Currently, the 2011 grape markets in Sonoma and Napa have become more active. Market discussions and more transactions occurred in the first quarter of 2011 than during the same period in 2009 and 2010.

In January of this year, Turrentine Brokerage's predictions for several years of a coming structural shortage of grapes came to pass, as more buyers, and buyers with higher priced brands, entered the market for bulk 2009 Napa cabernet sauvignon. In a short time, the price jumped above $20 a gallon for bulk wine, equivalent to $2,900 a ton for grapes, and passed through $25 a gallon, or $3,725 a ton. Wine from some better lots sold for around $30 per gallon.

We hit a record price of $50 per gallon for a truly reserve quality lot, equivalent of $7,850 a ton, less the cost of oak aging.

Currently, the average price is around $23 to $28 per gallon, but the 2009 inventory is disappearing rapidly. Because of that, buyers are being forced to look at 2010 Napa cabernet sauvignon in bulk, and some are walking vine rows looking for 2011 grapes.

A serious frost in the Central Coast has recently shaken up an already tightening market there, but the North Coast is moving at a slower pace.

Still, the North Coast supply- demand equation seems to be changing for most major varieties. With the market on the edge of change, the size of the 2011 North Coast crop will play a critical role in demand and pricing.

The harvest of 2011 will be my 21st year in the wine business. If you’re in this crazy game long enough, you will most likely come to realize that the reason you are spinning head over heels is the cyclical market. The cycles are amplified by greed and panic.

For the last 24 months, the North Coast grape and bulk markets have suffered with the economy. Most grapes on the spot market -- as opposed to grapes sold in previous years under multiple-year contracts -- have been selling below farming costs and it appeared there was no relief in sight.

But those of us who spend our days, and sometimes nights, in the markets know an important fact: few acres have been planted in the last seven years, giving no structural excess of grapes and bulk wine.

During the "dot-com" bust of the early 2000s, there was a structural excess. Not only were there too many grapes, but most North Coast grape varieties had many acres of vines just starting to produce a crop. Growing sales, including the growth of super value wines like Charles "Two Buck Chuck" Shaw, began to use up the excess. Then the massive crop of 2005 swamped the market into oversupply.

Demand began to catch up with supply in 2007 and grapes increased in price despite the recession. But the recession lingered, consumers traded down, and 2009 grape demand dropped dramatically, to the point that grapes were left on the vine.

The beginning of 2010 echoed 2009 with low consumer demand for wines retailing for more than $10 a bottle. We spent many hours meeting with wineries and growers, discussing supply and demand issues.

But even lunch at Zin’s was not enough to convince oversupplied wineries to buy more grapes. We were clear to both our grower and winery clients, however, that it would not take much of an economic recovery for demand to catch up with supply for Sonoma and Napa bulk wine and grapes.

The economic recovery has been anemic at best and wine consumers are still price sensitive. But demand is starting to nip away at supply; for instance, 2009 Napa Cabernet Sauvignon bulk wine. In January of 2010, the selling price was around $15/gallon (the rough equivalent of $2,075/ton for grapes after processing). The market was painful for sellers but the inventory was not nearly as big as it had been in some past years. By December of 2010, the price had climbed to $18/gallon (the rough equivalent of $2,570/ton for grapes after processing), still a brutal market but the number of buyers had increased.

So what happened? Well, a number of things:

The 2010 growing season started off very cool with a severe heat spike followed by 8 inches of rain during harvest. That lowered the size of the expected 2010 crop.

Sales for some wineries were better than expected.

For the last two years, wineries have been trying to trim their case good inventories. Now some of them are starting to worry about supply.

And I’ll say it again: There is not a structural excess of luxury bulk wine and grapes, because there are very few new plantings.

My tab at Zin’s is still high, but at least there are more sales to justify it.


Brian Clements is vice president and partner of Turrentine Brokerage (www.turrentinebrokerage.com), a Novato-based marketer of winegrapes and bulk wine in California and abroad.