US grape shortage pushes prices up

Rising demand and tightening supply are driving grape prices up in the US wine industry.

According to the Rabobank Wine Quarterly, released today, wine consumption in America “has grown consistently” for the past 17 years, but the area under vine has remained flat for over a decade.

While imported wine, “particularly bulk wine from lower cost producers”, has filled the gap in supply and historically prevented Californian wine prices rising, a weakening US dollar has, since 2010, pushed prices up for its major wine importers.

Meanwhile, Rabobank forecast further rises in American grape prices following estimates that the 2011 harvest will be at least 10% smaller than the 2010 crop.

Although it believes the increasing pressure on stocks in the US “allows growers to improve profitability,” it warns that in the short term, the situation “has created challenges for wineries that source supply from the spot market.”

It also believes that retailers may struggle to source wine for private label products as producers switch their focus to supplying brands.

The chart below, from Ciatti Company, shows the increase in grape costs by variety in Napa and the San Joaquin Valley.