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Wine grape glut pushed county prices down 5 percent:
Over-planted cabernet sauvignon, pinot noir will continue to drop for years

February 11, 2003

By TIM TESCONI
THE PRESS DEMOCRAT

For the first time in 10 years, Sonoma County grape prices have decreased, dropping 5 percent last year as a huge supply of California grapes overwhelmed limited demand for wine.

Wine industry experts predict it may be two to three years before grape
supply and wine demand come into balance, with prices continuing to drop
for over-planted North Coast varietals such as cabernet sauvignon and pinot noir.

Still, Sonoma County fared better in 2002 than most grape-growing regions
in California, according to a state report released Monday.

Overall, California grape prices dropped 17 percent in 2002 from the
previous year.

Napa County, California's premier wine region, bucked the downward trend,
commanding higher prices this year because of the value of the Napa name to wine consumers around the world.

Grape prices increased 4 percent in Napa County to an average $2,938 a ton, the highest in the state. Sonoma County was second at $2,055 a ton.

"Supply and demand are more in balance in the Napa Valley than in other
areas," said grape grower Doug Stanton, a director of the Napa Valley Grape Growers. He said most Napa growers sell their grapes through long-term contracts that guarantee average prices from the previous year's grape crush report with bonuses of 5 to 15 percent.

The California wine industry has been affected by a convergence of factors, including a flood of foreign wines and slowing U.S. wine sales because of the sluggish economy.

Although wine sales are increasing 4 to 5 percent annually, they aren't
growing fast enough to absorb the grapes coming into production as a result of the unprecedented planting boom driven by soaring wine sales in the '90s.

Longtime grower Richard Mounts of the Dry Creek Valley said down cycles are part of grape growing but that vineyards remain the agricultural future of Sonoma County.

"When you're in this business for the long haul you learn to plan ahead for
the low spots," Mounts, 56, said Monday.

Grape prices and production figures for the 2002 harvest are contained in
the California Department of Food and Agriculture's preliminary grape crush
report. The report, widely used by the wine industry in setting future
grape prices, is the first official calculation of yields and prices for
the 2002 crop.

Mendocino County grapes averaged $1,373 a ton, down 6 percent from 2001, and Lake County grapes averaged $1,306 a ton, up 1 percent. Lake County prices slightly increased because it predominately produces sauvignon blanc, one of the few varietals not over-planted.

Although an estimated 5 to 10 percent of the crop in Mendocino and Lake
counties was not sold, the state crush report tracks only actual grape
sales. Therefore, unsold grapes -- with no value -- don't drag down the
average price.

Even with lower average prices in Sonoma and Mendocino counties, the total value of the North Coast grape crop hit a record $874 million, up from $849 million in 2001. Napa led the four counties with a grape crop valued at $384 million, followed by Sonoma County with a crop valued at $376 million. Mendocino County grapes returned $81 million, and Lake County's brought in $33 million.

Nick Frey, executive director of the Sonoma County Grape Growers
Association, said despite horror stories at harvest, most growers sold
their grapes at good prices because of long-term contracts. He said only a
small percentage of the grape crop was sold at rock-bottom prices on the
spot market.

"All in all, it was a pretty decent year, with average prices declining
less than 5 percent in Sonoma County," Frey said.

The market situation would have been much worse if growers hadn't taken
action to reduce the crop, Frey said.

Early in the season, he said, growers heavily thinned grape clusters to
lighten the load and improve fruit quality, removing unwanted tonnage from the market.

Sonoma County's grape crop was 183,000 tons in 2002, up 10,000 tons from the previous year, according to the grape crush report.

"Growers really managed the big crop load. The crop was only up 10,000
tons, even with the 5,000 acres of new vineyards coming into production
last year," Frey said. Sonoma County has a total 59,000 acres of vineyards.

Frey said another 10,000 acres of new vineyards will be coming into
production over the next several years, with most of the land planted to
cabernet sauvignon and pinot noir.

Chardonnay, the most widely planted grape varietal in Sonoma County, took the biggest hit last year. Chardonnay averaged $1,731 a ton in 2002, a 9 percent decrease from the previous year. Merlot grape prices in Sonoma County declined 8 percent.

Frey said there are some indications that chardonnay and merlot may be
moving out of excess supply and more into balance with wine sales. He said this year's market will be difficult for growers who have unsold cabernet sauvignon and pinot noir because there will be so much coming into production.

But, he cautions, everything depends on the weather. A spring frost, a
summer heat wave or fall rains could severely lower crop yields, increasing
the value of grapes.

"Anything could happen to reduce crop set this year and that would change the story very dramatically," Frey said.

Statewide, California growers harvested 3.7 million tons of grapes, a 12
percent increase from 2001. Red wine varieties accounted for 52 percent of the grape crush.

According to the report, the average statewide price for all California
grapes was $460 a ton, down 17 percent from 2001.

You can reach Staff Writer Tim Tesconi at 521-5289 or
ttesconi@pressdemocrat.com.