Early Reports Put 2018 Harvest at Above Average

California wine industry maintains an optimistic view, larger wineries sitting on full inventories

by Jim Gordon
Grape growers in many parts of California are predicting good yields for the state's 2018 harvest.

San Rafael, Calif.—Growers and winemakers expressed optimism in mid-July about the 2018 California wine grape harvest as bunch closure was occurring in many parts of the state. An average to above-average crop of about 4 million to 4.25 million tons was predicted by well-informed sources including the Allied Grape Growers cooperative and Ciatti & Co., grape and bulk wine brokers.

Winemakers also liked what they saw in vineyards in terms of crop size and condition. “In terms of quality, the vines have great uniformity, and pest pressure has been very low,” said Ryan Stapleton, director of grower relations for The Family Coppola. He sources fruit for 1.6 million cases of wine. Much comes from near the winery’s Sonoma County base but also as far south as the Santa Rita Hills in Santa Barbara County and as far north as Redwood Valley in Mendocino County. “Because of that uniformity, it looks to be a really good year so far, but we’ll see what mother nature throws our way during the next several weeks.”

Stapleton and others interviewed by Wines & Vines noted that the growing season has been relatively cool in most of the coastal counties. Growing degree days have lagged behind last year, measuring 115 degree days behind 2017 in Windsor, Calif., in northern Sonoma County through July 12, for example, and 170 degree days behind 2014 for the same period. That raised a caution flag about a potentially later than average harvest risking damage from autumn rains, but it was too early in the season for serious worries.

Supply is strong
The wine industry had been in a reasonably balanced supply-demand situation since the 2017 vintage was completed. However, with retail sales of U.S. wine decelerating from a 5% rate of growth in June 2017 to less than 1% growth in June 2018, according to bw166.com, some of the larger wineries now have adequate if not more than adequate inventories in their tanks and barrels. They are less eager than last year to commit to more grapes and/or higher priced grapes for 2018, according to several well-informed sources.

“We’re in a time of change and adjustment,” said Glen Proctor, partner and broker in the Ciatti Company and a former winery grape buyer. “Premium wine is not showing the strength it once did as an overall category. Starting around last harvest we’re seeing some change. Price had been able to grow, but not so much now.”

Grape prices had risen generally in areas suitable for wines retailing at about $15 and higher. The weighted average grower return per ton in Monterey County, for example, rose by 8% to $1,413 from 2015 to 2017, according to the California Grape Crush Reports, and for Sonoma County the average grower return rose 15% in two years to $2,767.

Proctor said the squeeze at retail means wineries can’t maintain their margins if they keep paying more for grapes that go into wines stuck at certain price points. Adding to their resistance to higher grape prices is a currently strong supply of bulk wine. “We’re seeing a bit of a stall from the buyer side. The competitors are not chasing it. It’s not just big guys but the smaller wineries, too. I am getting more calls from growers who say, ‘I’ve got grapes available, do you have a buyer?’ On the other hand, wineries are saying, ‘My finance department won’t let me buy.’

“If I was in charge of supply strategy for a large winery I would say, well, why should I chase it? Do I want to set the price by buying more now or wait and see what the price will be?” Proctor said.

Besides the wait-and-see tactic, some wineries with full tanks have become sellers of bulk wine rather than buyers to manage the margin challenge. One move that Proctor has seen repeatedly is a winery selling off bulk wine from the more expensive coastal counties and buying bulk or grapes from lower-priced interior regions. They then blend in as much as they can to keep a Sonoma County or North Coast AVA on the label, or transition the brand to the lowest common denominator California AVA.

The Ciatti Company’s latest newsletter advises, “Sellers can unload small lots of wine at the current prices, but those wishing to move large volumes must consider discounting their price. This is when opportunities could arise for buyers.”

Weather cooperating
Affecting the likely timing of the harvest were spring rains and somewhat cooler temperatures than usual in the early part of the growing season, setting up expectations of a later than average start, at least in the coastal counties. Stapleton, at Francis Coppola winery, said the season is tracking seven to 10 days behind last year, and has been reading that a wet El Nino weather pattern may potentially settle in before the year is over, so he is watching the weather closely.

Dave Michul is the viticulturist who manages Beckstoffer Vineyards’ 1,000-plus acres of wine grapes in Napa Valley. “Things look really good here,” he said. “the vines are very uniform. Chardonnay looks less uniform, with some hens and chicks (variations in berry sizes). It was a little bit longer bloom than usual but Cabernet looks really good and Merlot looks really good. Growth was really good this spring. We had plenty of it and the April rains helped. Hopefully things will keep on par and we can finish the season without any more drama.”

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