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Monday, May 20, 2013, 6:20 am

Grape Market Insights: 2013 looking a lot like 2012?

Maybe, but there remains a long-term disconnect between demand and supply

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    In the 1993 comedy movie Groundhog Day, Bill Murray plays a TV meteorologist covering the annual Groundhog Day event in Punxsutawney, Pa. He soon finds himself repeating that day over and over. Sometimes it feels that way in the wine business — like last year is playing out all over again.

    The North Coast wine grape harvest of 2011 came in below expectation and left many North Coast wineries on the short side, especially as consumers began trading upscale once again. Some wineries turned to the market for wines in bulk to augment short supplies — but they found that the inventory available was limited and prices had jumped. They would have to pay dearly if they wanted to protect their market share.

    The 2012 grape market followed suit: activity started early, tonnage available was limited and prices were strong.

    The growing season of 2012 was extraordinary, as we have discussed in this column before. This time last year, wineries, growers and brokers were in the vineyards counting two clusters per shoot, which usually means an average sized crop. The market needed to see a large crop so prices remained high with numerous multiyear agreements signed. The North Coast experienced a near perfect growing season that increased the weight of the berries and surprised everyone with record or near record crops throughout the area. But wineries were thirsty enough to keep accepting overages and some continued buying on the spot market as long as they could find space in a tank or barrel – or the executive swimming pool.

    So here we are at half-past spring in 2013. Frost danger is just about over. Both the bulk-wine and grape markets have been active, and tonnage available on the spot market is limited. Most vineyards are reporting two clusters per shoot, as seen last year at this time.

    Are we caught in a Groundhog Day replay of last year? Well, no, we’re not. Here are two differences:

    • There is about three times as much bulk wine available now as there was last year at this time. As the proprietary chart with this column shows, Turrentine Brokerage currently has almost 15 million gallons of wine listed for sale, compared with almost 5 million a year ago.
    • Last year, people saw two clusters per shoot and expected an average crop. This year, people see two clusters per shoot and expect an above-average crop. But I don’t expect a repeat of the bounty of last year. We have not had as much rain and already have had some higher temperatures.

    As always, the real challenge in the wine business is to separate short-term and long-term trends and to deal effectively with both, even if they move in opposite directions.

    Short term, there is more supply in tanks and casegood storage after the large 2012 crop. The 2013 crop probably will produce fewer North Coast tons than that of 2012, but it will still probably be adequate to satisfy immediate needs.

    Casegood sales are growing, however, and productive capacity in the North Coast is not. Ultimately, it is impossible to continue to grow sales without growing supply. This is likely to be the fundamental challenge of the next 10 years in the North Coast.

    This year on Feb. 2, Punxsutawney Phil the groundhog came out of his lair and proclaimed an early spring. I’m not sure he was correct for Pennsylvania, but he was certainly accurate for those of us in the North Coast. The crop size of 2013 is now up to the very unpredictable lady we call Mother Nature.

    We have a long ways to go, but I believe we need to look at the crop this year considerably differently than that of 2012. And we must not let short-term abundance blind us to long-term needs.

    I’m neither a groundhog nor really a poet, but here’s how I would put it:

    We advise not to surmise but open your eyes.
    Every year’s a surprise but you win the prize
    that goes to the wise by watching the size
    and listening to the sales guys.

    •••

    Brian Clements is a partner and vice president of Novato-based Turrentine Brokerage (turrentinebrokerage.com).

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