California’s harvest is now over and for many its completion comes as something of a relief, feeling as it does like the closing of a chapter on what has been a bruising 2020. The focus now is on winemaking and some sellers are reporting very good quality wines from the new vintage. We are estimating a harvest in the range of 3.16 to 3.53 million tons which would be the smallest since 2011’s 3.34 million tons, predominantly due to lighter than average yields.
Another, secondary, factor on total tonnage is smoke exposure. Reiterating what we said last month, we cannot afford a repeat of 2020 in how the industry deals with this problem. The industry requires: baseline numbers to work from (what are the smoke exposure measurements in a non-fire year for each varietal?), industry recognized and standardized measurement techniques and interpretation of results, and access to all the data so informed decisions can be made. Perhaps the precedent already set by Brix or MOG oversight, for example, offers a way forward, and might include wineries informing growers of the acceptable smoke exposure threshold before the season starts. All parties are understandably trying to protect themselves but there needs to be a dialogue in order to reach something fair and equitable for all.
Following the increased activity that we saw through summer in response to the uptick in off-premise sales and then smoke exposure concerns from August onward, the bulk market has been quieter in recent weeks. With the frenzy having reduced bulk inventory and there having been a lighter crop this year, plus the continued strength of wine sales in off-premise channels, the bulk market appears more balanced than it has been for a while: We would characterize it as shifting from an oversupply to a more ‘normal’ position.
However, a feature of this return to a more normal position is the lopsided nature of it: The big brands with large distribution in the off-premise channels are controlling the buying activity while the rest – especially those supplying the on-premise – are far more cautious. Overall wine sales volumes in the US are projected to be flat to slightly up in calendar year 2020. Value will likely be down (according to research firm bw166, it was down 7% in the 12 months to the end of September) as the off premise accounts for roughly only a quarter of the total value of the US wine market. COVID-19 injects uncertainty into the market in numerous ways – will the off-premise sales uptick be sustained, when will some normality return and the on-premise be able to get up and running again? – draining the confidence buyers have in their sales projections. This uncertainty, plus the smaller margins that can be made via grocery stores versus other sales channels, leads us to believe there is a ceiling on how high bulk wine prices can go.
It continues to be dry in California and a La Niña ocean-atmosphere phenomenon is forecast in the Pacific: this would mean higher than average temperatures, and near average to drier than average conditions, through January. Read on for the latest on the state’s bulk wine and grape markets, get in touch if you have bulk wine or grapes to sell, and stay safe.