allied grape growers, 2014. all rights reserved. winegrape supply and market outlook jeff bitter...

Allied Grape Growers, 2014. All rights reserved.

Winegrape Supply andMarket Outlook

Jeff BitterAllied Grape Growers

May 7, 2014


Today’s presentation utilizes information obtained via Allied Grape

Growers’ (AGG) annual Nursery Survey combined with critical evaluation of reports and data made available by

the State of California. Wine shipment data is courtesy of the Gomberg

Fredrikson Report. AGG’s internal operations data along with numerous pieces of anecdotal evidence was also used in the formulation of conclusions.


Answering Some Key Industry Questions…….


Answering Some Key Industry Questions

Question #1:How did the 2013 crush size up?


California Production

Answering Some Key Industry QuestionsHow did the 2013 crush size up?

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

5.00

2005 2006 2007 2008 2009 2010 2011 2012 2013

3.76

3.143.25

3.06

3.70 3.583.34

4.024.23

4.33

3.673.49

3.673.67

Tons(in Millions)

Statewide Grape Crush 2005-2013

Other Crush Winegrape Crush

4.09 3.98

4.694.39


Region 2013% Change from 2012

Three-Year Average

% Above Average

North Coast 583,012 1% 518,760 12%Central Coast 588,399 7% 508,036 16%Lodi/Clarksburg 942,546 3% 847,038 11%Central Interior 2,025,989 8% 1,904,643 6%Other 90,621 1% 85,353 6%Total 4,230,567 5% 3,863,831 9%

A regional look at production, stated in tons crushed

How did the 2013 crush size up?



2009 3,703,031 495,000 7.48

2010 3,588,985 505,000 7.11

2011 3,342,689 515,000 6.49

2012 4,018,237 530,000 7.58

2013 4,230,567 545,000 7.76

Average per acre yield from 2009-2013: 7.28

Crop Year

Winegrape Tons Crushed or Projected

AGG Estimated Bearing

Winegrape Acres

Average Winegrape

Yield

A look at average yields statewide

How did the 2013 crush size up?




Question #1:How did the 2013 crush size up?

Answer:Clearly larger than recent

averages, in total production as well as in per acre yields



Question #2:How many acres do we really

have?


Answering Some Key Industry QuestionsHow many acres do we really have?

- 5,000

10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000

Three YearsAgo

Two YearsAgo

One Year Ago Currently

Range of Potential California Winegrape Acres Planted (Current Year 2013/2014)


Bearing Non-Bearing TotalState Reported 469,062 25,131 494,192 State Estimated 525,000 45,000 570,000 DPR Permitted N/A N/A 620,837 AGG Estimated 545,000 75,000 620,000

2014 AGG Estimate 555,000 90,000 645,000

2013 Acreage Data Comparison

Answering Some Key Industry QuestionsHow many acres do we really have?



Question #2:How many acres do we really

have?Answer:

Much more than the state has historically reported or estimated



Question #3:What are growers planting today?

(other than almonds)


29% White

71% Red

Other Reds Include:GrenacheCab Franc

SyrahMalbecTannat

Other Whites Include:GewurztraminerRieslingViognierOther florals

What are growers planting today?


Cabernet Sauvingon

29.4%

Pinot Noir12.5%

Zin/Primitivo10%

Petite Sirah5%

Merlot3.5%

Rubired2.7%

Petite Verdot2%

Other Red6%

Other White2%

Sauvignon Blanc<1%

Muscat Alex/Canelli

1.4%

French Colombard6%

Pinot Grigio5%

Chardonnay13.7%

2013 Winegrape Vines Sold by California Nurseries



Question #3:What are growers planting today?

(other than almonds)

Answer:Cabernet Sauvignon….

and a few other varieties



Question #4:What about the drought?


Drought impacts different regions in different ways:

• North Coast

• Central Coast

• Northern San Joaquin Valley (Lodi)

• Central and Southern San Joaquin Valley (east side)

• Central and Southern San Joaquin Valley (west side)

What about the drought?



Viticulturally, what does it mean for 2014 and beyond?

• Functional root zone reduction (root flush minimized)• Potential for bud necrosis• Restricted spring growth• Nutrient deficiencies and/or toxicities• Potential lack of frost protection• Vine stress, increased pest and disease pressure• Water quality concerns• Potential canopy/crop load reduction

What about the drought?




Question #4:What about the drought?

Answer:The drought will undoubtedly

cause concern and loss for California winegrape growers.

Production will likely be negatively impacted.



Question #5:Will our domestic supply depress

import growth?


Will our domestic supply depress import growth?

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3.50

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5.00

5.50

6.00

6.50

0

100

200

300

400

500

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700

800

900

1000

1100

1200

1300

Jan 08 Jul 08 Jan 09 Jul 09 Jan 10 Jul 10 Jan 11 Jul 11 Jan 12 Jul 12 Jan 13 Jul 13 Jan 14

Exchange Rates (Value to $1 U.S.), January 2008 - December 2013

Chilean Peso Argentine Peso Australian Dollar Euro British Pound

ChileanPeso

Aust $Arg Peso

Euro & Pound





0.010.020.030.040.050.060.070.080.090.0

100.0

2008 2009 2010 2011 2012 2013 -Tracking

Imported Wine - Bottled and Bulk(In Millions of Cases)

Bottled Imports Bulk ImportsData obtained via the Gomberg Fredrikson Report

Total-1%

Total+12%

Total+0%

Total+7%

Total+16%

Total-5%

-5%

+27%

+92%

-2%+7% +3% -2%

+5%

-20%+26%

+71%

-24%


0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

2005 2006 2007 2008 2009 2010 2011 2012

California Grapes Crushed for Wine vs. California Wine Shipments2005-2012

Grapes Crushed for Wine Wine ShipmentsCalifornia Wine Shipment Data Source:The Gomberg Fredrikson Report.

Millionsof Tons




0.010.020.030.040.050.060.070.080.090.0

100.0

2008 2009 2010 2011 2012 2013 -Tracking



Total-1%

Total+12%

Total+0%

Total+7%

Total+16%

Total-5%

-5%

+27%

+92%

-2%+7% +3% -2%

+5%

-20%+26%

+71%

-24%






0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

2005 2006 2007 2008 2009 2010 2011 2012

California Grapes Crushed for Wine vs. California Wine Shipments2005-2012

Grapes Crushed for Wine Wine ShipmentsCalifornia Wine Shipment Data Source:The Gomberg Fredrikson Report.

Millionsof Tons


0.010.020.030.040.050.060.070.080.090.0

100.0

2008 2009 2010 2011 2012 2013 -Tracking



Total-1%

Total+12%

Total+0%

Total+7%

Total+16%

Total-5%

-5%

+27%

+92%

-2%+7% +3% -2%

+5%

-20%+26%

+71%

-24%





Question #5:Will our domestic supply depress

import growth?

Answer:Yes. Based on market behavior in

the recent past, it should.



Question #6:What are the regional planting

trends?


Answering Some Key Industry QuestionsWhat are the regional planting trends?

Regional Allocation of Major Winegrape Vines Sold, 2013

High End

Mid Range

Value

FrenchColombard

Muscats

PinotGrigio

Chardonnay

Zinfandel/Primitivo

PinotNoir

Merlot

CabernetSauvignon

Petite Sirah

A high percentage of the “Value” plantings are in Lodi


Answering Some Key Industry QuestionsWhat are the regional planting trends?

Varieties charted are Chardonnay, Cabernet Sauvignon, Merlot, Pinot Noir and Zinfandel.

-

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

2010 2011 2012 2013

Breakdown of vines sold by categoryFive major varieties, 2010-2013

High & Mid

Value



Question #6:What are the regional planting

trends?

Answer:Coastal planting of major varietals has increased

substantially. Interior planting has shifted north to Lodi.



Question #7:Are we headed for surplus,

balance or shortage?


2009 3,703,031 495,000 7.48

2010 3,588,985 505,000 7.11

2011 3,342,689 515,000 6.49

2012 4,018,237 530,000 7.58

2013 4,230,567 545,000 7.76

2014 3,774,000 555,000 6.80

2015 4,132,500 570,000 7.25

2016 4,343,500 595,000 7.30

2017 4,581,250 625,000 7.33

Crop Year

Winegrape Tons Crushed or Projected

AGG Estimated Bearing

Winegrape Acres

Average Winegrape

Yield

Are we headed for surplus, balance or shortage?


Average Statewide Yield = 7.28 TPA

Assumes no escalation in the current rate of annual vineyard removals…….(<2% per year).


0.0

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1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

2009 2010 2011 2012 2013 2014Est.

2015Est.

2016Est.

2017Est.

California Wine Shipments and Grape Production (for wine only)2009-2013 with estimates and projections thru 2017

Wine Shipments Grapes Crushed for Wine

Millionsof Tons

Forecast shows production growth outpacing shipments in the near future






-

100,000

200,000

300,000

400,000

500,000

600,000

700,000

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

Estimated California Bearing Winegrape AcresFrom 1990 with projections




-

100,000

200,000

300,000

400,000

500,000

600,000

700,000

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

Estimated California Bearing Winegrape AcresFrom 1990 with projections

Forecast shows acreage growth beginning to outpace the trendline by

2017.



Question #7:Are we headed for surplus,

balance or shortage?

Answer:We are not forecasting a shortage

in the foreseeable future


Questions?

You may download or view a copy of this presentation at:www.alliedgrapegrowers.org

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