By Barbara Barrielle
The disastrous wildfires, smoke damage and the worldwide pandemic may have been the painful medicine to bring balance back to the grape and wine market and position the industry for a healthier future with valuable lessons learned.
On Thursday, March 4, Wine Industry Network hosted Growing Forward, a half-day virtual conference for winegrowers. The program explored the 2020 California Crush report and what it reveals about the grape and bulk wine market, emerging vineyard management techniques, and a grower’s perspective on smoke exposure and what it means for grape contracts.
2020 California Crush Report Insights
Ciatti Company brought a team of experienced grapebrokers led by Partner Glenn Proctor to breakdown the crush report insights region by region. Overall the crush report revealed a huge decrease in production in 2020 of 3.4 million tons much of it due to the wildfires and resulting smoke that affected many of California’s growing regions.
This comes after a mounting oversupply from previous record harvests had been putting downward pressure on grape prices in all grape categories. The lack of new inventory, however, resulted in a rebounding demand for bulk juice and a steady increase in price there as well as for grape prices beginning late last year. The rebound is affecting the Central Valley and coastal areas with pricing heading upwards to levels similar to 2017.
“After 2019’s big bulk inventory, then 2020’s lack of activity until all the bulk got sucked up because of perceived smoke damage, I’ve never seen a more active market (in 2021) in all my years at Ciatti. Producers looking at 3-5 year contracts, buyers coming on strong, and renewed interest in Sonoma County, Russian River Valley, Alexander Valley and more,” said Todd Azevedo, Ciatti partner, Central Coast.
In the short term the dramatic drop in 2020 grape crush tonnage even has the potential to go beyond rebalancing the grape market. Ciatti President Greg Livengood warned that “the supply-side issue was back in balance but will only get worse. There is very little inventory and a long way to go before 2021 harvest.”
Regenerative Organic Farming
Paul Dolan, co-founder of Truett-Hurst and a leader in the regenerative organic farming movement, explained how this approach is like biodynamics but goes further. It is built on three pillars: social fairness for farmers and employees, animal welfare, and farming standards.
“Farm like the world depends on it,” it says on the Regenerative Organic Certified (ROC) website, and the panel expressed a similar attitude. “The spiritual sides of biodynamic farming are not really implied in ROC”, said Jordan Lonborg, viticulturist at Tablas Creek Vineyards. “We are still Demeter-certified, but we add the social welfare aspects to farming with regenerative organic.”
Craig Camp, who has been heralded for turning around Troon Vineyards in Oregon’s Applegate Valley points out that in their replanted vineyards “biodynamics is the framework we integrated into our process. Regenerative organic is the next step.”
Paul Skinner, president of Vineyard Investigations and owner of Sequum Winery, noted that “adding carbon to soils where they have been depleted is a good idea. There is the potential to take land that has been degraded and regenerate it.” Skinner has done this with thousands of acres in China but warns against “using microbial priming to add carbon but be careful not to lose carbon that has been there for eons.”
Smoke Exposure, Rejection and Grape Contracts
2020 was the most difficult year throughout the state said Brain Clements, Vice President of Turrentine Brokerage, “There were thousands of tons of rejections for grapes. It has been a seller’s market since 2017, but with inventory, prices were dropping.”
With the oversupply of grapes coming into 2020, some buyers were looking to the pandemic as a force majeure excuse to get out of contracts, then the fires happened. “Attention switched to fire and smoke in the air in all areas. Old or new smoke, volatile phenols, exposure v. taint, free v. bound,” said Jeff Bitter, president of Allied Grape Growers.
Testing and lawyers came to play a big part of the 2020 harvest difficulties. Growers were not well prepared nor were the labs, and most grower/buyer contracts did not have flexibility built in to reflect the wait on results. How they were handled often came down to relationships. “[It] comes down to people. It is a small world and ethos is everything,” said David Balter, Litigator at Dickenson, Peatman and Fogarty. “Usually in dispute cases, an agreement can be reached. This year a side effect of Covid meant the courts were limited and hearing primarily criminal cases. Out of 20-40 cases, though, I only have two that are still active.”
Going forward, growers and buyers should approach a contract with a “playbook of rights and responsibilities,” said John Trinidad, Dickenson, Peatman and Fogarty. “Contracts are changing and there is more detail and it is easier to put a dispute on the road to resolution. The approach to risk sharing tells you who you are dealing with.”
“Winemakers will have different tolerances just as they do with all faults,” said Bitter. Are you doing business with a small producer of single vineyard $350 Napa Valley Cab or a winery with lots of brands to spread the risk? Custom crush costs or established winery operation? They will have different pressure points.
Testing is also evolving, and there is some chatter about baseline testing of vineyards, so that any perceived smoke damage can be better compared with a non-fire influenced harvest.
2020 delivered painful lessons for growers and balance to the grape market, “But, truly, balance in the wine market lasts about a second before it’s a seller’s or a buyer’s market. Fires had a positive effect on the market. We were going to be in a 5-7 year oversupply and the market now feels balanced in the 10-20 year range,” said Clements.