A smaller California 2011 winegrape crop has eliminated any surplus that was still on the market and sent the industry on the edge of a shortage.
As a result, Nat DiBuduo, president of Fresno, Calif.-based Allied Grape Growers, has recommended that growers begin planting winegrapes once again as long as they do it smartly and with a long-term winery contract.
"It looked like in 2011 we could have a good depletion based on California wine sales, and it looks like we're on the cusp of a shortage," says DiBuduo, who represents about 600 growers in the cooperative.
"The time for acreage expansion is here, and you probably never thought you'd hear me tell you that. Learn from our history. Let's look at it in moderation and plant it for value-priced wines and varieties that are appropriate for your region."
DiBuduo's comments came during the recent annual state-of-the-industry session at the Unified Wine and Grape Symposium in Sacramento, Calif.
The National Agricultural Statistics Service in October estimated the 2011 California winegrape crop to be 3.4 million tons.
DiBuduo says Allied puts it more at 3.25 million tons, down 10.4 percent from the 2010 crop and fairly close to the 2007 short crop.
He blames late rains, frosts in some production areas both during spring and at harvest, and rains at harvest for the reduced crop.
Steve Fredricks, president of Novato, Calif.-based Turrentine Brokerage, says bulk wine shipments also back DiBuduo's contentions.
When case wine sales are slow, wineries put more into bulk wine and vice versa.
Turrentine's latest figures show the lowest U.S. bulk wine inventory in 11 years, Fredricks says.
That also opens the door for lower-priced imports to supplant part of the shortage.
Faced with a price of $8 to $11 per gallon for Lodi wine, for example, some wineries may look toward Chilean wine at $5.50 to $6 per gallon, Fredricks says.
The tight supply also has sent bulk wine prices climbing.
Cabernet sauvignon, for example, is double what it was at the same time last year, Fredricks says.
Based on a 3 percent annual growth in wine sales, DiBuduo says California growers would need to harvest 3.61 million tons in 2012, 3.68 million tons in 2013 and 3.75 million tons in 2014.
That means 45,000 new bearing acres would have to come into production by 2014.
The anticipated shortage is part of a cycle the California wine industry has experienced about every 10 years. Only five years ago, the industry was in an oversupply situation, and winegrape growers—mostly in the Central Valley—removed 150,000 aces.
Much of that acreage was replanted with other permanent crops, such as almonds, walnuts, pistachios and pomegranates.
Even today, winegrapes continue to see competition from other commodities that may bring higher rates of return, says Bill Pauli, a Potter Valley winegrape growe and chairman of the California Association of Winegrape Growers.
A grower can develop 2.5 acres of almonds in the Central Valley for the same amount as it takes to develop only 1 acre of vineyard, DuBudio says.
Despite today's higher winegrape prices, almonds still net the grower more, he says.
Nurseries that concentrated in producing grapevines five years ago also have changed their product mix, increasing other permanent crop propagation and decreasing vine propagation.
Based on an annual survey of grapevine nurseries conducted by Allied, DiBuduo says only 17,000 to 23,000 acres worth of grapevines were sold and planted in 2011.
Nurseries are sold out for 2012 and few plants are left for 2013 delivery.
Despite the tight supply, DiBuduo, Fredricks and Jon Fredrickson, president of Woodside, Calif.-based Gomberg, Fredrikson and Associates, say California wine sales will continue to grow, albeit at a slower rate than the 4 percent seen in 2011.
In the next few years, Fredrickson predicts a rate of 2 percent to 2.5 percent growth.
Consumers also will see retail discounting subsiding, Fredrikson says.
On the bright side, they point to the triple-digit growth in sweet moscato wines and sweet red blends.
Some have compared these sweet wine trends to earlier ones that involved white zinfandel and Portuguese red wines.
"This means new people are coming in and starting out in these products and some of them are going on to other varietals," Fredrickson says.