Quick Take on the Latest Acreage Numbers
The recently-released Acreage Report indicates a 20% increase in non-bearing acreage over last year. That is possibly an enormous jump in supply. But it isn't unexpected. Assuming that acreage is reported in its second leaf, it was planted in 2017. Anyone planting in 2017 had seen prices rise an average of over 3.5% since the start of the Great Recession in 2007. That's a significant outpacing of inflation. For coastal regions, the numbers were even more impressive.
It's that same old story as always. Growers saw prices rise, but they didn't want to get ahead of themselves. But after a few years, planting seemed like a good bet and they all started planting. And all of this supply is set to hit the market now and drive down prices. If you planted early enough, you'll have gotten a decent length of highly profitable pricing. Otherwise, you may see your investment start producing in a faltering market. It's something I have been forecasting, planning for and warning about for a decade now. And I'm not the only one. (Turrentine puts out a well-crafted example.)
So, what does it mean? Well, we're probably looking at price stagnation or depression for at least a few years for some regions. It could be a quite painful correction, especially if/when macroeconomic headwinds appear. But it's also a learning moment. How can we track and predict this pivots in market dynamics?
Here are a few suggestions, which are best done together:
Method One: Look to History. First, you can pretty much time these cycles. You won't be completely on point, but for many regions and/or varieties, the cycle length has been pretty consistent. Use my Grape Data Tool and chart prices and acreage. Often, the picture is crystal clear. I would recommend charting them in inflation-adjusted terms.
Method Two: Keep Up with the Acreage Report and Other Sources. Most growers stay on top of the Crush Report. Fewer keep up with the Acreage Report. Many point out that it is not very accurate and, to some extent, that's true. For one, the non-bearing acreage numbers are pretty much useless for actually calculating acreage, though they can be used to identify trends. Some regions, such as District 8 have such a high level of underreporting that they're not useful, either. But some regions have stable and moderate levels of underreporting. For instance, Napa and Sonoma bearing acreage numbers are consistent enough to be predictive of price in my models. The non-bearing numbers are more of a question mark. However, based on large amounts of anecdotal/proprietary evidence, I think this jump is at least partially real. It's also supported by the 5% jump in bearing acreage.
You can also triangulate with other sources. Allied Grape Growers puts out a lot of info, some of which I use. County crop reports are another great source of data. The point is, you CAN find good info out there to see if others have been planting.
One final note on this issue: you can ask your neighbors about their planting plans, of course. Growers talk with each other and that is a good thing. But... don't put too much emphasis on the wisdom of the crowds here. If everyone is planting and you haven't started, that means you may be coming to the party a bit late...
Method Three: Hire Me. Find my contact info here.