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California moves forward on petition to redraw Solano wine grape district to favor North Coast pricing

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Farmers of west Solano County vineyards in the same North Coast appellation as Napa Valley and Sonoma County may soon get official recognition that their wine grapes sell at higher pricing than what’s bound for lower-priced brands.

The California Department of Food and Agriculture is moving forward with a petition to redraw a portion of the eastern boundary of Solano County’s grape pricing District 5 to move large vineyards in the Sacramento River Delta to neighboring District 17, which includes the Clarksburg appellation, the agency announced Thursday.

While moving the district line on Ryer Island seems like a small change, the growers behind the petition last August, who are based in the North Coast subappellations of Green and Suisun valleys, say it will make a big difference in district average pricing in the annual grape crush report compiled by state and federal ag regulators, a document used as a starting point for grape purchase contracts, crop insurance policies and property valuations.

Glenn Proctor, partner of bulk wine and grape brokerage Ciatti Co., said the district shift would help contract negotiations between growers and wineries.

“It means we don’t have to have the explanations (about the price differences between west and east Solano) like we had in the past about those grapes,” Proctor said.

In east Solano, the part of Ryer being proposed to shift to District 17 is estimated to account for 30%–35% of District 5 wine grape tonnage and 28% of revenue, according to the petition. That’s based on analyses by marketing group Allied Grape Growers in April 2017 and by Gabriel Froymovich of Healdsburg-based Vineyard Financial Associates in July 2019.

Even with better price discovery for west Solano wine grapes, growers throughout the North Coast are in an especially difficult time of the wine business cycle, according to Proctor and Brian Clements, a partner in Turrentine Brokerage. Wine sales growth started slowing in 2017, and a huge 2018 crop and sizable 2019 harvest have been pushing the wine grape market toward oversupply, where wineries weren’t eagerly looking for every prime grape on the vine to meet demand. That situation was made worse in March by the global shutdown for over two months now of major buyers of North Coast wines: restaurants, hotels, bars and cruise lines.

“For 2020, there’s going to bulk wine doesn’t sell, and grapes are going to remain on the vine,” Clements said. “Wineries that are well structured and have distribution to off-premise (markets) have been weathering the storm well.”

Hospitality-dependent wine brands from California coastal regions are being the most impacted, while producers of mass-market brands sourced from the Central Valley are facing less of a drop in demand, Clements said.

The next few weeks are expected to shine light on the size of the 2020 North Coast wine grape crop, with growers reporting chardonnay, merlot and pinot noir vines in flower now, according to Proctor. After the vines self-pollinate and clusters begin to form, the impact of earlier frosty nights and May showers on crop size will become more clear.

“Back a few years ago, many growers in North Coast had a high percentage of their grapes under multiyear contracts after winery buy-in during 2015-2017 because of demand in marketplace,” Proctor said. “With wineries more cautious now, a number have given notice on some of those contracts (of discontinuation).”

That means more North Coast growers will have grapes not under multiyear contract than in years before, and some wineries are renegotiate contracts and pricing. Those situations are making it more difficult for growers to cover fixed farming costs, he said.

California grape crush districts were established after the Clare Berryhill Grape Crush Report Act of 1976. Of the original 11 districts, Mendocino and Lake counties originally were District 1, but now they are districts 1 and 2, respectively. District 5 also used to include the San Francisco East Bay and South Bay, and its boundaries were last amended in the 1980s, according to the petition.

The state ag department said it plans to hold a formal hearing on the petition this fall, and the regulatory process of making the crush district change could take up to a year to complete. If an administrative law judge OKs the district boundary shift, wineries in the state would have to be informed that grapes arriving from that side of Ryer Island would now be in District 17. That change in processes would have to be coordinated with the U.S. Food & Drug Administration’s National Agricultural Statistical Service, which compiles the annual crush report.

Jeff Quackenbush (707-521-4256, jquackenbush@busjrnl.com) covers wine, real estate and construction.

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