Vineyard Values and Trends: The Cycle Continues Vineyard Values and Trends: The Cycle Continues...

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

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

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

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)

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

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

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

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

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;

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?)

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

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

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

The Central ValleyThe Central Valley

•Largest Producer •largest vineyards•highest yields per acre•lower quality = lower prices

of Grapes AND Vineyards

•Commodity, undifferentiated

The Central ValleyThe Central Valley

CYCLE: First to feel the painHits soonest, hardest and longest

Market Response?

PULL ‘EM, and plant ALMONDS!!

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

Fresno & Madera County Wine Grapes Vineyard Values vs Average Grape

Prices


Prices

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

2005200320011999199719951993

$100

$150

$200

$250

$300


Prices


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

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

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

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



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

San Joaquin County Wine GrapesVineyard Values vs Average Grape

Prices


Prices

$0

$6,000

$12,000

$18,000

$24,000

200520032001199919971995

$0

$150

$300

$450

$600


Prices


Prices

Zinfandel

$0

$6,000

$12,000

$18,000

$24,000

200520032001199919971995

Chardonnay

$0

$200

$400

$600

$800

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

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

Napa County Open LandNapa County Open Land

$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

2005200320011999199719951993

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

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

Thank You!!!

And,

Drink more wine!

Vineyard Values and Trends: The Cycle Continues Vineyard Values and Trends: The Cycle Continues...

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Transcript of Vineyard Values and Trends: The Cycle Continues Vineyard Values and Trends: The Cycle Continues...