District-by-District Review of the Crush Report, Part 2: Central Coast and Southern California

Those of you who read my review of the crush report for the Wine Industry Advisor, may have noticed that I gave limited analysis of the crush report by geographic location. This is the second part of a three-part series, focusing on the Central Coast and Southern California. The previous article looked at the North Coast, while the next will deal with the interior regions of the state.

District 6: Bay Area and Santa Cruz

Average Price Per Ton: $1,113.55, Overall Price Shift: +2.63%, Overall Change in Yield: -23.53%

The slight price increase in District 6 did little to offset the drop in yields. This diverse area’s most commercially important grapes are Chardonnay (>7,200 tons) and Cabernet Sauvignon (>5,100 tons). The former saw prices drop by 3.6% to $868.87, while the latter rose 6.46% to $1258.86. The next most important whites are Pinot Gris and Sauvignon Blanc, which also saw modest price decreases to $691.80 and $636.78 respectively. Luckily, per acre yields are around 10 and 8 tons to the acre, respectively. Meanwhile, a slew of lesser-grown and lesser-known whites saw their very modest yields fetch considerably higher prices.

Reds, over all, did much better, with an 8.16% increase in price. Merlot (>2,200 tons) saw prices rise over 20% to $1,050.43, welcome relief for farmers whose prices have been getting beaten down until recently. Of all the reds grown in large quantities, the priciest in District 6 is Pinot Noir, no doubt due to a tight market for coastal Pinot and Santa Cruz’s reputation for producing Pinot that approaches the quality of some of the state’s best growing regions. Prices rose over 10% to $2,044.64. Most Italian reds experienced huge gains of between 25% and 75%, though none are grown in large quantities.

District 7: Monterey and San Benito Counties

Average Price Per Ton: $1,240.01, Overall Price Shift: +2.30%, Overall Change in Yield: +2.69%

With a total yield of nearly 320,000 tons, District 7 produces more winegrapes than any other coastal region. Prices outpaced 2014’s 0.8% rate of inflation, although it is unclear that 2.3% is enough of a price increase to outpace the rise in the cost of doing business in California in the wine industry. Still, combined with the small increase in yields, uncommon in 2014, this was a good year for District 7. The Top 4 varieties, whose numbers are summarized in the chart below, account for roughly 80% of total production. Clearly, Cabernet Sauvignon’s gains explain a great deal of the overall price shift for the district. It amazes me how buyers seem so desperate for Cabernet that they are willing to pay almost as much for Cab as for Chardonnay from an area that is so much better suited for Chard.

Despite the good news, some growers felt serious pain in District 7. The nearly 7,000 tons of Gewurztraminer grown in District 7 fell nearly 16% in price from an already low price to $747.92. The over 10,000 tons of Sauvignon Blanc did poorly, too, falling almost 8% to $966.71. District 7’s nearly 12,000 tons of Riesling fared little better, falling over 6% to $963.18. Grenache took a dive of over 40%, which must have been devastating to the growers who produce the district’s 1,000-some tons of the stuff, although at $1501.22 per ton, I’m guessing they still made money. And, yeah, if you’re doing the math in your head, that means District 7 Grenache sold for over $2500 per ton in 2013. Petit Verdot (>2,000 tons) took a hit of almost 11% to $1208.71.

Syrah, a perennial piñata, rose almost 6% to $1,088.58 with a rather significant yield of over 9,000 tons. Malbec (>2,300 tons) did quite well too, rising over 4% to $1,059.65.

District 8: San Luis Obispo, Santa Barbara, Ventura

Average Price Per Ton: $2,318.92, Overall Price Shift: +9.16%, Overall Change in Yield: -11.73%

On the face of it, one might assume that, since yields fell more than prices rose, growers in District 8 were less profitable in 2014 than in 2013. I would guess, however, that the reduced variable costs associated with lower yields – primarily reduced hauling costs and, for hand-picked fruit, lower harvest costs – offset this and profits were similar in both years. District 8 has plenty of reason to cheer, as only Napa saw a higher price increase. Since 2010, the Wine Spectator seems to be paying more and more attention to this region and scores are rising. The benefits are clearly starting to accrue too growers.

The most spectacular performance in this year’s crush report was a more than quintupling of District 8’s “Other Whites” – all 27.6 tons of them. Though I am intensely curious as to what these grapes are and who is buying them, this region grows over 200,000 tons of mostly mainstream varieties. Though Chardonnay (>46,000 tons) lagged the average price shift, I would guess that the nearly 7% price rise to $1,327.45 was welcomed by growers. Sauvignon Blanc (>7,000 tons) did slightly better, rising 7.66% to $1,220.35.

Italian reds did well here, generally rising by 10% to 30%, though yields account for only a couple thousand tons. The roughly 1600 tons of Cabernet Franc grown in District 8 saw prices rise more than 20% to $2,130.41. The big red in the room, Cabernet Sauvignon, accounting for almost 52,000 tons of fruit, rose by 6.40% to $1,464.42. If you give Cab Franc another penny per ton then it is exactly $666 more per ton than Cabernet Sauvignon. Maybe that’s a clue that some sort of Wine-ageddon is on the horizon, like a sequel to Sideways where Paul Giamatti pans Cabernet Sauvignon and touts Cabernet Franc. More likely it’s an indication that Cab Franc production in District 8 tends to focus much more on quality than the bulk of the Cabernet Sauvignon vineyards. It’s also a sign that we should be paying attention to Cabernet Franc.

Merlot (>19,000 tons) also took a price increase of a couple percent, inching up $1,056.64. Pinot Noir’s nearly 27,500 tons averaged a healthy $2,682.77, a 3.41% increase over 2013. Syrah accounts for almost 17,000 tons and, in my opinion, does particularly well in this area. Despite being every distributor’s whipping boy, Syrah prices rose over 6% to $1,364.02 in this district. Zinfandel (>8,000 tons), a relatively minor varietal in this area, rose a dramatic 11.18% to $1,406.67.

District 15: LA and San Bernardino Counties

Average Price Per Ton: $838.98, Overall Price Shift: +43.41%, Overall Change in Yield: -35.25%

Apparently, growers in California’s lowest-yielding grape pricing district are responding to the drought by cropping less or removing vines and this is driving prices higher for the 341.5 tons of wine still grown here. I would guess this is less a function of supply and demand and more of culling out the more disastrously uneconomical plantings. How anyone grows such small amounts of grapes at prices that averaged less than $600 per ton in 2013 is beyond me. I am genuinely curious about the wine “industry” in District 15, but know nothing about it, except that the two largest wineries in the area, Castle Rock and Riboli, do not make wine from local grapes. If someone who is reading this has information to share, I would love to hear it.

District 16: San Diego and Surrounding Counties

Average Price Per Ton: $1,474.05, Overall Price Shift: +7.15%, Overall Change in Yield: +7.99%

Another commercially unimportant area, with less than 5,000 tons of production, District 16 is the second lowest-yielding district in the state. Fun fact: about 1% of wine grown in District 16 is Vermentino, which rose over 15% to $1,821.35. I’m really surprised at how high the average prices are here. There is no dominant grape in District 16. Chardonnay is the most important white, followed by Muscat Blanc. In line with the rest of the state, Cabernet Sauvignon’s price rose by over 14% to $1,521.89, buoying prices, as it is the most widely grown grape in the region.

In the next and final installment of this series we’ll look at inland regions of California, so be prepared for some seriously bad news.