Potential Reward + Risk= Opportunity (?)

In the middle of the recession, some growers in the great Interior valley may have one of their best years ever in 2009. Crop size looks at least average or above and demand is strong for some (but not all) varieties. Many growers in the Coastal areas, however, are experiencing no demand at all for some varieties and demand for the stronger varieties only at prices far below expectations. Many growers are betting that wineries currently on the sidelines will enter the market before harvest and that this will strengthen prices. However, when wineries must sell some of their own high-end fruit — and a number are doing so — they are often accepting the same low-priced offers that independent growers refuse.

Many wineries are experiencing slower sales and lower margins for premium North and CentralCoastbottled wines. They are also obtaining significantly lower prices for wines from prestigious appellations sold on the bulk wine market. Growers from these areas, on the other hand, are quick to point out that most wines made from red grapes purchased this year will not be bottled and released until at least 2011. The majority of economists expect economic recoveryby then. Pricing should therefore be based on projected future demand and not on current recessionary conditions. This is a logical argument, but wineries must pay for grapes from current cash flow. Lenders have a tight hand on the reins —and an eye on slowing depletions. The fact is that there is currently a huge premium for risk. Some high-end wineries are suffering and are not willing or able to make a big bet on future inventory despite the strong likelihood of recovery. When recovery comes, everyone will be fighting to get their hands on inventory. Right now, however, everyone is fighting NOT to hold inventory. High-end growers with uncommitted fruit may be faced with a tough choice: either take a much lower price than they expected or assume the risk themselves by custom-crushing their grapes. Custom-crushing is a big risk but it could prove to be a great choice if the economy improves, high-

end wine sales revive and wineries, distributors and retailers start scrambling for supply. But it takes both guts and access to capital to double down your bet in these perilous times.

Grape Market Review

Lodi, Delta, Central and Southern Interior (Erica Moyer)

Chardonnay and Red Zinfandel are the toughest varieties. The market has been very slow and most completed sales have been packaged with more desirable varieties. The Zinfandel crop size appears to be above average and Chardonnay is average or slightly above. Mildew pressure has been high, increasing farming costs. Prices for White Zinfandel are down from last year but we are making sales.

The Pinot Grigio crop is looking much better than the light 2008 harvest. Early season demand continued at the strong price levels of last year. There are currently few active buyers but there is also not much tonnage uncommitted. Pinot Noir has also maintained strong demand and firm pricing. Many new acres are starting to produce and the crop looks healthy but there is still very little uncommitted tonnage.

Merlot demand is fairly balanced with supply. It appears to be an average or better crop and not very many tons are left unsold. The strongest variety is Cabernet Sauvignon. There has been some shatter but the crop is still average in size. Pricing is actually up from last year and available tonnage is now scarce.

CentralCoast (Matt Turrentine, Paso Robles and Santa Barbara; Erica Moyer, Monterey)

We have been moving Chardonnay in Santa BarbaraCounty, but at much lower prices than last year. Monterey County Chardonnay, on the other hand, has been very slow.

The Merlot crop looks average in both MontereyCounty and Paso Robles. We have been making some Merlot sales in Paso Robles but most potential buyers are still on the sidelines. Cabernet Sauvignon, disastrously light in 2008 in Paso Robles, has suffered some shatter and varies widely from vineyard to vineyard. Overall, the crop is probably average in both Paso Robles and MontereyCounty. We have sold large tonnages in Paso Robles, but prices have been well below last year’s levels. The Monterey County Cabernet Sauvignon market is currently slow, however we did move significant tonnage earlier in the year.

Pinot Noir in Santa Barbara looks healthy in volume. Some lots have moved at prices similar to last year but most of the demand is at much lower prices. Monterey County Pinot Noir also appears to have a good crop, much better than last year. We have moved a significant tonnage, although again at lower prices than last year.

NorthCoast (Brian Clements)

The North Coast Chardonnay crop appears to be above average. With some mildew pressure and vigorous growth, farming costs are up. Unfortunately, the market is slow and most offers so far are substantially below last year’s prices.

Pinot Noir also has a good crop, with lots of clusters and small berries. We have been selling large quantities of Pinot Noir grapes, especially from SonomaCounty. But the prices are much lower than in the past few years. In some cases, independent growers have been holding out for prices twice the level offered by potential buyers.

Merlot and Cabernet Sauvignon both came into bloom during a protracted cold spell. Merlot especially has suffered from shatter. This has reduced what was potentially a large crop down to an average level for Merlot and perhaps above average for Cabernet Sauvignon. The Merlot market has been very slow so far in all areas of the NorthCoast. The Cabernet Sauvignon market, on the other hand, has been active. Recently the most action has been in NapaValley, where we have sold large tonnages at prices down substantially from last year.

Prophets of the Vine

Alejandro Alvarez of Martin Ray Winery took top honors in our 2008 crop contest, coming within nine tons of the actual volume of 2008 Napa Chardonnay. Piña Vineyard Management was the company champion, with both John Piña and Johnny White putting their vineyard experience to work. Other prophets of the vine include: Michael Boer, Stipp Ranch; Bob Masyczek, Diageo Chateau and Estates; Dan Kleck, Silverstone Wines; Dan Waddington, Waddington Ranch Vineyards; Charlie Gilmore, Fetzer Vineyards; Niels Udsen, Castoro Cellars; and DavidMezynski, J. Lohr Vineyards. A bottle of sparkling wine, bubbling over with prophetic vision, is on its way to these winners.

Crop Contest 2009

Your chance for victory is just a click away. In addition to fame and bubbles, this is a simple but informative experience. We provide past crop numbers and you guess what the numbers will be for 2009. Check it out at the following location: or if you prefer a hard copy, give us a call and we will fax one to you.

Just-in-time

The trouble with just-in-time inventory in the wine business is that everyone is on the same time schedule, which is: get-it-done-before-harvest time. When the clusters turn sweet, activity could explode. Which means that growers and wineries need to have considered their options well in advance. Call your favorite broker at Turrentine Brokerage now to make it happen.

Market Opportunities

Available: Mt Veeder and Atlas Peak Cabernet Sauvignon, 10 + ton lots

Available:Napa Cabernet Sauvignon, multiple appellations and lot sizes

Available:Sonoma Coast Pinot Noir grapes,truckload quantities

Available: Russian River Chardonnay grapes,truckload quantities

Available:SuisunValley Chardonnay grapes,truckload quantities

Available: Dry Creek Valley 2009 Chardonnay planting, clone 37 & clone 17

Available:RussianRiverValley, 6 acres available for 2010 Chardonnay planting

Available: Bulk wine from organic grapes: 2008 Washington Riesling and 2008 Italian IGT Marche

Sangiovese

Available: 2007 and 2007 ZinfandelNC and CA bulk wine, various lots

Available: Chardonnay 2008 wine in bulk from Napa Valley, Russian River Valley, Mendocino Co.,

Monterey Co., Santa Barbara Co.

Available: 2008 Albarino bulk wine, 3 lots,Monterey, Clarksburg and Lodi appellations

Available: 2008 Grenache bulk wine, various CentralCoast appellations

Available: Petite Sirah 2008 bulk wine, various appellations

Needed: 2008 Paso Robles Cabernet Sauvignon wine in bulk

Needed: 2008 Alexander Valley Cabernet Sauvignon wine in bulk

Needed: Casegoods for various close-out opportunities, call for more details on specific volumes

and possible price points

Needed: 2008 Sangiovese wine in bulk from any California appellation

Needed: 2008 Lake County Sauvignon Blanc bulk wine

Needed: 2008 California appellation Pinot Noir bulk wine

Tel 415.209.9463 I Fax 415.209.0079 I I grapes, wines in bulk, case goods, barter, strategic planning