Grapes

SIC 0172
GRAPES

Establishments in this industry are primarily engaged in the production of grapes.

NAICS Code(s)

111332 (Grape Vineyards)

Industry Snapshot

Grape production has consistently constituted one of the largest U.S. non-citrus fruit crops, usually competing with apples for the greatest amount of total fruit produced. In the general fruit category, however, grapes have always trailed oranges. The farm value of the grape crop has totaled approximately $1.5 billion to $2 billion each year since the mid-1980s. The two types of establishments engaged in the production of grapes in the United States are grape farms and vineyards. Grapes are grown for table use, processed into wine or juice, canned or frozen, and dried for raisins. California, Washington, and New York lead the country in grape production, although California alone produces about 90 percent of the country's grapes. California also leads in wine consumption. California had more than 100 wine grape farms in 2003.

While European grape varieties account for 90 percent of cultivated grapes in the world, early attempts to grow them in the United States were unsuccessful because of native pests and diseases. As a result, U.S. grape growers began domesticating native species. The Concord grape, an American variety, is a favorite of eastern growers and accounts for 80 percent of the eastern crop. Most eastern grapes are processed into grape juice and wine, while California is the major table grape growing region of the country.

Grape growing is labor intensive. The vines are trained to grow on a system of stakes and wire and are pruned to develop the desired shape for maximum production and quality. Hand pruning continues throughout the year. Other practices used by growers to increase production or quality include thinning of the berries, and clusters and girdling.

The many diseases and pests that attack grape vines are a continuing threat to the industry. Throughout the late 1980s and early 1990s, the Napa Valley of California was infested with a new strain of root pest. Industry losses as a result of the infestation were estimated to be $600 million.

Harvesting is also an arduous task, especially for table grapes, because they require special care to avoid bruising. Because of the higher cost for field labor, mechanical picking is used for grapes intended for wine or raisins.

The California Table Grape Commission has identified several important trends that benefit the grape industry. First, the large number of two-income households in the United States has increased the demand for convenience food items, and health-conscious consumers find that grapes meet all the criteria in convenience and nutrition. Second, children are playing a growing role in the marketplace with grapes being their number one snack food choice.

Exports of California table grapes to other countries have increased at record levels each year since 1985 and by the early 1990s represented 14 percent of the total crop. A saturated domestic market, a willingness of American farmers to grow varieties favored by foreign buyers, adoption of international packaging, and improvements

in handling and shipping are credited with the dramatic rise in exports. California also hosts a thriving vineyard economy, producing many world-famous red and white wines. About 680 wineries in California produce over 90 percent of the country's wine. For red wine, the grape varieties zinfandel, cabernet sauvignon, and merlot made up 59 percent of California's red wine variety grape acreage in 1995 and 30 percent of the state's total wine variety grape acreage. For white wine, the grape varieties chardonnay, colombard, and chenin blanc made up 80 percent of the state's white variety grape acreage and 40 percent of California's total wine variety grape acreage.

Current Conditions

Research and innovation, coupled with encouragement from state governments, have transformed grape growing in the United States. Laws encourage research and promotional activities; new pest controls have reduced the amount of chemical control; and new cultivation techniques have increased quality. One of the most dreaded grape enemies is phylloxera, an aphid-like insect that attacks susceptible grape rootstock. Private industry and universities have developed varieties of grapes that offer greater diversity and that have superior pest tolerance and extended growing seasons.

In 2002, among the major fresh fruits consumed by Americans were bananas, apples, oranges, and grapes.

Combined, they accounted for nearly two-thirds of fruit eaten. Due to increased grape production and imports, per capita consumption of fresh grapes alone grew from 7.6 pounds in 2001 to 8.6 pounds in 2002. Raisin consumption increased slightly to 7.3 pounds in 2002, after several years of fluctuation. Grape juice consumption increased from 3.6 pounds in 2001 to 4.1 pounds in 2002, although it still remained below 1999 levels of 4.8 pounds. Despite recessionary economic conditions, consumption of grapes used to make wine increased from 27.3 pounds to 31.5 pounds. Prices for fresh-market grapes ranged between 27 cents per pound and 37 cents per pound in both 2002 and 2003.

In the early 2000s California's grape crop continued to grow despite a slowdown in the state's wine industry, which was valued at $33 billion in 2002. Overproduction pushed prices down, which impacted growers throughout the state. Despite efforts by California grape growers to limit production, total U.S. wine grape harvests in 2003 were expected to grow 8 percent to reach 3.3 million tons, while raisin grape harvests were forecasted grow 7.2 percent to reach 400,000 tons.

Overcapacity was also exacerbated by a 28.4 percent increase in U.S. grape imports, which grew to 320.4 million pounds during the 2002-03 marketing season. Leading importers included Chile, Mexico, and South Africa. Wine imports also grew 10.7 percent to 150 million gallons. During this season, while wine exports increased 27.3 percent to 82.3 million gallons, overall grape exports decreased by 7 percent to 530 million pounds, and raisin exports dipped 2.7 percent to 96.2 million pounds.

Hit particularly hard by increased imports was California's San Joaquin Valley, which produced roughly 40 percent of worldwide raisin crops as of 2002. Lower labor costs, as well as reduced import tariffs, allowed Australia, Chile, Greece, Iran, South Africa, and Turkey to compete against California raisin growers. At the same time, higher export tariffs made it difficult for U.S. producers to compete internationally. As a result, the raisin industry began to curb production by paying farmers to pull vines or to allow raisins to die on the vines in 2002. Industry advocates began to call for additional intervention by the U.S. government.

Industry Leaders

Some of the leading grape producers are the National Grape Cooperative Association Inc. of Westfield, New York, with annual sales of $579 million in 2003; Guimarra Vineyards Corp. of Bakersfield, California, with estimated sales of $100 million; and privately owned Delicato Vineyards with estimated sales of $79 million.