Why Farmers Didn’t Pick All Their Winegrapes in 2023


The preliminary annual California Grape Crush Report was just released publicly last week. Packed with statistics on the volumes, types, and pricing of grapes across the state’s various winegrowing districts it tells an interesting story about the 2023 vintage.

The primary headline is that the state crushed 3.668 million tons of wine grapes. That amount puts this harvest around average as far as California goes, at least since the big bumper harvests of 2016-2018. Last year was on par with 2021, and a little bit more than 2022’s harvest of 3.37 million tons.

Many grape varieties saw significant jumps in their price per ton, some achieving the highest prices ever for their respective regions, sometimes even as their volumes also increased.

Below the headlines, however, many commentators are suggesting that the harvest could have been much bigger, had the state’s farmers actually harvested all their grapes.

So why would a farmer leave grapes on the vine instead harvesting them? The easy answer, of course, is because no one wanted to buy them. Indeed, demand seems to be softening for winegrapes as the industry faces the continued stiff headwinds of falling demand.

But that’s not the full story or even the correct one.

In many cases last year, farmers did have people offering to purchase their grapes but they still refused to sell them, preferring to let them rot on the vine than put money in their pockets.

What on earth could have motivated them to do this? The answer is actually the California Grape Crush Report itself. This document is so powerful, it might as well be the one ring to rule them all when it comes to the majority of the $1.8 billion California wine grape economy.

But most people (myself included, until recently) think it’s just a bunch of statistics gathered by government bureaucrats.

The secret power of this annual government document really comes down to tables like this one:

Excerpt from the 2023 USDA California Grape Crush Report

What you’re looking at is the listing of prices paid for different amounts of grapes in 2023 in District 4, which is Napa County.

The amount I have circled shows that for Cabernet Franc grown in Napa County, the weighted average price was $10,620.72 per ton. To the right of that, you can see that 1,863.3 tons were sold in Napa.

That price, circled in red, is the magic number. Why is it magic? Because the majority of grape contracts made between growers and wineries in California are based on that number.

That’s right. If I’m a farmer, and I have 10 acres of Cabernet Franc to sell, and you’re a winery who wants to buy it, we will sign a contract that agrees how much you will pay for a ton of grapes. And 99% of the time, that price will either be exactly, or be based on, the number in that red circle up there (growers with more ‘premium’ grapes will price their fruit at 1-2 standard deviations higher than the average price).

Yes, some contracts now pay farmers by the acre rather than strictly by the ton, which can be more fair given the fluctuations in yield that can happen (or decisions by customers to drop or hang fruit longer), but even those contracts make an assumption about average yield in tons per acre, and guess what that number is multiplied by to get the price per acre? Yep. That price per ton from the California Grape Crush Report.

Which brings us back to the question of why in the world farmers would leave grapes on the vine instead of selling them to a willing and ready buyer? It all comes down to what price that buyer is offering.

Here’s how it plays out. Earlier in the summer, some big wine player like Gallo or Jackson Family Wines or Duckhorn announces what they’re willing to pay for certain types of grapes. You can guess what that price is based on. Usually, they sign a bunch of contracts and take care of things so that their core grape supply is covered.

But then the year goes on,…

Source : https://www.vinography.com/2024/02/why-farmers-didnt-pick-all-their-winegrapes-in-2023