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Vineyard Values and Trends:
The Cycle ContinuesVineyard Values and Trends:
The Cycle Continues
Central Valley Wine GrowersThursday, November 30, 2006
Central Valley Wine GrowersThursday, November 30, 2006
Tony Correia, ARATony Correia, ARA
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What the Vintners buy…What the Vintners buy…
“…I often wonder what the Vintners buy
One half so precious as the Goods they sell.”
“…I often wonder what the Vintners buy
One half so precious as the Goods they sell.”
The Rubaiyát of Omar KhayyámSeventy-First Quatrain
First Edition of the Translation by Edward Fitzgerald
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2. 3.
1. 4.
Wineries:Wineries: Insufficient inventory but Insufficient inventory but
big price increasesbig price increases
Wineries:Wineries:Marketing costs up, Marketing costs up,
prices downprices down
Wineries:Wineries:Must contain cost & add Must contain cost & add
value in a competitive marketvalue in a competitive market
1996 & 97
1988 & 89
Wineries:Wineries: Eliminate discounts,Eliminate discounts,
increase volumeincrease volume
Growers:Growers: Higher prices,Higher prices,
longer contractslonger contracts
Plantings:Plantings: Experienced growers Experienced growers get planting contractsget planting contracts
Consumers:Consumers: Prices upPrices up
DEPRESSIVE
SUPPLY
EXCEEDS
DEMAND
Growers:Growers:Low prices, shorter Low prices, shorter
commitments, higher quality commitments, higher quality standardsstandards
Plantings: Plantings: Phase 1 plantings bearing, Phase 1 plantings bearing,
some new speculative some new speculative plantingsplantings
Consumers:Consumers:Low prices, better selectionLow prices, better selection
Growers:Growers: Astronomical prices, Astronomical prices,
long contractslong contracts
Plantings:Plantings:Planting maniaPlanting mania
Consumers:Consumers:Starting to find Starting to find
imported alternativesimported alternatives
1998 -2000
1990 & 91
1982 & 83
2001 -2004?1992 & 93
1984 & 85
1994 & 95
1986 & 87
Growers:Growers:Grapes without contractGrapes without contract
hard to sellhard to sell
Plantings:Plantings:Phase 2 plantings nowPhase 2 plantings now
bearing; little new plantingsbearing; little new plantings
Consumers:Consumers:Great Values!Great Values!
MANIC
DEMAND
EXCEEDS
SUPPLY
HIGH PRICES
Acute
Shortage
Slight
Excess
Slight
Shortage
Acute
Excess
LOW PRICES
The Manic-Depressive Wine Business Wheel of Fortune
Copyright Turrentine Wine Brokerage 1997
All Rights Reserved
:)
:)
:)
:):)
:)
:)
:):(
:(
:(:(
:(
:(
:(
:(
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California ChardonnayCalifornia Chardonnay
0
100
200
300
400
500
600
700
800
79 81 83 85 87 89 91 93 95 97 99 01 03 O5
Production (1,000 Tons)
$500
$750
$1,000
$1,250
Price per Ton
0
100
200
300
400
500
600
700
800
79 81 83 85 87 89 91 93 95 97 99 01 03 O5
Production (1,000 Tons)
$500
$750
$1,000
$1,250
Price per Ton
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Overall TrendsOverall Trends
1,500
2,000
2,500
3,000
3,500
4,000
4,500
78 81 84 87 90 93 96 99 02 2005
Production (1,000 tons)
$0.0
$0.5
$1.0
$1.5
$2.0
Total Value ($Billion)
1,500
2,000
2,500
3,000
3,500
4,000
4,500
78 81 84 87 90 93 96 99 02 2005
Production (1,000 tons)
$0.0
$0.5
$1.0
$1.5
$2.0
Total Value ($Billion)
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Production Trend; Total Tons (1,000s)Production Trend; Total Tons (1,000s)
San Joaquin Valley
Other
Lodi
Central Coast
North Coast
-
500
1,000
1,500
2,000
2,500
3,000
3,500
1991 1997 2000 2005
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Production Trend; Share of Total TonsProduction Trend; Share of Total Tons
San Joaquin Valley
North Coast
Other
Central Coast
Lodi
0%
20%
40%
60%
80%
100%
1991 1997 2000 2005
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Production v Crop ValueProduction v Crop Value
Lodi
North Coast
Central Coast
San Joaquin Valley
0%
25%
50%
75%
100%
1991 93 95 97 99 O1 O3 2005
SJV; 44% of Tons, 18% of Value
North Coast; 11% of Tons;42% of Value
C. Coast; 16% of Tons;26% of Value
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Average Grape PricesAverage Grape Prices
$-
$100
$200
$300
$400
$500
$600
1991 93 95 97 99 01 2003 2005
11 12 13 14
Average Grape PricesDistricts 11 - 14
$179
$350
$193
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what does all this mean to our local Real Estate
markets? And, what are they telling us?
what does all this mean to our local Real Estate
markets? And, what are they telling us?
But;
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Land and Vineyard MarketsLand and Vineyard Markets
• Coastal areas are totally different Real Estate Markets
• Grape prices do impact vineyard and land values, especially for marginal properties, but relationship is weak.
• Demographic driven demand has driven rural homesite values higher; “Vineyard Estates”
(Chorus: Bubble, what bubble? I don’t see no stinkin’ bubble?)
• Coastal areas are totally different Real Estate Markets
• Grape prices do impact vineyard and land values, especially for marginal properties, but relationship is weak.
• Demographic driven demand has driven rural homesite values higher; “Vineyard Estates”
(Chorus: Bubble, what bubble? I don’t see no stinkin’ bubble?)
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Quote of the DayQuote of the Day• Once a price history develops, and people hear
that their neighbor made a lot of money on something, that impulse takes over, and we're seeing that in commodities and housing...Orgies tend to be wildest toward the end. It's like being Cinderella at the ball. You know that at midnight everything's going to turn back to pumpkins & mice. But you look around and say, 'one more dance,' and so does everyone else. The party does get to be more fun -- and besides, there are no clocks on the wall. And then suddenly the clock strikes 12, and everything turns back to pumpkins and mice.“
• Warren Buffett
• Once a price history develops, and people hear that their neighbor made a lot of money on something, that impulse takes over, and we're seeing that in commodities and housing...Orgies tend to be wildest toward the end. It's like being Cinderella at the ball. You know that at midnight everything's going to turn back to pumpkins & mice. But you look around and say, 'one more dance,' and so does everyone else. The party does get to be more fun -- and besides, there are no clocks on the wall. And then suddenly the clock strikes 12, and everything turns back to pumpkins and mice.“
• Warren Buffett
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Vineyard Market IssuesVineyard Market Issues
•Consolidation ; the BIG get
BIGGER•Perception of Value;
Quality at Reasonable Prices
•Consolidation ; the BIG get
BIGGER•Perception of Value;
Quality at Reasonable Prices
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Vineyard Market IssuesVineyard Market Issues• BIG Buyers:
–Professional Investors (PPV & CALPERS; REITs, and rumors of rumors of REITs)
– §1031 Exchangers–Real Estate Developers
• Grape Crush Capacity?• Replacement Costs Increasing;
•LAND PRICES!!!!• WATER
• BIG Buyers:–Professional Investors (PPV &
CALPERS; REITs, and rumors of rumors of REITs)
– §1031 Exchangers–Real Estate Developers
• Grape Crush Capacity?• Replacement Costs Increasing;
•LAND PRICES!!!!• WATER
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The Central ValleyThe Central Valley
•Largest Producer •largest vineyards•highest yields per acre•lower quality = lower prices
of Grapes AND Vineyards
•Commodity, undifferentiated
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The Central ValleyThe Central Valley
CYCLE: First to feel the painHits soonest, hardest and longest
Market Response?
PULL ‘EM, and plant ALMONDS!!
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Average Vineyard Values;Fresno & Madera Counties Wine
Grapes
Average Vineyard Values;Fresno & Madera Counties Wine
Grapes
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
2005200320011999199719951993
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Fresno & Madera County Wine Grapes Vineyard Values vs Average Grape
Prices
Fresno & Madera County Wine Grapes Vineyard Values vs Average Grape
Prices
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
2005200320011999199719951993
$100
$150
$200
$250
$300
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Fresno & Madera County Wine Grapes Vineyard Values vs Average Grape
Prices
Fresno & Madera County Wine Grapes Vineyard Values vs Average Grape
Prices
Rubired
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
2005200320011999199719951993
French Columbard
$100
$150
$200
$250
$300
$350
$400
$450
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Fresno & Madera County Wine Grapes Vineyard Sales; Prices per Acre; 1998 - 2006Fresno & Madera County Wine Grapes Vineyard Sales; Prices per Acre; 1998 - 2006
$1,000
$3,000
$5,000
$7,000
$9,000
$11,000
Dec-98 Jan-00 Feb-01 Mar-02 Apr-03 May-04 Jun-05 Aug-06
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Fresno & Madera County Wine Grapes Vineyard Sales; Prices per Acre; 2004 - 2006Fresno & Madera County Wine Grapes Vineyard Sales; Prices per Acre; 2004 - 2006
$3,000
$5,000
$7,000
$9,000
$11,000
Dec-03 Jul-04 Jan-05 Aug-05 Feb-06 Sep-06
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Fresno & Madera Thompson Grapes Vineyard Sales; OVER 15 Acres; 2005 - 2006
Fresno & Madera Thompson Grapes Vineyard Sales; OVER 15 Acres; 2005 - 2006
Thompson Vineyard Sales, Over 15 acres; 2005 - 2006
$3,000
$6,000
$9,000
$12,000
$15,000
$18,000
$21,000
$24,000
Sep-05 Nov-05 Feb-06 May-06 Aug-06
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Fresno & Madera Thompson Grapes Vineyard Sales; OVER 30 Acres; 2005 - 2006
Fresno & Madera Thompson Grapes Vineyard Sales; OVER 30 Acres; 2005 - 2006
Thompson Vineyard Sales, Over 30 acres; 2005 - 2006
$3,000
$6,000
$9,000
$12,000
$15,000
Sep-05 Nov-05 Feb-06 May-06 Aug-06
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San Joaquin County Wine GrapesVineyard Values vs Average Grape
Prices
San Joaquin County Wine GrapesVineyard Values vs Average Grape
Prices
$0
$6,000
$12,000
$18,000
$24,000
200520032001199919971995
$0
$150
$300
$450
$600
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San Joaquin County Wine GrapesVineyard Values vs Average Grape
Prices
San Joaquin County Wine GrapesVineyard Values vs Average Grape
Prices
Zinfandel
$0
$6,000
$12,000
$18,000
$24,000
200520032001199919971995
Chardonnay
$0
$200
$400
$600
$800
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Monterey County Wine GrapesVineyard Values vs. Average Grape Prices
Monterey County Wine GrapesVineyard Values vs. Average Grape Prices
CHARDONNAY
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
2005200320011999199719951993
CAB
$500
$750
$1,000
$1,250
$1,500
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San Luis Obispo & Santa Barbara Counties Vineyard Values vs. Average Grape PricesSan Luis Obispo & Santa Barbara Counties Vineyard Values vs. Average Grape Prices
CHARD
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
2005200320011999199719951993
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
PINOT
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Napa County Open LandNapa County Open Land
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
2005200320011999199719951993
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Napa County VineyardsOn Resistant Rootstock
Vineyard Values vs. Average Grape Prices
Napa County VineyardsOn Resistant Rootstock
Vineyard Values vs. Average Grape Prices
CAB
$0
$40,000
$80,000
$120,000
$160,000
$200,000
2005200320011999199719951993
CHARD
$0
$1,000
$2,000
$3,000
$4,000
$5,000
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Sonoma County Vineyards On Resistant Rootstock
Values vs. Price
Sonoma County Vineyards On Resistant Rootstock
Values vs. Price
Cabernet
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
2005200320011999199719951993
Chardonnay
$1,000
$1,200
$1,400
$1,600
$1,800
$2,000
$2,200
$2,400
$2,600
$2,800
Cabernet
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
2005200320011999199719951993
Chardonnay
$1,000
$1,200
$1,400
$1,600
$1,800
$2,000
$2,200
$2,400
$2,600
$2,800
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Thank You!!!
And,
Drink more wine!