Figures from the Final Grape Crush Report for 2018 showed strong numbers for both price and volume, however, grape prices are not expected to remain at those levels for 2019. Contract expirations compounded with a shift in demand will likely depress prices somewhat from levels seen last year.
“We do anticipate that for many categories the average prices will not continue to climb in the immediate future,” said Allied Grape Growers President and CEO for Jeff Bitter. “We’ll probably see a reversal of pricing in the near-term for various categories throughout the report.”
The report indicated that the average grape prices were nearly $832 per ton. Bitter said that those prices were primarily driven by reference price contracts. “That would be a contract that would reference the previous year’s price plus something, whether it’s a percentage or a few dollars per ton, or whatever the negotiation is,” Bitter noted. “When you have a large existence of those it tends to drive prices up over time so that they stay on par with the increasing cost that farmers have to produce product.”
As market conditions shift, contracts that expire and come due for renegotiation will reflect the changes the market has undergone since the original contract was agreed on. The balance between supply and demand will play a significant factor when negotiating contracts and Bitter noted that demand is not quite as strong as where it used to be.
“Currently we are experiencing more supply than we have a market for and that’s because demand has flattened out where we have historically seen a lot of growth,” said Bitter. “That has negatively impacted the market. It’s negatively impacted the inventory situation where we’ve had a little bit of buildup of inventory so that certainly would be the reason why we would see a change in pricing for grapes.”