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Napa: Wine, Farm Workers and Housing -- Philip Martin
September 27, 2000
Prepared for Changing Face, October 5-6, 2000
Grapes and Vineyards......................................................................................................................................... 3
Vineyard Labor......................................................................................................................................................... 4
Employment and Wages...................................................................................................................................... 5
Farm Worker Housing......................................................................................................................................... 6
Policy Options............................................................................................................................................................ 7
Napa is one of the smallest but best known of California's 58 counties, with 123,000 residents in 1999 and a projected 158,000 by 2020; about 18 percent of residents are Hispanic. The county's labor force averaged 63,100 in 1999, and the unemployment rate averaged 3.3 percent, considerably under the state's 5.2 percent rate. The county is projected to add jobs in services, including food service workers, salespeople and cashiers, and maids and housecleaners.
Napa and Wine
Napa's farm sales were $237 million in 1997, and 96 percent represented the sale of wine grapes—Napa vineyards produced an average 3.3 tons of wine grapes in 1998 worth $1,900 a ton, for gross revenues of $6,300 an acre.. The California wine business is growing rapidly, expecting a record crush of 3.5 million tons of wine grapes in 2000; Napa county is expected to produce about 100,000 tons or 3 percent of California grapes.
California has 12,000 to 13,000 growers of wine grapes and 850 wineries that produced 2.4 billion bottles of wine with a wholesale value of $15 billion in 1998, or an average $6.25 a bottle. Many smaller wineries, those that sell less than 10,000 cases a year, sell most of their wine from their tasting rooms at prices of $60 to $84 a case ($5 to $7 a bottle).
Many of the small wineries are in the Napa Valley, which draws an estimated five million visitors a year. Napa county grows premium wines on expensive land--vineyard land that sells for $50,000 to $100,000 an acre, compared to $40,000 an acre in Sonoma county, $25,000 an acre in the Central Coast, and $10,000 to $15,000 in the Central Valley.
Wine is usually fermented grape juice— fermentation is a chemical reaction that converts sugar into carbon dioxide and alcohol. The origins of wine are unclear, but wine was mentioned in early Egyptian writings and in those of most early civilizations. By 1500 BC, crushing grapes to make wine was an established art and fledgling science in the Middle East, and efforts to understand and improve fermentation were a major motivation for modern biochemistry.
The world produces and consumes about seven billion gallons of wine a year, with wine production and consumption concentrated in three countries in Western Europe:
--France produced 20 percent of the world's wine in 1997,
--Italy, 19 percent, and
--Spain, 13 percent.
The US is the fourth leading producer of wine, producing about 700 million gallons. Per capita consumption in the US is less than two gallons a person per year, compared to about 22 gallons of beer. Few Americans drink wine regularly--16 percent of US consumers drink about 88 percent of the wine consumed in the US, and it is said that 80 percent of US households do not own a corkscrew.
Argentina is the fifth leading producer of wine, accounting for 5.1 percent of world production, followed by South Africa, 3.3 percent; Australia, 2.3 percent; Chile, 1.7 percent; and China, 1.6 percent. The dynamic trio is Australia, Chile, and South Africa—they collectively produce about 7.4 percent of the world's wine, and they are rapidly expanding their production of premium varietals such as Cabernet and Chardonnay, often in large operations that use the latest techniques in grape growing and wine making to produce high quality and consistent wines at relatively low cost. However, these three countries have a total of less than 80 million people—1.3 percent of the world's population, so that most of their wine has to be exported.
Wine production and consumption are falling in old world Europe, while production is rising faster than consumption in the New World— North and South America, Australia, and South Africa— which makes "the coming grape glut" headlined on August 3, 1998 by Barron's one of the most talked-about issues in the wine business.
France, Italy and Spain produce about half of the world's wine, and consume 40 to 45 percent. However, there are distinct wine making styles in the old and new worlds. In most European countries, wine is made by blending different varieties of locally grown grapes, and the wine is labeled according to where the grapes were grown, that is, European countries want consumers to know that the wine is a Burgundy or Bordeaux, and consumers check charts and books to learn whether the grapes grown in a particular year in that region produced outstanding wine. In the new world Americas, by contrast, wineries aim for consistent taste regardless of when and where the grapes were grown, so that, for example, Mondavi's Woodbridge California Chardonnay has included grapes grown in France.
A major question facing the wine industry is whether wine is a normal or luxury good, that is, will higher prices be associated with increased demand or is wine like other agricultural commodities, where supply tends to increase faster than demand, putting downward pressure on price? Will the wine business segment into different categories, with the ultra-premium category behaving like a luxury good and the premium and table wine categories like normal goods?
Wine resembles many other agricultural products in the sense that the value of the grapes in a bottle of wine are a very small share of the retail price. One ton of grapes produces about 150 gallons--at 5 bottles per gallon, a ton of grapes produces 750-750 ml or one-fifth bottles of wine, or 62.5 cases. If the average price of wine grapes is $500 a ton, as it was in 1998 in California, the cost of grapes in a typical bottle of California wine is about 66 cents. The most expensive grapes in 1998 were Napa cabernet sauvignon--the top price paid was $5100 a ton, and the average price was $2,250 a ton, making the value of grapes in a typical bottle of Napa cabernet about $3. The cost of the grapes in a $20 retail bottle of Napa Chardonnay is about $2.25; the distributor and retailer mark up is $10.
One ton of grapes produces about 62.5 cases or 750 bottles of wine
Sales of premium wine in the US— premium wines are often defined as those costing $7 or more per bottle— have been increasing by 10 to 15 percent a year. Premium wines in the US account for 25 percent of the volume of wine sold but 50 percent of wine revenues.
Grapes and Vineyards
It is often hard to interpret grape production data because there are several types of grapes, and the same grape can be used for multiple purposes. For example, Thompson seedless grapes can be used to make raisins, crushed to make wine, or crushed to make grape concentrate, a "natural sweetener" that can be added to food products that are labeled "no sugar added." Some 20 to 25 percent of the grapes crushed each year in California are used to make grape concentrate; the high yields of lower quality San Joaquin Valley grapes make grape concentrate competitive in price with sweetners made from apples, pears and other fruits.
Relatively few table grapes—mostly Thompson Seedless and Red Flame—are diverted to other uses—some 825,000 tons worth an average $450 a ton were produced in 1997 in California, for a total value of $370 million. Raisin grapes are more flexible— some 2.9 million tons worth $250 a ton, or a total $700 million, were produced in 1997. If wine grape prices are high, some raisin growers sell their grapes to wineries. Wine grapes are the most valuable grapes—they were about half of California grapes by volume, and two-thirds of the value of all California grapes.
The leading grapes crushed for wine in 1998 were Thompson seedless, accounting for 17 percent of the crush, and Chardonnay, 13 percent. California's 12,000 to 13,000 wine grape growers are divided into four major wine growing regions: the North Coast (Napa-Sonoma), Central Coast (Monterey), Northern San Joaquin Valley (Lodi/Woodbridge), and the San Joaquin Valley. Wineries petition the federal government to create viticultural areas, proposing, for example, that 75 percent of the grapes used in a bottle labeled Napa county must be grown in Napa county.
Most of California's wine grapes are grown in the Central Valley, where flat fields, high yields and often large acreages encourage mechanical harvesting. In 1998, where about 2.5 million tons of wine grapes were crushed, about 70 percent were grown in the Central Valley, that is, about 20 times more wine grapes were grown in the Central Valley then in Napa county.
Wine grapes require significant amounts of labor for pruning and harvesting, and the need for hand labor is increasing with higher density plantings. In the late 1980s, it was estimated that about 30 percent of the 100 hours an acre were required for pruning, suckering, leaf removal and shoot positioning and another 30 to 40 percent were required for hand harvesting. Pruning is done between December and February to remove last season's cane growth, and then workers are hired beginning in April-May for cordon shoot removal, followed by suckering, moving wires, and leaf removal.
Harvesting begins in August-October, when crews of 10 to 20 workers using picking pans cut bunches of grapes and load them into gondolas that hold two tons of grapes. UC cost studies in 1999 put the cost of hand harvesting at $150 to $200 a ton, including the cost of gondolas and trucking the grapes to the winery for crushing, or $525 for an acre for yields of three tons. Mechanical harvesting costs $50 to $70 a ton—at $60 a ton to machine harvest, a three-ton yield costs $180 an acre to harvest, and a seven-ton yield costs $420 an acre to harvest.
In Napa county, where yields average three tons an acre, about 75 percent of the grapes are hand picked--the general rule is that the less expensive the grapes, the more likely they are to be harvested by machine, although several well known labels, including Domaine Chandon, harvest grapes mechanically. Mechanical harvesting is feasible on farm more acres—except those on steep slopes—but many growers believe that premium wine grapes should be hand picked.
Four hand harvesters can pick about one acre of grapes a day; a mechanical harvester, which uses a crew of five to harvest around the clock, can harvest 10 to 20 acres a day. Wine grape harvesters straddle the row and use shaking rods to dislodge the grapes, which fall onto a conveyor belt and are taken to an adjoining gondola. Leaves and debris are blown away from the grapes by a fan and removed by hand. Mechanization is spreading, and grape growers have recently turned their attention to mechanical pruning, including using flame throwers to get rid of excess leaves. Relatively high farm wages have given Australia one of the most mechanized wine grape industries and very low costs of production
Employment and Wages
Statewide farm sales were $23 billion in 1997 (COA). Monthly farm employment in 1997 averaged 413,000, suggesting that each $56,000 in farm sales was associated with one year-round equivalent farm job. In 1997, 232,000 or 56 percent of average farm employment were directly hired workers, and 181,000 or 44 percent were hired through agricultural service firms.
Beringer Wine Estates and Robert Mondavi Corp are among the top 10 employers in Napa county—each has about 1500 acres of grapes and several hundred farm worker employees-- but most of the top 10 employers are government agencies or health care operations. For more information: http://www.calmis.cahwnet.gov/file/MajorER/napaER.htm).
Employment in Napa county agriculture includes workers hired directly by farms and workers brought to farms by labor contractors and farm management companies. The number of directly hired workers peaked at 4,700 in September 1998, as well as the number of agricultural service workers at 1,900.
The number of directly hired workers hit a low of 2,300 in December, for a peak-trough ratio of two— two workers were employed in September for every one employed in December. Agricultural services have a higher peak-trough ratio of 3.2, with a low of 600 in December. By comparison, peak-trough ratios in Fresno county are 2.3 for directly hired workers and 2.5 for agricultural service workers, that is, the ratio is higher in Napa than in Fresno county.
Total farm employment peaks at 6,600 in September and reaches a low of 2,900 in December, i.e., 3,700 more workers are employed in September than in December.
Using EDD data, Motto, Kryla and Fisher estimated 5,259 full-time equivalent employees in Napa County wineries in 1998, earning an average $36,509 a year, and 3,077 full-year equivalent vineyard workers, earning an average $19,825 a year— workers employed 2,000 hours averaged $18.25 an hour in wineries and $9.91 an hour in vineyards; wages reportedly rose in 1999. MKF apparently ignored the average 1,000 workers employed by ag service firms in Napa, whose full-year equivalent earnings are lower.
There are several other hourly earnings indicators. The Farm Employers Labor Service (FELS) did a survey for the California Association of Winegrape Growers (CAWG) that found hourly earnings ranging from $5.75 to $12, with entry level wages averaging $7 an hour. Full-time vineyard workers are employed 10 to 11 months a year—if they work 1000 hours at $7, they earn $7000 a year; 1500 hours means $10,500, and 2000 hours means $14,000 a year.
California’s Occupational Employment Statistics (OES) programhttp://www.calmis.cahwnet.gov/FILE/occup$/oeswages/ca$oes98.htm) surveys employers each October to obtain the number of workers in each of 11 hourly wage categories, such as the number earning less than $6.75 an hour, the number earning
Farm Worker Housing
The two types of workers employed in Napa agriculture-- -round and long-season workers compared to migrants---have different housing needs. Most farm workers rent housing and the US Department of Housing and Urban Development has developed Fair Market Rents for each county to administer the Section 8 Housing Assistance Payments Program—,HUD's fair market rents include the cost of shelter and utilities, but not telephone. For more information: http://www.huduser.org/datasets/fmr/fmr2001p.pdf)
HUD's 40th percentile rent was $857 for a two-bedroom apartment in 2000 in the Napa-Vallejo-Fairfied area. This means that 40 percent of "standard quality rental housing units" in the area rent for less than $857, and 60 percent for more than $857. HUD recommends that families not spend more than 30 percent of their earnings on housing, which means that a family in a two-bedroom unit should earn $2,857 a month. If a two-earner family worked full-time, each working 160 hours a month or 320 hours, they would have to earn $8.93 an hour for an income of $2,857 a month. Workers in the Napa area for only a few months are not likely to want or be able to afford first and last month's rent deposits. Thus, most migrants arrange housing through friends and relatives, which can lead to the overcrowding and garage conversions etc, as in the Central Valley.
There are 10 farm labor camps in Napa county with 302 beds available in private (135 beds) and public (152 beds) camps and temporary trailers in Napa county in 2000, including a 30-person temporary camp opened at the Yountville Corporation Yard for 90 days. Most labor camps charge residents $10 a day for a place to sleep and meals. There were reportedly 29 camps with almost 400 beds in the mid-1980s.
Three of the Napa labor camps are under the control of the Napa Valley Housing Authority:
-the 60-bed (three men per room) Calistoga Farm Worker Center, which is operated for the Housing Authority by the California Human Development Corporation, which is open for 330 days a year. In April 2000, long-time manager Isaac Perez resigned after acknowledging that he permitted extra men to sleep at the camp (there were 100).
-the 53-bed Mondavi camp on the Silverado Trail, leased to the Housing Authority for $1 a year, is open for 90 days during the harvest season
-the 60-bed Beringer camp in Carneros, leased to the Housing Authority for $1 a year, is also open only during the harvest
These camps operate at a loss, for example, the Calistoga camp costs about $140,000 a year to operate, and has an annual deficit of $40,000 to $50,000.
Private labor camps include: Yount Mill Vineyards in Yountville, which housed 30 men during the harvest for $6 a day; Frank Wood and Sons Vineyard of Rutherford, which has space for 15 men and charges $8 a day; and St. Supery has a portable camp that can house six workers. Napa county's Environmental Health Department in May 2000 sued Bartolucci and Sons Vineyard and Nichelini Winery; both were fined previously for housing workers in non-approved facilities without a permit.
Napa growers and wineries have actively tried to expand farm worker housing. Napa grape growers and vintners in 1999 donated $250,000 for farm worker housing and pledged another $85,000 from the Napa Valley Wine Auction to Napa Valley Community Housing for farm worker housing. Some have proposed a "housing tax" of, for example, $5 a ton, which would raise about $500,000 a year, or $10 an acre, which would raise about $360,000 a year.
There are two major problems: (1) high housing prices; and (2) a county ordinance that requires a great deal of land for farm worker housing. According to the California Association of Realtors' affordability index, only 24 percent of households in the Napa-Sonoma area could afford to buy a median-priced home at the start of 2000; the Bay Area's affordability index of 23 percent, and the California index is 33 percent. Median prices for single family homes in Napa hit $285,000 in August 2000; the monthly payments on a $285,000 house, including mortgage, taxes and insurance, would be $2,019, assuming a 30-year mortgage at eight percent interest. Seasonal farm labor camps that are open less than 120 days must be on at least a 20-acre parcel, and permanent or year-round camps must be on at least 40-acre parcels.
Napa county has a 14-member Farmworker Housing Oversight Committee that makes recommendations to the Napa Valley Housing Authority, with Supervisor Brad Wagenknecht the county government's liaison.
The best estimates are that Napa currently has 200 to 300 beds for migrant workers who come into Napa county in September, and needs 1,2000 to 1,3,00 beds. There are four major options to close the gap between the demand for and supply of temporary housing for migrant and seasonal farm workers in Napa:
· Mechanize more harvesting. If more grapes were picked mechanically, there would be less need for migrant harvest workers, and less need for additional housing for them. The argument against mechanization is that premium wines require hand-picked grapes.
· Build more temporary farm worker housing. The Calistoga Farmworker Center and other labor camps managed by CHDC for the Housing Authority are regarded as serving the very useful purpose of making temporary housing available. Workers pay $10 a day for room and meals, and grower and other contributons cover the $5 a day deficit.
The major problem with building more temporary housing is that land is very expensive, and a minimum 20 acres is required to contruct temporary farm worker housing. Relaxing the 20-acre requirement is believed by some to open the door to turning Napa into another “Orange county.”
· Bus workers from lower-cost areas. Fairfield, Vacaville, and Vallejo, cities in Solano county, as well as Santa Rosa in Sonoma county, offer lower cost housing. Employers could arrange to rent housing in these nearby cities, and run buses or vans to bring workers into Napa for the harvest.
· Tent camps. Washington state employs about 16,000 workers to harvest cherries for 4-6 weeks in June-July, and faces the same issue of growers being reluctant to build housing that will be occupied for only a few weeks—there are not enough jobs in cherry-growing areas to encourage year-round settlement. Beginning in 1995, cherry growers were licensed by the state Department of Health to house workers in store-bought military-style tents, if employers also provided refrigerators, cooking facilities, hot and cold water and toilet facilities. The state of Washington spent $1.2 million to purchase 571-$2,100 tents that each house six workers on cots; most of the tents are put on public land near e.g. little-used airports, with growers paying the state $15 a day per worker, and the worker paying $3 a day.
Many of the current farm labor problems seem to revolve around finding housing for the newest arrivals who have the most seasonal jobs. Turnover among the most seasonal harvest workers seems high, and these newcomers seem to have the most difficulty finding temporary local housing, forcing them to either sleep in makeshift housing or commute from outside the Napa Valley. Unlike other agricultural areas facing similar housing issues, Napa seems unique in that growers have played a prominent role in discussing and seeking solutions to the lack of affordable housing. That solution is very likely to include changing the ordinance that requires 20 or 40 acres of land to build temporary or year-round farm worker housing.
 EDD data record employment by industry, that is, California employers report the number of workers on their payroll for the period that includes the 12th day of the month. Workers employed by two employers during a payroll period are reported twice; workers employed by an employer during the month but not during the payroll period including the 12th are excluded. Self-employed and unpaid family workers are not reported. A comparison of average monthly employment by industry and the total number of unique Social Security Numbers reported by agricultural employers in the late 1980s suggested that there were two SSNs for every year-round equivalent job. In a seasonal industry, the number of persons employed sometime during the year exceeds average monthly employment, but it is not certain how many of the SSNs reported by employers are: (1) unique individuals compared to (2) one individual with several SSNs