A short 2007 crush in Australia should help balance new world supplies.
The news is generally good for white wine varieties in the global market for the next few years, says an international wine broker representative. However, the U.S. wine industry is still working through a surplus of bulk red wines left over from the huge California crop in 2005.
"The white picture looks really strong for the next couple of years," said Joseph Ciatti, chair of the Joseph Ciatti Company and chief executive officer of Vintage Wine Trust, a real estate investment trust. Ciatti shared global and California wine trends with about 1,000 growers and vintners at the annual meeting of the Washington Association of Wine Grape Growers, in Kennewick. Ciatti founded the wine brokerage company, headquartered in San Rafael, California, in 1976. Today, with offices in six foreign countries, it is the largest bulk wine brokerage in the United States and does about 100 million gallons of wine business annually.
Though the United States only accounts for about 8 percent of wines produced in the world and 5 percent of the world's wine grape acreage, it has become a targeted market for foreign wines, he said, adding that wine industry analysts predict it will become the largest wine-consuming nation. Short inventories in the United States of Pinot Gris, Pinot Noir, and Riesling—a variety that is also in short supply in Washington State—and excess product in South America and Australia have fueled some of the increase in wines imported from foreign countries.
About 30 percent of all wines consumed in the United States comes from a foreign producer, Ciatti said.
Australia has had large crushes of around two million tons in the last three years, he said, but the 2007 crush is expected to be "way short."
Since last October, Australian wine producers have raised all bulk wholesale prices by $1 per gallon because of the perceived short crush, Ciatti said.
Until last October when Australians raised their prices, California wines were typically about $1 per gallon higher for nearly all types of bulk wines. But with the Australian price increases, prices for wines, particularly Chardonnay, are beginning to come into balance and are more even among the New World wine producers. Chile is still the lowest-
cost producer of Merlot and Cabernet Sauvignon, selling bulk wines for $1.25 and $1.10 per gallon, respectively, compared to California's $2.50 per gallon for Cabernet and $2.85 for Merlot.
California's huge 3.76 million tons of wine grapes produced in 2005 represented an increase of 35 percent from the previous year and tipped the supply over the edge. "When we got to 3 million tons in 2000, it knocked our socks off and led to excesses. We just started to come out of the funk in 2004, and then the huge 2005 crop came," Ciatti said.
"The huge crop in 2005 was not just a Central Valley issue," he said, noting that Napa, Sonoma, and the Central Coast regions known for high-end wine also had big increases in production, ranging from 10 to more than 50 percent more grapes than the previous year. "Some of the areas with the biggest increases were premium wine areas."
To put the excess crop in perspective, he explained that the extra tonnage of 980,000 tons of grapes crushed in California was nine times bigger than Washington's entire harvest of 110,000 tons that year. "With 166 million gallons of extra grape juice, we filled up every nook and cranny in the state."
In Napa alone, growers in the region produced an extra 10 million gallons, with 5 million gallons of that in Cabernet Sauvignon. "That's the reason why Franzia sells Napa River wines in Trader Joe's for $4.99 a bottle."
Sales of California wines could not keep up with the tide of wine in 2005 as the industry crushed more than 630,000 tons more than the amount of wine sold, he added.
"I think we will eventually work through the extra production, but it really hurt our growers on prices," Ciatti remarked.
"The reason why Australia and California got into problems was indiscriminate planting," he said, adding that growers should not plant wine grapes without a winery contract.
Ciatti noted that Washington and Oregon have premium wine grape areas that are well positioned with hot varietals like Pinot Gris, Pinot Noir, and Riesling. Also, the regions have a limited number of new vineyards recently planted. Recently released acreage statistics show there are 31,000 acres planted in Washington, an 11 percent increase in wine grape plantings since the last acreage survey taken in 2002.
"But don't get caught up in the wave that there is a huge need for grapes up here," he warned. "Stay focused on what you do best, and stay with these hot varieties."