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.