Shortage? Or Not? Are Growers About To Over-Plant Again?

The most recent issue of the Allied Grape Growers Newsletter that landed in my email this morning raises some very important questions about supply, un-counted acreage and asks some really vital questions about whether to join the planting frenzy.

The following is from the newsletter which you can read in its entirety by clicking here.

 The State of California released the 2011 Grape Acreage Report on April 17, and the numbers are impressive. Once again the state’s Agricultural Statistics Service is estimating California bearing winegrape acreage to be at its highest level ever, at 506,000 acres.

This is the first time that the state has estimated bearing winegrape acres to be above 500,000. But it is important to note that there are two sets of data in the acreage report. One is the reported acreage that growers voluntarily submit to the state, and the other is the state’s estimate of what is actually out there.

It is a well-known and understood fact that not all winegrape acres are reported by growers. In fact, if you compare the reported bearing winegrape acres to the state’s estimated number, there is about a 44,000 acre difference. The reported amount of bearing winegrape acres is 462,023.

The state goes a step further and provides estimates by variety, so that we can have a better understanding of where the majority of the differences are. The table shows the estimated versus reported bearing acreage, by variety.

ESTIMATING WHERE THE UNREPORTED ACRES ARE

However, what we discover by analyzing the two sets of data is that the percent difference between reported and estimated acres is almost identical (9.3 to 9.6 percent off) for all categories/varieties that are listed by the state.

So in essence, there is no special analysis being done to determine whether the 44,000-acre difference between estimated and reported is actually skewed toward any particular variety(ies) or district(s).

In fact, when we observe that very old varieties like Chenin Blanc and French Colombard are said to be underreported by the same percent as newer plantings like Syrah, that is suspicious. Most of those French and Chenin fields are 30 to 40 years old. If we don’t know where they all are by now, then we have some serious problems. If we can utilize sophisticated devices to locate unknown destinations, I’m sure we can identify where all of the stationary French Colombard and Chenin Blanc vineyards are in our own backyard.

REPORT YOUR ACREAGE

The point in exposing this issue is not to discredit the acreage report or the people that produce it. It is to encourage those that don’t report their acres to consider doing so, so that we have more reliable information to work off of in the first place. The state’s numbers, no doubt, are the basis for all acreage data that is available. They do the very best job they can with the resources allocated to the department.

We are just pointing out that there is much more in-depth analysis and cross-referencing that can take place to closer define actual acreage, by variety and region. Much of that is done at Allied Grape Growers, and we share that information periodically with the industry through our own acreage reports that are presented in various industry publications and at industry events such as the Unified Wine & Grape Symposium.

CENTRAL VALLEY HAS VAST MAJORITY OF UNREPORTED ACRES

The Grape Acreage Report, despite some inaccuracies, remains a critical and valuable tool for the industry. It turns out that, through analysis, we find the vast majority of unreported acres are in the central valley. It is easy to identify specific varieties and areas that are underreported based on yield, by taking the tons crushed in the district from the Grape Crush Report and dividing it by the bearing acres in the Grape Acreage Report.

For example: The 2011 acreage report shows 1,194 bearing acres of Pinot Noir in District 12 (the central valley area from Merced to Manteca), but the crush report indicates that 23,714 tons of Pinot Noir were crushed from that district in 2011. If you divide the tons crushed by the reported acres to determine yield, the result is about 21 tons per acre.

Obviously, this is not an accurate reflection of yield. It is clear that the acres are underreported in the district. In fact, if you assumed a more reasonable yield for Pinot Noir of about eight tons per acre, it is likely that there are almost 3,000 acres of bearing Pinot Noir in the district, not 1,194 as reported.

This same analysis can be done throughout the various districts in California, by variety, to find where the largest data holes are in the report. Another example is that in District 14 (the very southern central valley), 362,861 total winegrape tons were crushed in 2011. Only 25,528 winegrape acres were reported as bearing in 2011, which would result in an average yield for the district of over 14 tons per acre.

Even though that might be expected and standard for many new plantings of winegrapes in the central valley in recent years, it certainly can’t be accepted as an average for a district that has many decades-old vineyards and historically lowerproducing varietal grapes. It is likely that the actual average is +/-10 tons per acre, making the actual acres closer to 36,000 or about 10,000 more acres than the report indicates.

SAME PROBLEM WITH NON-BEARING ACRES

Unfortunately, we have the same problem, but only magnified, with non-bearing acres. It is incredibly hard for the state to track down vineyards as they are being planted. Many new vineyards are planted by growers that are already part of the state’s agricultural acreage surveys, so those might be getting reported from the beginning. But in most cases, the new plantings aren’t being identified until they have been in the ground a few years.

This is either because the growers refuse to report their acres or simply because they are unaware of the opportunity and the state is unaware of them. At least with bearing-acreage data, there is a way to ground-truth it, as described previously.

But with non-bearing data, there is no real easy way to verify its accuracy. In the past, we estimated what was actually being planted by doing very involved analysis of the acreage report over time. By analyzing the report in detail over many years, we determined that acreage is generally under-reported by about 50-66 percent the first year in which new acres are reported, 20-33 percent the second year and 10-15 percent the third year.

Usually by the fourth year, the state has captured the lion’s share of the data, and it is included in the report, subject to the discrepancies discussed earlier. But that method, as useful as it is, still didn’t give us the accuracy we were hoping for. To remedy the problem, Allied Grape Growers approached it from a different angle.

NURSERY DATA TO THE RESCUE

For the last four years, we have been going directly to the nurseries that are selling the vine stock to find out what’s happening. The state’s nurseries (especially the larger ones) have been very cooperative with Allied Grape Growers, and we want to continue to express our gratitude for the information they have provided over the recent years. Each year we survey the nurseries to find out what exactly is selling and where it is going in.

The specific information is held in strictest confidence, but the aggregated data is provided to the industry free of charge. Most of the state’s nurseries participate, but not all, so it is still a “voluntary” data collection event. However, we strongly feel that we capture a clear majority of the annual vine sales in the state, and we are confident that the numbers will be substantiated over time.

As we have always known or suspected, we can verify that the reported non-bearing acreage is grossly under-reported in the state report. The acreage report states that the current reported non-bearing winegrape acreage total is 18,299. This represents all vines reported as planted since 2009, because they are considered non-bearing for three years.

However, via the nursery survey, Allied Grape Growers can substantiate that the actual amount of vines purchased for planting over the last three years is probably closer to 45,000 acres worth. That is quite a discrepancy. To the state’s credit, they do make an estimate of the actual non-bearing winegrape acreage, because they, too, know that the reported number is significantly off. The state estimated that there were 37,000 non-bearing acres in 2011…..still well shy of the 45,000 acres worth of vines that we can verify as being sold from 2008 to 2010, but at least double what is reported.

POPULAR VARIETIES BEING PLANTED

Our survey indicated that the most popular varieties that are being planted today are Muscat of Alexander (for Moscato wines), Cabernet Sauvignon, Chardonnay, French Colombard and Pinot Noir. Recent popularly planted varieties Pinot Grigio and Rubired have dropped off significantly in new interest, as reported by the nurseries. Included is a pie chart showing how the 20,000+/- acres worth of vine sales in 2011 were distributed among the varieties/categories. To answer the real question on everyone’s mind…..the answer is “no.”

ARE WE OVER-PLANTING AGAIN LIKE WE DID IN THE 1990S?

The question being: “Are we overplanting again like we did in the 1990s?” We strongly believe that the current rate of vineyard acreage expansion can be classified as moderate and acceptable. The proven continual growth of the industry (in terms of wine shipments), even through significant recessionary times, tells a story of consumer acceptance that parallels few luxury goods. And let’s face it, wine is a luxury good. But as some say, “It’s an affordable luxury.”

With California wine shipments increasing at an average rate of at least 3 percent per year over the last decade, the amount of new acres being planted annually is right at that number needed to continue to supply the projected growth. We don’t see any reason why it would change in the foreseeable future. Additionally, as long as vineyard expansion is prohibited by cost of land and cost of development, as well as alternative crop options, we don’t really see a huge potential for uncontracted acres to be developed in mass like they were in the 1990s and early 2000s. Today, at 20,000 acres planted annually, we are only at half of the 40,000 acres that were planted annually in the late 1990s. We have a much larger base of bearing acres, and an established consumer base to build on.

SUMMING UP 2011

In wrapping up our acreage discussion, we should make mention that the bearing raisin variety acreage declined once again in 2011, regardless of whether you consider the reported or the estimated acreage numbers. The numbers show a decline of 5,000 acres from the year previous. Total raisin variety acreage is now estimated at 205,000 as compared to 287,000 acres in the year 2000. With alternative crops in the San Joaquin Valley continuing to provide substantially higher opportunities for profit, as well as an aging raisin acreage base, raisin acreage will likely continue to decrease in the future.

Overall, the 2011 Grape Acreage Report can be summed up as follows:

• Only 37,000 acres out of 543,000 total acres are non-bearing. This is 7 percent of total acres, which is a relatively low ratio.
• At 506,000 acres, we are at the highest amount of estimated bearing acreage ever in the state.

There is actually the question of whether or not we are planting enough vines to keep up with potential growth in demand. Considering that all the new acres are relatively highly productive, we think that the supply will be there longer term. The real question is whether it will be there in the next two to three years, since the newly planted acres will only be growing toward production and not actually producing full crops.