The preliminary annual California Grape Crush Report was just released publicly last week. Packed with statistics on the volumes, types, and pricing of grapes across the state’s various winegrowing districts it tells an interesting story about the 2023 vintage.

The primary headline is that the state crushed 3.668 million tons of wine grapes. That amount puts this harvest around average as far as California goes, at least since the big bumper harvests of 2016-2018. Last year was on par with 2021, and a little bit more than 2022’s harvest of 3.37 million tons.

Many grape varieties saw significant jumps in their price per ton, some achieving the highest prices ever for their respective regions, sometimes even as their volumes also increased.

Below the headlines, however, many commentators are suggesting that the harvest could have been much bigger, had the state’s farmers actually harvested all their grapes.

So why would a farmer leave grapes on the vine instead harvesting them? The easy answer, of course, is because no one wanted to buy them. Indeed, that happened this year. Demand seems to be softening for winegrapes as the industry faces the continued stiff headwinds of falling demand. Of course, the grapes might not have ripened or might have disease issues, both of which were something of a challenge in what was a very cool vintage.

But there’s another factor at play as well for some growers.

In many cases last year, farmers did have people offering to purchase their grapes but they still refused to sell them, preferring to let them rot on the vine than put money in their pockets.

What on earth could have motivated them to do this? One answer is actually the California Grape Crush Report itself. This document is so powerful, it might as well be the one ring to rule them all when it comes to the majority of the $1.8 billion California wine grape economy.

But most people (myself included, until recently) think it’s just a bunch of statistics gathered by government bureaucrats.

The secret power of this annual government document really comes down to tables like this one:

What you’re looking at is the listing of prices paid for different amounts of grapes in 2023 in District 4, which is Napa County.

The amount I have circled shows that for Cabernet Franc grown in Napa County, the weighted average price was $10,620.72 per ton. To the right of that, you can see that 1,863.3 tons were sold in Napa.

That price, circled in red, is the magic number. Why is it magic? Because the majority of grape contracts made between growers and wineries in California are based on that number.

That’s right. If I’m a farmer, and I have 10 acres of Cabernet Franc to sell, and you’re a winery who wants to buy it, we will sign a contract that agrees how much you will pay for a ton of grapes. And most of the time, that price will either be exactly, or be based on, the number in that red circle up there (growers with more ‘premium’ grapes will price their fruit at 1-2 standard deviations higher than the average price).

Yes, some contracts now pay farmers by the acre rather than strictly by the ton, which can be more fair given the fluctuations in yield that can happen (or decisions by customers to drop or hang fruit longer), but even those contracts make an assumption about average yield in tons per acre, and guess what that number is usually multiplied by to get the price per acre? Yep. That price per ton from the California Grape Crush Report.

Which brings us back to the question of why in the world farmers would leave grapes on the vine instead of selling them to a willing and ready buyer? It all comes down to what price that buyer is offering.

Here’s how it plays out. Earlier in the summer, some big wine player like Gallo or Jackson Family Wines or Duckhorn announces what they’re willing to pay for certain types of grapes. You can guess what that price is based on. Usually, they sign a bunch of contracts and take care of things so that their core grape supply is covered.

But then the year goes on, and harvest gets underway, and these big players decide they could use a bit more. So they put the word out that they want a bit more of this or a bit more of that. But the price will be lower than it was earlier in the season. The later the date gets, the lower the price goes.

So let’s say you’re a grower and you’ve either set a lot more fruit than you expected, or you had some winery decide they didn’t want the fruit that they had contracted for, and all of a sudden, you’ve got this unharvested fruit that you’d love to get rid of.

But instead of the weighted average price that you would usually have gotten for that fruit if you had a paying contract customer, you’re now being offered one-third of that price.

Yes, you could sell that fruit for a 66% discount, and put that cash in your pocket, but what you’ve also just done is make a dent in the weighted average price per ton for that vintage year.

Which means that next year, you’re going to get less money for all of your grapes.

Every transaction to sell grapes is supposed to be reported to the Department of Agriculture, and goes into the calculations that appear in the Annual Grape Crush Report. Every time a load of grapes, be it 1 ton or 20 tons, is sold for a price below last year’s average, it will bring down the average for next year. And since those averages are per grape variety, per district (California has 17 districts), it doesn’t take too many under-priced lots of a given grape variety to start having an impact.

When presented with below-average offers for their grapes farmers have to choose whether they’re willing to sacrifice future gains for immediate cash flow. And when they’ve already sold a bunch of their grapes for the year, most of the time, they’re willing to let their remaining grapes rot on the vine rather than rob themselves of higher prices next year.

And that’s a major reason why California ended up with 3.668 million tons harvested, instead of what analysts suggested would have been more than 4 million if everything came off the vines.

Photo by Samantha Fortney on Unsplash