by Olena Sambucci and Julian Alston
In the last blog update from the economics team, we talked about developing an alternative method for computing average crush prices for wine grapes in California, which resulted in estimates of the average price for the state being 14–20 percent higher than what was reported in the California Crush Report produced by the CDFA. We are happy to report that our suggestions were well-received, and the CDFA has adopted our method of calculating average prices to be used in the Crush Reports from now on. This means that the total value of wine grapes calculated using the average prices provided by the report will now be about $500 million per year higher than it would have been otherwise. While this outcome was not our main focus while working on the Efficient Vineyard project, it a positive spillover benefit, and it is always great to see results from our “academic” research being implemented in the real world.
Last week it was time to leave the office and data behind, and catch up on what is going on in the industry. “Unified” (the Unified Grape and Wine Symposium) is the biggest annual industry event, and it has taken place in Sacramento, less than 20 miles from UC Davis, since 1990. The Symposium includes a humungous trade show with over 2,000 vendors offering anything from harvesters to birds of prey for hire. In addition, a series of information sessions offered updates on the state of the industry, best practices, and major current issues, for both grape growers and producers of wine. This year, my focus was on two things: (1) learning more about quality standards for grapes and wine, and (2) mechanization and use of precision agriculture tools. Quality of wine grapes is the most elusive concept we as economists have to deal with when trying to put a dollar value on changes in the production system that occur when growers adopt a new technology or practice. Mechanization in vineyards goes hand in hand with implementing other precision management techniques such as management zones based on soil characteristics and vine size. Of the talks I got to hear, two sessions stood out.
I was happy to see a joint Grapegrowing and Winemaking session on Cabernet Sauvignon in the program. The room was packed: this was definitely the most popular of all the sessions I attended. The audience got to hear about production practices and the winemaking process for four different Cabernet Sauvignons ranging from $12 to $78 per bottle (and then taste the wine). Did I learn what makes a good Cabernet Sauvignon grape in terms of objective measurable characteristics? Alas, no. But the general pattern of how growers go about the production process is clear: mechanization and a greater propensity to augment the chemistry of the fermentation process for wines on the lower price spectrum; meticulous, involved management of each vine in the vineyard, and a “hands off” approach to making wine on the higher end of the price spectrum. One winemaker humbly stated: “I don’t do anything, they do it all when they grow the grape.” While I trust that the growers know what they are doing, I was left wondering: if one were to compare two grapes side by side without knowing anything about their origin, how would one tell the difference?
The other session was “Winemaker Experiences with Vineyard Mechanization: How I Learned to Love Machines in the Vineyard.” The panel again included growers and winemakers from a range of locations and price points. One of the early adopters of mechanization (pruning and shoot thinning) was a grower of wine grapes from Missouri. Local producers from the Northern San Joaquin Valley and the Paso Robles AVA, were also present. Adoption of mechanized practices for all growers is primarily driven by the shortage of labor, a problem projected to only get worse. Growers are willing to compromise on timing cultural practices or harvest to make sure their labor crews are available. Mechanical pruning and shoot thinning is more widespread in vineyards that produce cheaper wine, but are making their way to producers that sell at a higher price. This session included a tasting of wines that were produced from the same vineyard using either traditional labor-intensive management practices, or mechanization, and the general consensus is that while a mechanically pruned vineyard looks ugly, the quality of fruit is not an issue and may even be more consistent than before. One of the questions from the audience (coincidentally, from Jerry Lohr, one of the Efficient Vineyard project collaborators) was what were the actual numbers: Changes in the cultural costs? Profits? The panelists offered some numbers, but were not specific. In at least one case, mechanization ended up being more costly than what the grower was doing before, but it seems that the primary driver of adoption of mechanized practices is concern about the future reliability of the supply of labor, and its cost.
When I attend talks about differences in production systems or practices, I try to figure out whether the information I am getting would allow me to determine the best way to proceed if I were a grape grower or a producer of wine. Learning about what practices or technologies industry participants are choosing for their specific operations provides a valuable overview of the state of the industry, but neither of the two sessions addressed the specifics of why growers do what they do. Does opting not to filter the wine really make better wine down the road? What is really more costly: harvesting the grapes a week early or late based on the availability of labor, or investing in a machine that can harvest at any time, day or night? There is a lot to know about growing grapes and making wine. In some cases, getting the right answer is more costly than just guessing, so economists would argue that guessing makes more sense. However, there are plenty of questions that have an objective answer, and I hope that in some near future an economic approach to cost-benefit analysis will make its way to more sessions at Unified. Perhaps, there will be an Efficient Vineyard breakout session somewhere in the near future?