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California's 2014 grape crush shows 'healthy decline' but won't stop bulk prices sliding

Published:  11 February, 2015

California's grape crush for 2014 hit 3.91 million tonnes, showing a "healthy decline" of 340,000 tonnes on the previous year, however the "ample inventories" of 2012 and 2013 means finding buyers for wine will be a challenge.

Some brokers have said bulk stocks of previous vintages are at the "highest levels" experienced in the past 25 years, adding that the market will need to pick up quickly to prevent prices sliding further.

The California Department of Food and Agriculture's Preliminary Grape Crush Report for 2014 is a "critical barometer" for the industry, according to Turrentine Brokerage, which highlighted a decline of 300,000 tonnes for red grapes, 115,000 of Zinfandel and 65,000 tonnes of Merlot throughout California. It described the latter two decreases as "beneficial" due to the inventories still available in tank and bottle from the previous two years.

There were 54,000 fewer tonnes of white grapes crushed, while the strongest varieties overall, "including Cabernet Sauvignon, Pinot Noir, Pinot Grigio and Chardonnay, all dropped a little from 2013 but still exceeded their average production for the last five years. This should ensure adequate supply to fuel sales growth", said Steve Fredricks, president of Turrentine Brokerage.

When it comes to pricing, the least expensive areas of the state saw prices soften, while more expensive regions experienced the opposite. Fredericks attributed this to the "slow but steady shift to more expensive wines as consumers open their wallets a little further as the economy strengthens. This kind of trend always causes some imbalances but is positive for the wine business as a whole as growth is concentrated in wines that have margins sufficient to justify the huge capital investments required to grow grapes and make and market wine."

Another bulk brokerage firm Ciatti said: "When we look at where bulk inventories sit today, we see that we have significant supply, potentially at the highest level we have experienced in the history of Ciatti."

It described the 2014 harvest as one of the "most bountiful in the history of Napa and Sonoma counties". Prices in these areas have also increased, up by 5-7% for Cabernet Sauvignon, as sales of wine priced over $15 strengthens.

But the firm said it was concerned about Chardonnay, Pinot Noir and Merlot as "their inventory is concentrated in some of the older vintages".

It added that "the size and velocity of bulk transactions will need to pick up quickly in order to keep the price of these bulk wines above $10 per gallon".

Taking a closer look at the individual regions, the interior/valley region showed a 9% decrease in production from 2013, crushing 255,000 fewer tonnes that the previous year.

The latest Ciatti report stated: "The 2012 vintage still has a fair amount of bulk wine that needs to find an end user, but with very few buyers that is still a challenge."

Earlier this week, reported that California's surplus stocks would affect imports from Chile.