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July 2003, Volume 9, Number 3

California: FVH Commodities

Fresno county in 2002 produced farm commodities worth $3.4 billion,
returning to its spot as the number one US farm county. In 2001,
neighboring Tulare county was the number one US farm county with farm
sales of $3.5 billion, but Tulare's farm sales fell to $3.2 billion in
2002 as dairy production shrank.

The value of California farm land stabilized in 2002-03 despite low
commodity prices. In commodities such as raisins, the value of vineyard
land has fallen to $4,000 to $6,000 an acre, half of 1998 levels. Raisin
grape growers are also struggling with low prices; about 40,000 tons of
raisins are being diverted to cattle feed to reduce the supply of raisins
in storage, and growers hope that another 70,000 tons will be donated as
food aid to Iraq. About 90 percent of US raisins are produced around
Selma, a city of 20,000 in Fresno county and, over the next decade,
raisin vineyards are expected to be converted to dried-on-the-vine
harvesting, which requires less hand labor, or pulled out.

The value of San Joaquin Valley table grape land is estimated at $5,000
to $7,000, while vineyard land prices in Napa range from $50,000 to
$150,000 an acre. The value of land used to grow strawberries in Ventura
county was worth $30,000 to $50,000 an acre in 2003. The state
government releases an annual report on the amount of farm land converted
to urban uses.

Grapes. Wine grape growers struggled with rising costs and falling
prices. Some 3.8 million tons of wine grapes were crushed in 2002, up 12
percent from 2001, and the average price paid to farmers was $462 a ton,
down 17 percent from 2001. There was an enormous spread in the prices
received by farmers for wine grapes; an average $2,942 a ton in Napa
county, and $136 a ton in Fresno county.

About 20 percent of the wine grapes, 752,000 tons, were used for grape
juice and concentrate, up from 16 percent and 537,000 tons in 2001.
About 70 percent of California wine grapes are produced in the
eight-county San Joaquin Valley. Grape acreage peaked at 600,000 in
1999, and 50,000 acres were removed by spring 2003, based on burning
permits issued- permits are necessary to burn the treated wood used for
vineyard stakes.

In 2002, California wineries shipped 463 million gallons of wine worth
$14 billion. The big three California wineries shipped half of this
wine, with Gallo shipping 120 million gallons and Canadaigua West and The
Wine Group each 56 million gallons. Other large California wineries
included Beringer Blass and Robert Mondavi, 24 million gallons each.
Mondavi, which lost money in the first quarter of 2003, put 10 percent of
its 9,500 acres of vineyards up for sale. Mondavi's Woodbridge brand
accounts for 74 percent of sales volume and 57 percent of Mondavi's

Wine production is far more concentrated in the new world than in the
old. In France, the top five wine producers account for 13 percent of
total production in 2000; in Italy, five percent; and in Spain, 10
percent. However, in the US the top five wine producers account for 73
percent of wine production; in Australia, 68 percent; and in Chile, 47

Most European wine is produced by coops that are owned by grape growers.
France, for example, has 870 wine cooperatives with 121,000 members, and
they produced 52 percent of French wine in 1999. Italy has 607 wine
cooperatives with 208,000 members, and they produced 55 percent of
Italian wine. Spain has 715 wine cooperatives with 167,000 members, and
they produced 70 percent of Spanish wine.

A total of 595 million gallons or 250 million cases of wine were shipped
in or to the US in 2002. Of this total, 532 million gallons were table
wine, 37 million gallons were desert wine, and 27 million gallons were
sparkling wine.

Sales of California premium wines costing $7 or more per 750ml bottle
rose eight percent in 2002 to $4.1 billion, so that they accounted for 30
percent or 44 million cases of wine volume, but 62 percent of sales.
Over five million cases of "two buck Chuck," Bronco's Charlie Shaw wine,
was sold for $1.99 a 750ml bottle through Trader Joe's in the past 12
months. Data suggest that it was primarily purchased by consumers who
normally bought more expensive wines, launching a wave of "super value

About 10 percent of the adult US population - the 19.2 million people
who drink wine at least once a week - account for 86 percent of the table
wine consumed in the United States, according to a 2000 study by the Wine
Market Council. Adams Wine Handbook 2002 reports that 34.3 percent of
white adults drink table wine, 32.2 percent of Hispanics, 28.8 percent of
Asians and 25.8 percent of blacks.

US wine sales rose 9.4 percent in 2002, to $20.8 billion. However,
imports accounted for 25 percent of US wine consumption in 2002, up from
15 percent in 2001. Wine imports from Australia and Chile are rising,
while wine imports from France are falling; according to the French ONIV,
there is global surplus of about 50 million hectoliters of wine, roughly
equivalent to France's annual output. France exported almost $1 billion
in wine to the US, a fifth of its wine exports. However, American wine
guru Robert Parker canceled his trip to Bordeaux in 2002, and Bordeaux
producers said that his failure to rate their wines contributed to
falling demand for their wine.

About two-thirds of the wine consumed in France comes from Bordeaux; the
US market is more important to other regions. One commentary noted that
French wines often fail to satisfy Americans, who "value the reliability
of a standardized product." French wine "varies in quality from year to
year, an unpredictability that is prized by connoisseurs but whose charm
may be lost on the average American consumer."

Many wine grape growers are switching to mechanical pruning, which saves
costs and may reduce problems with powdery mildew and bunch rot because
mechanically pruned vines distribute bunches of grapes more widely on
vines. Mechanical pruning, which puts the vine in a box or V-shape, may
also increase wine quality by increasing the ratio of wine skins to
juice, improving the sugar-acid balance.

Peaches. There are too many peaches, so some growers agreed to drop
peaches on the ground to reduce the 2003 harvest. Peaches yield about 18
tons an acre, and growers planted about 6,500 acres of peaches between
1998 and 2002, increasing supply as imports rose.

Tomatoes. There are too many processing tomatoes, and growers are
expected to produce only 10.5 million tons in 2003, down from 11.1
million tons in 2002 and less than annual US consumption of 107 million
tons. Yields in 2002 averaged 38 tons from 290,000 acres. The state's
400 growers will be paid $50 a ton in 2003.

Almonds. Almonds are one of the few commodities in which growing
production is matched by high prices. Of the state's 7,000 almond
growers, 4,000 belong to the Blue Diamond Growers Coop, which negotiates
prices on their behalf. California supplies about 80 percent of the
world's almonds, and is the world's low-cost producer because of high
yields- an average 2,000 pounds an acre, compared to 100 pounds an acre
in Spain.

Dairies. Milk prices have plummeted to 25-year lows, about $11 per
hundredweight, which is less than the cost of production in New England,
but not in California. Some of the 1,400 dairy farms in Vermont are
expected to go out of business. There are calls to eliminate 125,000 US
cows in order to remove about 2.7 percent from the US milk supply.
California has 1.6 million cows that produced 33 billion pounds of milk
in 2001, which is about 21 percent of US milk.

Dairies are closing in Chino, which is welcome news to residents
downwind in Riverside and other Southern California cities. Dairies have
been exempt from clean air regulations, and there is little support for
keeping the Chino dairy farms. Chino-area farmers can sell their land
for $200,000 to $300,000 an acre for urban development.

About half of the farmland in the Netherlands is devoted to dairy herds,
with 1.5 million cows on roughly 30,000 farms, most of them small by US
standards. In the 1980s, the Dutch government began to require quotas to
become a dairy farmer, and buying a quota to become a dairy farmer can
cost $20,000 a cow.

Some Dutch farmers are selling their land and quotas and moving to the
US to become dairy farmers. However, some are running into trouble with
Midwestern laws aimed at prohibiting foreign ownership of farm land.
Since 1973, Minnesota's Alien Farm Law prohibits foreigners with E-2
investor visas from buying farm land. Nonetheless, some Dutch farmers
have bought farm land, and they and their allies are asking that the law
be repealed.

US Imports. The US imports about $45 billion of food a year, 11 percent
of consumption, including two-thirds of the fish and shellfish consumed
in the US, as well as 60 percent of the apple juice and asparagus.
Beginning in September 2004, US supermarkets are to label or otherwise
display the country of origin of beef, pork, lamb, fish, produce and
peanuts. The restaurant industry is not covered by the country-of-origin
law; Americans spend 46 percent of their food dollars outside the home.

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