North Coast grape market begins to recover

NAPA - Grape growers, who are traditionally the last in the wine industry to benefit from an economic recovery, are finally starting to see a rebound in both prices and interest from buyers.

Wineries are now committing to buying more premium grapes - and paying higher prices - for the first time since the recession devastated the high-end wine market starting in late 2008, market insiders said Tuesday at a vineyard conference in Napa.

"The market has gotten better," said Glenn Proctor, a Santa Rosa grape broker with Ciatti Company. "It might actually be worth being a grape grower again."

Prices for grapes sold on the spot market in Sonoma County have jumped anywhere from a few percentage points for flagging varietals like sauvignon blanc to 50 percent for in-demand grapes like pinot noir, according to figures provided by Proctor at the 2011 Vineyard Economics Seminar.

Much of the grape buying activity in California remains in the Central Valley, which produces less-expensive wines that have been popular with budget-minded consumers throughout the recession. But in recent months, the premium markets in Sonoma and Napa have started picking up too.

Steve Dutton, whose family business farms 1,100 acres of vineyards in west Sonoma County, said starting in January grape buyers have been signing contracts to purchase his grapes for both this year and, in several cases, for multiple years.

"There is definitely a recovery underway," Dutton said.

Grape buyers are still moving slowly, and targeting specific varietals and appellations.

"Pinot noir is our hot market right now," Dutton said. "We're almost sold out."

Of course, before the recession, Dutton would not have had any surplus to sell. And it is still a challenge to sell his chardonnay, which remains in lower demand across the North Coast.

"(Chardonnay) is still lukewarm, at best," said Steve Sangiacomo, whose family farms 1,600 acres in Sonoma County, including well-known chardonnay from the Los Carneros appellation.

Despite the flagging recovery for some varietals, the grape market appears to be improving over last year. Some growers let their crop rot on the vine last fall because they could not find a buyer willing to pay a price worth the added cost of picking the grapes.

This year, with several industry reports showing the glut of high-end wine is nearly exhausted after months of steep discounting by producers, wineries are again in a position to buy grapes to make more wine, according to an industry survey conducted by David Freed, chairman of the Silverado Group.

"Selling grapes is not as big a concern as a year ago," Freed said.

In the post-recession wine market, many expect prices and grape buying will stabilize in the next year or two as a new, lower-priced market takes shape.

"We're trying to figure out how much grape supply we need, and at what prices," Proctor said. "It's all about price."