Like many in the highly competitive North Coast wine industry, the analysts and lenders at American AgCredit are always searching for information to help us better understand the market and anticipate future trends.
The USDA Grape Crush Report, released on Feb. 9, is one of those key information sources. Here are key data from the report:
• Napa Valley cabernet sauvignon has hit an all-time high price per ton at $7,421.44 and has increased at an average compound annual growth rate (CAGR) of 7.24 percent from 2010–2017. During this same period of time, Napa Valley cabernet sauvignon total acreage has only increased by an average of 1.21 percent.
• Sonoma County cab has hit an all-time high price per ton at $3,019.50 and has shown an average CAGR of 5.49 percent. In a similar scenario to what has been seen in Napa, acreage in the county has only increased by an average of 1.71 percent.
• Likewise, Lake County cab hit an all-time high price per ton of $2,351.92 and has increased at an average CAGR of 7.58 percent. However, unlike Napa and Sonoma, acreage has to an extent followed suit, with an increase of 4.07 percent.
WHAT THE DATA ARE TELLING US
Wine grapes and wine, at nearly $2 billion in loan volume, comprise the largest component of our commodity portfolio, and not surprisingly, the lion’s share of that is in Napa, Sonoma, Mendocino and Lake counties. As such, understanding the trends and nuances that lie behind the data help us, in turn, provide better information and service to our customers.
American AgCredit has noticed a planting trend throughout the North Coast, demonstrated by the recent increases in the nonbearing components (see the charts in the gallery for this story). However, the charts tell two different stories of the nature of that planting.
For Napa County, where undeveloped plantable land is hard to find, nonbearing acreage largely represents replantings. Following the phylloxera infestation of the late ’80s and early ’90s, a large percentage of the producing acreage was planted effectively at the same time.
Twenty-five years later, many of those vineyards are now reaching the end of their economic lives and so are once again being replanted en masse. With the long average economic life of a vineyard, replanting is often an opportunity to update the vineyard to varietals, clones, rootstocks and technology that better fit modern farming practices and consumer taste preferences. With the historically high prices and large consumer demand, much of the replanting is moving towards cabernet sauvignon.
Conversely, undeveloped plantable land in Lake County is more readily available, and accordingly, the nonbearing acreage largely represents new plantings. Viticulturists planting this new land in Lake County have the opportunity to apply new technology and growing styles from the initial development of the vineyard.
The application of these modern viticultural practices, along with legacy knowledge about the county’s terroir, is producing high-quality fruit.
And, the price data from the USDA Crush Report (see the price-per-ton table in this story) validates that the quality of Lake County fruit is being recognized by the wider market.
We will continue to monitor these price and production trends through all the North Coast American viticultural areas (AVAs, aka appellations). Like many others, we are intrigued to see where the cabernet sauvignon journey takes us, and look forward to seeing what the future holds for the Lake County vineyard industry.