Brexit Also A Concern for California Sellers

By Joanne Lui, Associate Editor

The Ciatti Company – a worldwide company headquartered in San Rafael, CA – has been in the wine, grape concentrate and spirit brokerage business since 1971. They are experts in the industry, and President Greg Livengood spoke to California Ag Today recently to give an update on this year’s harvest and prices around the globe.

Ciatti Co. President Greg Livengood

“World supply is down a little bit this year from last. We saw some major weather events in the southern hemisphere to start out the year. … Starting in January in Argentina, we saw a fair amount of rain throughout the harvest. They were down a little over 30 percent from their three-million-ton average harvest and that really set the tone for South America,” Livengood said.

“Right behind that, the Chileans got going. They hit about the halfway point of their harvest when El Nino came and slapped them around a little bit. It rained very hard there – five major weather events – and their crop was down at least 20 percent, but in addition to that, they probably would have been down more, but they tried to salvage some of that fruit that suffered a lot of damage from the rain.”

According to Livengood, all of this may not affect pricing in California.

“It certainly helps to set a floor, a pricing floor, and that floor has come up,” Livengood said. “I don’t know that pricing necessarily will go in any direction here based on what happened down there, but … it’s a much more shallow dive that pricing could potentially take here if things go the wrong way.”

A real concern for California winemakers is actually Brexit – Britain’s exit from the European Union.

“ U.K.’s been a very good … market for wine. It is. They don’t grow a lot of their own so they’re buying it from everywhere else. It’s been a very good market for the U.S. The problem with Brexit is the economy. It’s the value of the pound, so the pound took a big hit when Brexit was announced. There’s concern it will take more of a hit. That decreases their buying power and that’s a concern for us here in the U.S. because our prices are generally a little bit higher than all of our competitors around the world,” Livengood said.

“We’re selling on the California name and we’re selling on quality and so as that consumer and as that retail buyer in the U.K. has less buying power, we do have concern that they may look for alternatives to California.”

Overall, Livengood actually hopes for a smaller crop worldwide because high crop yields in multiple years isn’t necessarily a good thing for the industry.

“You never want really long oversupply.  2013, worldwide, it was a bumper crop just about everywhere.  We had too much wine in ‘14 and ’15 … and it’s taken us almost three years to really eat through a lot of that inventory.  A shorter worldwide crop here in 16 is certainly something that we would welcome.”