Normal pre-harvest prep or a genuine uptick in buyer interest?
Following a pleasant May and early June, much of California began experiencing a record heat spell in late June through the first half of July. The prolonged heat may potentially have slowed sugar accumulation and slightly affected yields in the vineyards, but as the growing cycle was running up to three or four weeks ahead of where it was in 2023, and water supplies are good after a wet winter, the heat is not yet – as of the time of writing on July 15th – a significant concern.
With the arrival of some intense heat disincentivizing canopy thinning, and many uncontracted vineyards being minimally farmed, growing areas have appeared green and lush. Mildew pockets have occurred across the state, as per normal, but in general vines seem in positive health. The crop potential in most areas seems to be at least average; there remains plenty of time, however, for Mother Nature to have her say.
Activity levels on the bulk wine and grape markets in June continued the uptick seen in May. The great majority of this activity consisted of inquiries only, as prospective buyers – many of them smaller operatives identifying market niches for specific private labels and other programs – assess the potential opportunities. Second-quarter case-good sales numbers remain unclear and third-quarter figures are mere conjecture at this stage, plus there are still some weeks to go before harvest. Consequently, buyers and sellers alike have good reason not to rush into any decisions. That said, bulk wine and grape prices have continued to soften and deals intermittently occur when motivated sellers – requiring cashflow and/or storage space – intersect with opportunistic buyers on price. Buyers, enjoying plenty of choice and increasingly operating on a just-in-time basis, rarely enter into price negotiation.
We caution that the more positive mood music emanating from a number of recently-released reports and articles – essentially that case-good sales volumes may stabilize sometime this year – is mainly based on forecasts and assumptions, not – as yet – hard numbers. It is too soon to read anything into the aforementioned recent uptick in bulk wine and grape inquiries; it could be normal pre-harvest prep.
Some believe the extent of the retailer-distributor destocking over the past 18-24 months, and the number of vineyards that have been – and are continuing to be – removed, amount to an overcorrection, so that any market rebound will be rapid when case-good demand stabilizes. That is speculation and, even if it proves to be the case, no one knows when the rebound will occur. In the meantime, many suppliers will struggle for cashflow or to make payments on time, will resize operations or remove vines, or attempt to sell their businesses on a viticultural real estate market that naturally mirrors the wine market: few transactions, reduced prices.
Read on for our detailed assessment of how things stand and – for the most up-to-the-minute information – get in touch with Ciatti directly. The broker team includes industry professionals with over 135 years of collective experience, ready to help buyers and sellers alike navigate through this challenging period.
Click here for the full July 2024 California Report as a PDF.
