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April 2010 Volume 16 Number 2
Wine Prices, Local Food
The California wine crush in 2009 was 3.7 million tons, up from three million tons in 2008 and the largest since the record 3.8 million tons of 2005. The average grower price of wine grapes was $571 a ton in 2009, up slightly from 2008. About 2.7 pounds of wine grapes make a bottle of wine; with the average grower price $0.29 a pound, the value of the grapes in a typical bottle of California wine was $0.77.<< back
The crush included two million tons of red and 1.7 million tons of white wine grape varieties. The leading grape varieties were Chardonnay, 20 percent of the crush, followed by zinfandel and Cabernet Sauvignon, 12 percent each.
The world is awash in wine; especially Australia has too much wine, some of which is being sold in bulk for as little as $2 a gallon (there are five bottles in a gallon). Butch Lindley of Lockwood Vineyard in January 2010 asserted that "There's wine gushing into this state by the tanker load at prices one-fifth of what we can grow it for."
2010 vs 2000. The wine world looks very different in 2010 than in 2000, when the economic boom and the turn-of-the-century led to soaring prices of high-end wines and fears of insufficient champagne. In 2010, the outlook is for falling wine prices due to less dining out, consumers trading down to cheaper wine, increased globalization that makes high-quality and low-priced wines widely available, and new search tools such as wine-searcher.com and vinfolio.com that allow consumers to search for the lowest price on particular wines--most states allow adults to receive wine shipments.
The internet and bloggers may help to expand the market for low-cost wines from Greece, Portugal, and Brazil in the US, while overproduction in Australia and New Zealand helps to hold down the prices of wine there and in the markets that import Australian and New Zealand wine. French champagne producers are trying to restrict shipments to maintain high prices, but may lose market share to Italian Prosecco, Californian sparkling wine, and Spanish cava. More wineries are switching from corks to screw tops.
Some wine experts believe that multinational wineries are shifting from terroir, marketing wines that reflect the sun and soil of a particular region, to produce wines with a consistent taste using the lowest cost grapes available. This means that a Mondavi California wine may include up to 25 percent wine from Australia, Chile, or another place with a surplus offered at low cost. At the beginning of 2010, Australia had 100 million cases of wine in storage, and expected to produce 40 million more cases from the 2010 harvest.
"Consumer reset" is the term used to explain consumers trading down to cheaper wine; "global sourcing" is the term for mixing cheaper imported wine with locally produced wine. The continuing consolidation of US wine distributors into fewer and larger operations makes it difficult for new small- and medium-sized wineries to gain a foothold in retail markets.
Chile. The 8.8 earthquake that struck Chile February 27, 2010 killed more than 800 people and destroyed over 100 million cases of wine worth almost $1 billion, according to Wines of Chile. About an eighth of Chile's annual wine production, which is concentrated in the Maule, Colchagua and Cachapoal valleys, was lost in the earthquake.
An estimated 80,000 workers are employed in the Chilean wine industry. The March 2010 harvest was expected to be smaller than usual, in part because of fewer workers given the availability of jobs in rebuilding destroyed housing and infrastructure. Wine-related tourism is expected to fall sharply in spring 2010.
Locavore. The local food or locavore (a word popularized by Michael Pollan) movement got its start in the San Francisco Bay Area. Locavores believe that food should not travel more than 100 or 150 miles from farm to fork. Supporting local farmers, they argue, results in fresher food and less energy consumed in moving food long distances; a seventh of US energy is used to produce and transport food.
Some locavores plant their own gardens, but many learn, as author William Alexander chronicled in the book, "The $64 Tomato," that gardening generates more expensive produce.
The New York Times reported March 26, 2010 that many small farmers who produce food for local consumers cannot find packers or processors to handle their small quantities. Those raising animals for slaughter, for example, cannot find slaughterhouses that will handle a few animals, prompting some small farmers to form cooperatives in an effort to ensure that their animals can be processed.
Obesity. About two-thirds of US adults and a third of children are overweight, double the rates of 1980. Adults need about 2,000 calories a day. Calorie counts on packaged foods reflect serving sizes that many experts consider unrealistically small, such as an ounce of chips? the 150-calorie count per serving may refer to six chips. FDA serving sizes were developed based on food consumption surveys during the 1970s and 1980s? most experts believe that people underestimate their serving size and that portions have been growing.
The health care reform bill signed in March 2010 requires fast-food chain restaurants with 20 or more outlets to post calorie information on their menus and drive-through signs beginning in 2011, and calorie information to be provided for snack items sold in vending machines. Restaurant chains supported federal standards to avoid a state-by-state patchwork of regulation.
USDA Secretary Tom Vilsack in February 2010 announced Obama administration support for pending bills that would bar "junk food" snacks from vending machines in K-12 schools as part of the reauthorization of the $18 billion federal breakfast and lunch programs. The National School Lunch Program serves 31 million children in more than 100,000 schools. Many local school boards oppose restricting sales of candy and soda, which often raise money for sports and club activities.
Breakfast sales at fast food restaurants peaked at almost $60 billion in 2007, and accounted for a quarter of sales at some chains, and up to a third of profits because of high margins on coffee and eggs. However, higher unemployment in 2008-09 slowed sales during a very profitable time of the day for fast-food chains.
Salt. New York City, among the first cities to require restaurants to eliminate trans fats and to post calorie counts on menus, in January 2010 announced plans to encourage food manufacturers and restaurant chains to reduce the amount of salt in food by 25 percent over the next five years to reduce high blood pressure and the associated strokes and heart attacks.
The average American consumes about 3,400 milligrams a day, more than the recommended maximum 2,300 milligrams (about a teaspoon) a day. An estimated 90 percent of the salt in Americans' diets comes from packaged or restaurant food.
The anti-salt campaign may be more difficult, since salt plays many roles in food, including enhancing flavor, preventing spoilage and improving shelf life. However, supermarket chain A&P and Subway said they would voluntarily encourage their suppliers and restaurants to comply.
There were two US outbreaks of salmonella linked to imported black pepper, one in March 2009 and another in January 2010. Salmonella is a bacteria that can cause fever, diarrhea, nausea, vomiting and abdominal pain.
Wal-Mart. Wal-Mart often transforms both retailing and the supply chain in developing countries.
Wal-Mart has more than 10,000 suppliers in China, and a million farmers supply produce to the company's 281 stores in China. Wal-Mart requires suppliers to be sensitive to energy usage and environmental and labor standards. CEO Lee Scott told Chinese suppliers in October 2008 that "a company that cheats on overtime and on the age of its labor, that dumps its scraps and its chemicals in our rivers, that does not pay its taxes or honor its contracts will ultimately cheat on the quality of its products. And cheating on the quality of products is the same as cheating on customers. We will not tolerate that at Wal-Mart."
Wal-Mart monitors conditions at its Chinese suppliers, but China Labor Watch complains it is not vigorous enough. Wal-Mart acknowledged in 2008 that it "commonly encounter factories that do not comply with the work hours standards, specifically the standards related to the permissible maximum number of regular work hours and overtime hours that a worker is allowed to work during a given day, week and/or month."
In India, Wal-Mart is trying to help small farmers to produce fruits and vegetables that meet its standards. Wal-Mart often pays farmers more than local wholesalers do, and picks up the produce that meets its exacting standards (a third of Indian fruits and vegetables are lost in the trip from farm to store); farmers sell inferior produce locally to other wholesalers.
Wal-Mart operates in India through a 50-50 joint venture with Bharti Enterprises, an Indian conglomerate that also owns the country's largest cellphone company. Bharti Wal-Mart supplies produce to Easy Day retail stores that are fully owned by Bharti and runs a wholesale store that sells to shopkeepers, hotels and other businesses. Wal-Mart anticipates India changing its policies and allowing foreigners to fully own supermarkets.
Catfish. The Food and Drug Administration regulates imported seafood, but the 2008 Farm Bill moved the regulation of catfish to USDA at the behest of the Catfish Farmers of America. Vietnam is protesting the move, which aims to reduce imports of Vietnamese catfish.
The 2002 Farm Bill barred the Vietnamese from calling their exports catfish. The Vietnamese relabeled their catfish Pangasius or basa, and Vietnamese basa costing $2 a pound or less was outselling US-produced catfish in 2008. That prompted the 2008 Farm Bill change to require Vietnam to call basa catfish, and to have USDA inspect production ponds in Vietnam to enhance "food safety" for Americans.
Vikas Bajaj, "In India, Wal-Mart Goes to the Farm," New York Times, April 12, 2010. Steven Mufson, "In China, Wal-Mart presses suppliers on labor, environmental standards," Washington Post, February 28, 2010.