts were generally up, but extra tons were often discounted from contract amounts.

    He said from a market balance perspective, while current bulk wine inventories are at historic lows. He believes a bountiful harvest will return stocks to more normal levels, bringing them close to the balance point.  

    At the same time, world grape production was down in 2012 by six percent and harvests in European Union countries, Argentina and New Zealand were off. During the recession, imported wine did not make significant inroads on domestic wine.

    The big question is will this uptick continue? Looking ahead to 2013, Mr. Frey said a lot depends on U.S. and European economic recovery — which he considers to be a key variable along with consumer acceptance of price increases at retail. The poor harvest in Europe could also improve U.S. market conditions.

    “It remains to be seen if consumers will continue to buy more wine at $20 a bottle or higher — a price point critical for Sonoma County.”

    Mr. Frey said California remains short on grape acreage to meet demand and has not planted new acres. However, he predicts that Sonoma County will soon increase its planting to 63,000 acres, up from 60,000 today.

    He also expects yields to return to normal levels in 2013 — probably lower than in 2012 — and said the industry can assume that weather probably won’t be as favorable.

    “The biggest risk we face as an industry is whether or not the country will slip back into recession, or if policy makers make wrong decisions.”

    Mr. Wilkinson said 2012 will be remembered as a “Goldilocks” growing season — not too hot or too cold. 

    “It was an easy year to be a grower with very few problems at bloom and set, few if any heat spikes, very low disease and pest pressures and high demand at good prices throughout the growing season.”

    He said the harvest was compressed this year because growers let fruit stay on the vines two to three weeks longer.

    “Growers that dropped less fruit following two years of short crops and expecting heat, saw longer hang times for many varietals in both Napa and Sonoma.  As it turned out many reds and the whites came in together putting pressure on all cooperage. ”

    Labor, tank and barrel shortages were seen through October and into November, causing some growers to keep fruit in the vineyards until tank space became available. Fortunately the weather cooperated. However there was lots of overtime for both vineyard and cellar workers.

    Mr. Wilkinson said yields across most varietals were up 10 to 15 percent, especially for pinot, chardonnay, zinfandel, syrah and petite syrah. Average-to-plus yields were seen in merlot and sauvignon blanc, with average yields reported for cabernet sauvignon, malbec and petite verdot.

    “It was a very dynamic market for grape buyers with lots of activity both early and late. There was very little early spot pricing in the Spring and as the harvest progressed, but excess fruit from a large crop eventually causes late, spot market pressure.” 

    The depth and breadth of the market was strong with multiple buyers for fruit, according to Mr. Wilkinson.

    “It was a grower trifecta, with higher prices and early selling combining with higher tonnages and lower farming costs per ton, due to the crop size, along with lower pest and disease pressure.”

    He believes the outlook for the future is good due to more wine in the system and more choices. “The shortage is gone for now thanks to the 2012 harvest and the holes have been backfilled.”

    “Prices will be calmer and closer to normal as long as we see some growth in case sales.  Distributors looking for new projects are taking some of the ‘froth’ out of the market keeping rates supported.”

    Mr. Wilkinson observed that not many new acres have been planted in Napa (due to ordinances restricting hillside planting), but replanting under-performing vineyards should result in higher yields. It has been over two decades since many vineyards have been replanted.

    He expects to see significant investments in vineyards over the next five years — barring another economic recession. Buyer demand is focusing on smaller acquisitions in the $5 million to $20 million range with an emphasis on vineyards.

    “Money is cheap and people are taking advantage of it.”

    Some in Napa County are starting to utilize mechanical harvesting and leafing solutions along with optical sorting. Growers are making large capital investments in new technologies after a slow start caused by adherence to “hand crafted” solutions.

    He said these improvements will continue to take pressure off labor shortages typically occurring during pruning and harvesting. 

    Computerized lab equipment, automated weather stations and plant monitoring devices tied to irrigation systems are leading to quality improvements and labor savings.

    New tools, from micro-oxygenation to flash détente, as well as a variety of oak alternatives and other innovations are providing winemakers with new ways to improve wines.

    Optimism has returned to the region.

    “Wine consumption in the U.S. is on the rise and consumers continue to move up in price and quality. The numbers are looking better and better and Napa is well positioned to benefit from these trends,” Mr. Wilkinson said.

    Copyright © 1988–2014 North Bay Business Journal
    View the policy for linking to website content.

    Print Friendly Print Friendly    

    Submit Your Comments

    Required

    Required, will not be published

    Comments are moderated and generally will be posted if they are on-topic and not abusive. For more information, please see our Comments and Letters Policy. To share this item by email or social media, use the links above.

    Do not use this form to contact people, companies or organizations mentioned in this story. Contact them directly. Private messages left here will be deleted.