Californian needs to remove vineyards to become sustainable, report warns

More vineyards will need to be removed in several regions of California to reach sustainable farming levels, as the focus on water intensifies and consumer demand slackens, a new report has warned. 

Silicon Valley Bank’s State of the US Wine Industry 2022 Report, which was published last week, has warned that although the light harvests in both 2020 and 2021 had brought the supply of grapes from California back into a “temporary balance”, there are too many vineyards to support sustainable farming levels in several regions.

The report points to the low prices of grapes and bulk wine from California, which is hovering around the lowest levels for the last five years, suggesting that demand is low, given the two lower than average yields in 2020 and 2021.

“Consumer demand is flat at best by volume,” the report states – “and the industry is not predicting any growth in consumption.”

“The fact that there has been no price movement in grapes after two short crops can only mean that wineries think they have enough already and they see no need to buy more for now,” it said.

Balanced supply

The 2021 crush in California is estimated to finish at around  3.6 million tons, (although the quality is reported to be “excellent”) which has helped balance the supply.  However if more average yields resume, there will be a return to oversupply.

“With increasing climate impacts from drought, fire, low soil moisture and record low reservoir levels, there will be even more pressure for agriculture and residential users to share limited water,” the report warned.

The ongoing problem of drought has caused soil moisture to fall to levels that are now impacting  yields, the report warned and water is likely to be the most important discussion topic for 2022, unless there is a significant amount of rain and snow during the winter and spring.

The problem isn’t a short term one, the report warned – reservoirs are currently only 35.7 percent full in California and there has been less snow running off into the drainage basins in the West, including the Sierra Nevadas and Colorado River Basin/

“While the San Joaquin Valley has dealt with restrictive water allocations for some time, the circle is expanding. This isn’t a short-term problem,” it said.

Wineries are also worried, the report said – a poll showed that only 2% were confident they had “abundant” water sources, while 43% very concerned about the potential for serious shortages – rising to nearly 90% in regions like Paso Robles, Napa (81%) and Sonoma County (80%).

These ongoing droughts and demands on the soil, coupled with low levels of demand and the threat of returning to oversupply suggests that hectares of vines will need to be removed in California and Washington to sustain the balance, “particularly if volume sold continues to dip”.

Historic oversupply

The oversupply ‘bubble’ started to form in 2015 and was expected to continue to grow, however the situation was changed “overnight” by effect of the  Covid 19 pandemic and the wildfires that raged in California and Oregon over the summer.

Panic buying at the start of the pandemic helped wipe out larger supplier’s oversupply within a few months and even though fruit from the North Coast was headed into harvest without contracts – threatening an oversupply again –  this was checked by the onset of the wildfires in August which burnt its way through 4 million acres in California and over 1 million in Oregon. Thousands of tonnes of grapes were subsequently affected by smoke taint.

“If there was any silver lining to the fires, grape supplies in the North Coast of California and Oregon were able to come into balance from this tragedy,” the report said.

 

 

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