Mother Nature, we forgive you for ’11; now let it rain

      Producers, consumers, and all others involved with the winegrape industry are upset as 2011's harvest was much smaller when compared to 2010's harvest.
     According to the California Grape Crush Report, the biggest varieties experienced a large percent change in quantity (-20 to -24% for chardonnay and -9 to -12% for cabernet sauvignon) in major growing areas on the North coast. The quickest growing variety, pinot noir, also experienced a significant decrease in quantity (-5 to -19% change in quantity).
     This can be a necessary evil. The truth of the matter is that excess supply is ultimately detrimental to everyone. It brings down both retail prices and grape prices.
     Short supply is also a problem, but it is needed for bringing in pricing power, or how the product price affects the quantity demanded.
     In the case of excess supply, the price of winegrapes would decrease along with consumer demand, resulting in little or no profit in the winegrape market. In the case of short supply, the markets would stabilize by causing prices to eventually rise, resulting in an increase in consumer demand for winegrapes.
     However, the economy is still in a vulnerable state and rain is exactly what European countries such as Italy and Spain are hoping for.
     On the bright side, the grape and wine supply in the North Coast of California is back to normal in terms of demand and wineries are buying grapes once again.

Source:  http://www.northbaybusinessjournal.com/49474/grape-market-insights-on-harvest-2011-in-preliminary-crush-report-2/