Napa Cab Prices

March 3, 2016

One of the first posts I did for my blog was a thirty year forecast for Napa Cab prices.  It was pretty experimental for two reasons.  The first is that it will remain static on my blog, though I will update it for clients.  Not updating a forecast is like not updating software - chances are very high that it will eventually break down and become useless.  The other, related, experimental aspect is that I wrote it in response to some research I did.  I found that the cyclical nature of the wine industry is now significantly less of an influence on Napa Cabernet Sauvignon prices than the trend over time.  So, my experiment is to see if a linear projection would work reasonably well for forecasting Napa Cabernet Sauvignon prices.  My contention has been that it will do well enough that, when coupled with probabilistic senstivity analysis, the forecasts will be useful, even without updating.  My goal is to prove that even simple data analysis can better our forecasting in this industry and, in addition, to prove that Napa County Cabernet Sauvignon prices are not longer very cyclical.

 

The preliminary crush report came out and I will use it to test this risky hypothesis of mine.  I should wait for the final numbers, but I'll be so busy updating client forecasts and the grape data tool I make available to the public that I really can't focus on this.  So there is that little bit of inaccuracy in this check.  Oh, also, these are all Table 6 prices.  Well, let's get to it.  

 

VFA's Forecast of 2015 Napa County Cabernet Sauvignon Prices:

Mean estimate: $5836.08/ ton

Range for 80% of all outcomes: $5,272.80 to $6,399.35

Range for 95% of all outcomes: $4,950.79 to $6,721.36

 

Actual price (preliminary): $6319.05

 

Error: Actual outcome was 8.3% higher than expected.

Within 80% range: Yes

Within 95% range: Yes

 

And going back into history a bit more:

 

VFA's Forecast of 2014 Napa County Cabernet Sauvignon Prices:

Mean estimate: $5,644.92

Range for 80% of all outcomes: $5,096.19 to $6,193.64

Range for 95% of all outcomes: $4,782.50 to $6,507.33

 

Actual price (final, but not including errata): $5,923.36

 

Error:  Actual outcome was 4.9% higher than expected.

Within 80% range: Yes

Within 95% range: Yes

 

Analysis

Well, these results are considerably worse than my own, updated forecasts, which I can't share.  Still, they are within the 80% likelihood range, although barely so for the most recent forecast.  So far, they do not seem to be very useful.  On the other hand, when I update with the same model but an expanded data set that includes new price outcomes, there is significant improvement, though it is still inferior to my full model.  It looks to me that the main issue here is a failure to update.  We will have to wait for the long-term to unfold to judge my assessments on the cyclicality of Napa Cabernet Sauvignon prices.  We will also have to wait to see if this simple model has worth in the long-term.

 

What is the forecast for next year?

The unrevised forecast for next year is $6,027.24.  The 95% range is $5,119.08 to $6,935.39 and the 80% range is $5,449.41 to $6,605.06.

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