Solano County winemakers’ pitch for new grape pricing advances

For just over three years wine grape growers and vintners in a portion of Solano County have been petitioning the California Department of Food and Agriculture (CDFA) with a request: Move a boundary line on a map and, in doing so, fix a problem that was costing them profit from the sale of wine grapes.

They continue to wait, with what Roger King, a director of the Suisun Valley Vintners and Growers Association and its former president, describes as “proactive patience.” Now the state is suggesting they may get their answer next summer.

King, who filed the petition on behalf of the association of 40 wineries east of the Napa Valley, said that this is the first time ever a group other than the legislature has initiated an amendment to the state’s Grape Price District boundaries. These districts divide the state into wine growing areas and play a key role in how much wine grape growers are paid.

The request to move the boundary line between districts 5 and 17 involves “basic equity,” said King.

Solano County’s pricing District 5 is the only one in the state that includes two very different growing regions — the northwest corner of Solano County and Ryer Island at the far eastern edge.

Their argument to the state is that Ryer Island, in the Sacramento-San Joaquin River Delta, has more in common in its grape growing conditions with the adjoining District 17, which is comprised of portions of Yolo and Sacramento counties west of Interstate 5 and south of Interstate 80. But northwestern Solano conditions are more like those found in adjoining Napa County.

“We are trying to correct the only serious anomaly” in the state’s grape pricing districts. King said the petition seeks to remedy the single case “of California coastal wine grape pricing being averaged with interior wine grape pricing within the same grape pricing district.”

King said the cause of the problem is that prices paid for commodity grapes grown on Ryer Island and other delta vineyards are considerably lower than those realized for the premium grapes grown in northwestern Solano County.

The association’s petition filed in 2019 cited a previous best estimate that 35% of District 5 grape tonnage comes from the Ryer Island area. More recent tabulations based on the 2020 crush report show the island’s annual grape harvest actually accounts for 42% of the District 5 total tonnage, which substantially reduces the published average price for District 5 grapes.

The higher 42% Ryer Island share tallied in 2020 strengthens the association's case for a boundary adjustment.

Under the Clare Berryhill Act of 1976, grape volumes and prices are reported to and tallied by the U.S. Department of Agriculture’s National Agricultural Statistical Service each year and then averaged across each district. The district-wide average for each varietal is published annually in the California Grape Crush Report and sets the grape price threshold for purchase contract negotiations between growers and grape buyers the following year.

King said District 5 is the only crush district in California where North Coast grape pricing is averaged with interior Central Valley pricing, even though the grapes grown in northwestern Solano County are of higher quality and would fetch a higher price for Suisun and Green Valley growers.

Grape cultivation on Ryer Island

King and others make the case that the difference in growing condition between the two Solano County wine growing regions is stark.

Ryer Island vineyards are planted in poorly drained, clay loam soils deposited by the Sacramento River and its tributaries. The island’s namesake, Washington Ryer, and other island landowners built levees around the island in the late 19th century to impede flooding, and the island has been farmed productively since then.

The state-authorized Reclamation Districts, with funding help from the U.S. Bureau of Reclamation, continued adding to and strengthening the levees and dredging canals up and down the delta as part of the Central Valley Project beginning in the 1930s. The reclamation program created a chain of fertile islands suitable for agriculture, from peat marshlands that had historically been subject to seasonal inundations from the Sierra Nevada snowmelt.

Ryer Island is managed by Solano County Reclamation District No. 501, which has continued to shore up and enhance the levees and drainage canals since their construction.

Fertile soils, a hot, sunny growing season, and ample water combine to produce large harvests of commodity grapes. Grapes grown there are mostly sold in bulk to one or more of the large buyers in the Central Valley, including E. & J. Gallo Winery, Wine Group and Constellation Brands. These buyers dictate the annual or multi-year contract prices to the Ryer Island growers, largely determined by the buyers’ primary markets, which are supermarkets across the country.

Suisun Valley and Green Valley appellations

The temperate, marine microclimate of the Suisun and Green Valley vineyards in northwestern Solano County is influenced by the cool onshore winds and fog flowing through the Carquinez Strait from San Pablo Bay. These climate patterns of sunny days and cool nights are similar to those in the Napa and Sonoma counties.

Unlike Ryer Island, which is currently also in District 5, Suisun and Green valleys in northwestern Solano have microclimates and soils that enhance production of premium-quality grapes, closer to what’s grown elsewhere in the North Coast appellation, which includes Napa and Sonoma counties, said King and others.

Suisun and Green valleys, between the Mt. George Range to the west and the Vaca Mountains to the east, have deep, well-drained, alluvial soils and foothills. Grapes are vinified and bottled on-site or sold in small lots to wineries in Napa and Sonoma counties.

A typical winery in Suisun or Green valleys, King said, negotiates a price based on a harvest of up to several hundred tons. By comparison, an average Ryer Island grape sale ranges from 2,000 to 3,000 tons.

The role of AVAs

In one sense, at least to the federal government that establishes boundaries of American Viticultural Areas, Green Valley and most of Suisun Valley are already high-quality winegrowing areas. Those parts of northwestern Solano County are part of the North Coast American Viticultural Area, the premium wine appellation that includes all of Sonoma County and parts of Napa, Mendocino, Lake and Marin counties.

In 1982, both Suisun Valley and Solano County Green Valley were granted their own AVA designations as subregions of the North Coast AVA. Until this year, Ryer Island was not included in any AVA, but it was added in April to the Clarksburg AVA, the balance of which lies mostly in District 17.

The AVA designation shows a wine is produced in a defined region with shared geography, climate and soils and declares the wine’s quality and character traits for the consumer. The fact the state’s District 5 boundary, so key to the amount paid for grapes, still lumps North Coast AVA vineyards together with Clarksburg AVA/Central Valley vineyards hurts not only in the price paid for grapes. It also factors into the insurable values set by crop insurers, the backers of the change say.

Although a premium lot of Suisun Valley Petite Sirah may be worth $1,700 per ton, it may only be insurable for $1,300 per ton based on the District 5 average price for the varietal, which includes the large volume of Ryer Island petite sirah grapes with an average price of $800 per ton. This underinsured value can result in a catastrophic loss for the grape grower in the event the vineyard is damaged by a fire or hail, as detailed in the written testimony at CDFA’s December 2019 workshop.

Land appraisers also start with the district’s average grape pricing when they estimate a vineyard’s value per acre, in spite of premium prices paid by buyers for a northwestern Solano vineyard’s grapes, according to written submittals from the association and the Allied Grape Growers on the record of CDFA’s December 2019 workshop.

California’s review of the petition

At first, the state agency’s review of the association’s petition proceeded smoothly. The state agriculture department scheduled and conducted a pre-regulatory workshop on Dec. 17, 2019, to consider the merits of the association’s evidence and gather industry and public testimony.

After the workshop, CDFA concluded the petition warranted formal agency review and, on May 14, 2020, issued its notice of intent to initiate the regulatory process to consider modifying the boundary between grape pricing districts 5 and 17 utilized for the Grape Crush Report.

CDFA cited three factors supporting its decision to initiate formal review:

1. “The reasonableness and economic soundness of the proposed Grape Pricing District boundary changes.”
2. “Level of support, or opposition, of the proposed Grape Pricing District boundary changes.”
3. “Input from experts in local real estate values and crop insurance.”

CDFA’s notice stated that it “anticipates initiating the regulatory process in fall 2020, pursuant to the Administrative Procedures Act (Chapter 3.5 of the California Government Code) and expects the process to take up to one year to complete. A formal hearing will be conducted as part of the regulatory process to ensure public input is gathered.”

CDFA’s projected one-year timeline was not achieved.

First came the retirement, soon after the December 2019 workshop, of CDFA Marketing Services Division Director Jeff Cesca, who had been deeply involved in reviewing the association’s petition.

Then, as the COVID pandemic’s long-term, public health and economic impacts became more apparent, Gov. Newsom introduced a downsized state budget in May 2020 that froze agency spending at 2019-20 levels. Both CDFA and the California Office of Administrative Law (OAL), which has final approval over the petition and the legal text of the Code amendment adjusting the District boundary, have been challenged since the pandemic to retain experienced staff and keep current with workloads.

No public hearing has been scheduled, but there have been “ongoing discussions back and forth,” according to King. The association has also encouraged industry leaders to write letters to CDFA in support of the petition.

Jeff Bitter, President of the Allied Grape Growers, said that he has written two letters in support on behalf of his organization, the first in July of 2019 when the petition was filed and a follow-up letter in January of this year requesting progress updates on the petition. King said that CDFA recently advised him that it will be holding a series of meetings with the administrative law office to finalize the text for the code amendment.

Kathy Diaz, director of CDFA’s marketing division, said that process is set to be in motion this year.

“We are hoping to submit to OAL the initial documents to start the rulemaking process this fall,” Diaz told the Business Journal in an email. “If accepted by OAL, that will open the rulemaking process and trigger a public comment period and will also give us the opportunity to hold a public hearing (likely in early 2023).”

Diaz wrote that all interested parties would be notified of the public hearing and given an opportunity to express their views on the petition.

“If everything goes as planned, a decision on whether to change the regulations will be finalized by next summer,” Diaz said.