Led By the LandNurturing Native Plants and Wildlife in the Vineyard
It’s All in the Preparation Domaine Helena: Can Small Winegrape Growers Survive in 2025?
October / November 2024
Photo by W. Blake Gray
PUBLISHER: Jason Scott
Email: jason@jcsmarketinginc.com
EDITOR: Taylor Chalstrom
Email: article@jcsmarketinginc.com
PRODUCTION: design@jcsmarketinginc.com
Phone: 559.352.4456
Fax: 559.472.3113
Web: www.grapeandwinemag.com
Eve Laroche-Pinel Postdoctoral Researcher, Computational Agriculture, California State University, Fresno
Luca Brillante Assistant Professor of Viticulture, Dept. of Viticulture and Enology, California State University, Fresno
Marc Fuchs Dept. of Plant Pathology and Plant-Microbe Biology, Cornell University
Monica Cooper UCCE Viticulture Farm Advisor, Napa County
Pam Strayer Contributing Writer
Stuart Spencer Executive Director, Lodi Winegrape Commission
Vicky Boyd Contributing Writer
W. Blake Gray Contributing Writer
Whitney Brownie Vineyard Team
UC COOPERATIVE EXTENSION ADVISORY BOARD
Surendra Dara Entomologist, Oregon State University
Kevin Day UCCE Pomology Farm Advisor, Tulare and Kings Counties
Elizabeth Fichtner UCCE Farm Advisor, Kings and Tulare Counties
Katherine Jarvis-Shean UCCE Orchard Systems Advisor, Sacramento, Solano and Yolo Counties
Steven Koike Tri-Cal Diagnostics
Jhalendra Rijal UCCE Integrated Pest Management Advisor, Stanislaus County
Mohammad Yaghmour UCCE Area Orchard Systems Advisor, Kern County
IT’S ALL IN THE PREPARATION
CALIFORNIA AG INDUSTRY, RESEARCHERS READY FOR EVENTUAL ARRIVAL OF SPOTTED LANTERNFLY
By VICKY BOYD | Contributing Writer
The tree of heaven, itself an invasive species from Taiwan and China, is the preferred host for lanternflies, including these nymphs, until late in the season (photo by Richard Gardner, bugwood.org.)
When a few viable spotted lanternfly eggs attached to giant artwork survived cleaning in Nevada and made it to Sonoma County earlier this year, it sent shivers through the California winegrape industry.
“It was terrifying to know it got in,” said California Association of Winegrape Growers (CAWG) President Natalie Collins. “Once that happened, we really wanted to make sure everyone was aware of the pest, every part of its life cycle and just understand what to be on the lookout for.”
CAWG had been actively educating its members for some time describing the lanternfly’s threat to the industry and how to identify the pest. But Collins said the hitchhiking egg masses prompted the association to ramp up its efforts. CAWG sent out a press release to alert the general public as well, and several media outlets picked up on it.
Continuing to spread the word is just part of preparing for the pest’s arrival, since it’s not a matter of if it will arrive but when, she said.
Since 2000, state and county agricultural inspectors have checked more than 2,000 sites across the state, including rail yards, highway rest stops and fairgrounds, for the spotted lanternfly (SLF) without finding it. During 2023, state inspectors checked an add itional 300 high-risk sites in 31 counties between
August and December when adult lanternflies are most active.
As part of the state’s action plan, the CDFA enacted an exterior quarantine in 2021 that prohibits introduction of SLF into the state. Included in the regulations are inspection protocols and restrictions on materials coming from states with known SLF populations.
USDA researchers continue to study potential biological control agents as well as develop pheromone lures for use in monitoring traps. And UC Riverside researchers just wrapped up research into a potential parasitoid wasp.
Throughout it all, Collins said CAWG continues to advocate for research funding both at the state and federal level. In addition, the Pierce’s Disease/ Glassy-winged Sharpshooter Board recently funded two lanternfly projects.
One led by UC Davis Plant Pathologist Neil McRoberts will involve preparing for SLF arrival with a focus on area-wide responses. The other, led by Plant Virologist Christina Rosa of Penn State University, plans to examine the interactions of SLF and Pierce’s disease.
Crystal Ball Predictions
The recent wakeup call involved a 30-foot-tall metal art installation coming from New York state laden with SLF eggs. The CDFA Truckee
The 1-inch-long lanternfly isn’t actually a fly but a planthopper in the Hemiptera order (photo courtesy University of Maryland.)
Spotted lanternflies infest a white wine grape variety in a Pennsylvania vineyard (photo by Heather Leach, Penn State University.)
border inspection station found the eggs and sent the artwork back to Nevada for hot power washing with detergent. Even so, three egg masses still snuck past reinspection and made their way to the piece’s final destination, Sonoma County. During another inspection, which involved taking the metal artwork apart, Sonoma County agricultural commissioner inspectors found the additional viable egg masses and destroyed them.
When SLF will arrive in California in earnest is anyone’s guess, although a computer model developed by North Carolina State University’s Biological Invasions group offers some estimates. Published in 2022, the model forecasted a low probability of the pest arriving on the West Coast by 2027, assuming no treatments to control the population occur. There’s a high probability SLF will reach the West by 2033 under the same assumptions.
One of the challenges with these types of model results, said Senior Research Scholar Chris Jones, is they quickly need to be updated.
“The interesting aspect of working with invasive species and modeling is what you know to be true changes quickly after the paper is published because the science changes so quickly,” Jones said.
Information available when they ran the model theorized SLF could only reproduce successfully on its preferred host, tree of heaven. Since then, he said scientists have found the pest also can successfully reproduce on black walnut and grapes. The Biological Invasions group plans to update and rerun the SLF prediction model with the new data.
Proactive Biological Control
After being surprised by Asian citrus psyllid numbers that exploded in Los Angeles basin residential areas in the early 2010s, Mark Hoddle wondered about taking more proactive approaches to future invasive pest infestations. As director of UC Riverside’s Center for Invasive
Species Research, his area of expertise involves finding natural enemies that can help control invasive species.
“What I learned was it took us several years to get those natural enemies into California,” Hoddle said, referring to Asian citrus psyllid. “I talked to CDFA and told them, ‘After dealing with ACP, I think we need to be better prepared. There are obviously threats coming to California, and SLF is one
of those. We’d be fooling ourselves to assume they could never come here.’”
He proposed a concept known as “proactive biological control,” which involves searching for and testing potential biological control candidates before a pest’s arrival. This is an about-face from past practices, when researchers would wait until an invasive species arrived in California even though it was established and spreading
“It was terrifying to know it got in.” – Natalie
Collins, California Association of Winegrape Growers
throughout other parts of the U.S. Then they’d begin work to find predators and parasitoids and test their compatibility and environmental safety.
Hoddle is wrapping up a three-year CDFA-funded project that examined whether a minute stingless wasp, Anastatus orientalis, found in SLF’s native habitat in China could potentially be used to help control the pest once it arrives in California.
Considered an egg parasitoid, female wasps lay their eggs in SLF eggs. The wasp eggs hatch and the larvae develop inside, eventually killing the SLF eggs and emerging as adults.
As with any biological control candidate, researchers put A. orientalis through a battery of tests to ensure it would only go after SLF and wouldn’t negatively affect native lanternflies or other non-target insect species.
In tests conducted at UC Riverside’s Insectary and Quarantine Facility, Hoddle said the wasp had too wide a host range and also oviposited in eggs of native Southwestern lanternflies, stinkbugs and various Lepidoptera (butterflies and moths). USDA colleagues on the East Coast conducted similar screenings.
“After a lot of testing both on the East and West Coasts, we came to the
conclusion it attacked way too many species,” Hoddle said.
Although A. orientalis failed the screenings, he still considered the work successful. “At least we’ll be better prepared than if we had done nothing,” Hoddle said. “It would take us about three years to figure this stuff out, so we’re already ahead. We can use that biocontrol money and resources for other things to manage SLF.”
USDA researchers in the East continue to look at another small wasp native to parts of China: Dryinus browni . This small stingless parasitoid goes after second- and third-instar SLF nymphs.
Tree of heaven is the preferred host for both the spotted lanternfly and brown marmorated stink bug. The invasive tree grows readily in disturbed ground, such as along road rights of ways, under power lines, in vacant lots and in vineyards, such as the one pictured here (photo courtesy Lodi Wine Growers.)
Adult lanternflies will lay masses containing 30 to 60 eggs on numerous inanimate objects, including grapevine trunks. The egg masses, to the left of the adult insects in this image, resemble dabs of dried mud (photo by Heather Leach, Penn State University.)
Adult lanternflies feed on a commercial grapevine (photo by Heather Leach, Penn State University.)
GET TO KNOW THE ‘HITCHHIKING VAMPIRE’
Sometimes dubbed the “hitchhiking vampire,” the spotted lanternfly (SLF) is not actually a fly but a planthopper in the order Hemiptera. It sucks sap from plants, including grapevines and apple, cherry, almonds and stone fruit trees, weakening them.
In severe infestations, it may kill grapevines. Altogether, the pest has a host range of more than 100 agricultural and ornamental plants. Topping the host list is tree of heaven, itself an invasive species from the SLF’s homeland of Taiwan and China.
Spotted lanternfly also excretes sugary honeydew, which attracts black sooty mold that can block the sun’s rays and reduce photosynthesis. And Penn State research, which has not yet been peer reviewed, showed the pest potentially can vector the Xylella fastidiosa bacterium responsible for Pierce’s disease.
SLF was first detected in the U.S. in Pennsylvania in 2014, although it my have been there for a few
years prior. Since then, the pest has spread westward and so far has been confirmed in 20 states all west of the Mississippi River.
SLF is not a strong flier, preferring to hop, and much of its dispersion has been aided by movement of egg masses laid on countless inanimate objects, including outdoor furniture, equipment, tools, automobiles, toys, recreational vehicles, rail boxcars and even artwork.
A 2020 Penn State University study estimated SLF was responsible for $554 million in annual crop losses and nearly 5,000 job losses per year where it’s established in the Northeast. High on its list of preferred hosts are grapevines, and Pennsylvania grape growers have reported losing thousands of vines to the pest.
Educating California residents about the pest and its threats is an ongoing effort. Among those leading the charge is UCCE. During a recent lunchtime Zoom meeting, more than 300 mostly Master Gardeners logged on to listen to UC IPM Advisor Cindy Kron, who’s based in Sonoma County. She talked about how to identify SLF, its habitat, its relation to tree of
heaven and what to do if they suspect the pest.
CDFA also continues to promote “Snag it. Snap it. Report it.” Basically, if you see a pest you suspect is SLF, capture it, take a photo and report it to the local farm advisor or ag commissioner’s office.
And Mark Hoddle, director of the UC Riverside Center for Invasive Species Research, said he checks iNaturalist almost daily to see if anybody has posted images of SLF or other invasive pests in California. An online community of citizen scientists, iNaturalist.org hosts more than 207 million observations from more than 3.3 million observers worldwide.
For more information on spotted lanternfly, visit CDFA’s SLF pest profile at https://tinyurl. com/y8zunsfz.
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Can a Coalition of Rockstar Scientists, Google Billionaire Philanthropists and Central Valley Leaders Create an Ag Waste Breakthrough?
By PAM STRAYER| Contributing Writer
Hotshot Lawrence Berkeley Lab energy experts and local leaders are participating in a regional initiative to see if agricultural wastes can fuel nextgen aviation fuels, plastics replacements and maybe even a few things no one has thought of yet, experts involved said. The
innovative coalition is moving forward with a specific project to map the available resources to support a nascent, bioindustrial economy in the Central Valley.
That coalition involves cutting-edge energy expertise from leading
scientists at Berkeley Lab, tech philanthropists exploring the edge of carbon innovation, circular economy evangelists and wineries.
“We are really rethinking our relationship with waste here in the Central Valley,” said Karen Warner, CEO of Modesto-based BEAM Circular. “We're working to unlock the power of agricultural communities to transform the waste that often comes from the food and ag sector into new economic value and environmental opportunities.
Some suggest the Central Valley could be the epicenter of a new bioindustrial innovation era. Among them is Paul Maglio, professor of management in the school of engineering at UC Merced, who spoke at a BEAM Circular community brainstorming session that E. & J. Gallo Winery participated in. He thinks the Central Valley has everything it takes to make it happen there.
“Innovations are going to happen in this area,” Maglio said in a video of a recent meeting. “With the access to intellectual
Some suggest the Central Valley could be the epicenter of a new bioindustrial innovation era. “Innovations are going to happen in this area,” according to Paul Maglio, professor of management in the school of engineering at UC Merced (photo courtesy Hawk Tower.)
What we're trying to do
is challenge that conventional wisdom and develop technologies that can handle mixed inputs, that take winery waste, ag waste, almond waste, municipal solid waste... and blend them and then convert them.”
– Blake Simmons, Lawrence Berkeley Lab
capital in the Bay Area, the access to the educational resources as well as access to the raw materials that we need, that makes [the Central Valley] the perfect spot.”
In July, another BEAM Circular initiative, funded by the Virtual Institute on Feedstocks of the Future (VIFF), received more than $9 million for a digital mapping project focused on the North San Joaquin Valley co-led by BEAM Circular, Berkeley Lab and UC partners.
Scientists, philanthropists and Central Valley leaders participated in a community brainstorming session courtesy of BEAM Circular to discuss opportunities for a bioindustrial economy in the Central Valley.
Exit Ag Waste Burning: Growers’ Burn Permits a Thing of the Past
The initiative is welcome news for those involved in making California air cleaner and safer. According to Valley Air officials, the Central Valley historically burned “well over 1 million tons annually.”
It took more than two decades for the 2003 legislation to stop burning ag waste to be implemented, critics said.
While regulations and incentive programs reduced ag waste in the valley to 125,000 tons in 2022, a near complete phaseout of remaining agricultural open burning in the Valley goes into effect by Jan. 1, 2025.
“Just before the phaseout began, around 25,000 to 30,000 acres of vineyards would be burned per year,” said Heather Heinks, communications manager for San Joaquin Valley Air Pollution District. “That has dropped off significantly since the phaseout and incentive program began.”
Turning Carbon Into Dollars
Researchers are trying to find out if what’s waste to some can become a valuable input for others in a novel approach to the problem.
“We want to prevent those emissions and turn that carbon into dollars,” said Blake Simmons, division director, biological systems and engineering at
Berkeley Lab, a leading tech partner in the project.
Schmidt Sciences (a group funded by climate activist and philanthropist Wendy Schmidt, whose husband Eric Schmidt was the CEO of Google) and the Foundation for Food & Agriculture (FFAR) funded a mapping project which will help those looking for available waste sources under its Virtual Institute on Feedstocks of the Future (VIFF) to transform biomass into alternative feedstocks for biomanufacturing.
“Carbon is all around us, whether it’s the byproduct of an orchard harvest or solid waste from cities, but right now, it’s too expensive to extract and use,” said Dr. Genevieve Croft, Schmidt Sciences program scientist who is directing VIFF. “Turning the carbon we have into the carbon we want is a critical challenge. VIFF aims to accelerate the timeline of the science needed through interdisciplinary research collaboration.”
This virtual institute is planting its seeds on fertile ground where industry players are already lining up, said Warner.
“BEAM Circular is launching a variety of services for Central Valley byproduct startups in the coming months, including an accelerator program,” Warner said. “We have raised over $16 million in seed funds since our launch
in 2023 to support the growing circular bioeconomy sector in the Central Valley in addition to the Schmidt Sciences $9.7-million investment in the joint BioCircular Valley project. This funding is a combination of county, state, federal and private sector grants and indicates the growing commitment and support for this industry and recognition of the unique opportunity for the valley to serve as a hub for new innovations in use of agricultural byproducts.”
BEAM Circular’s partner, Carmel Valleybased venture capital firm Hawk Tower, announced in September it is committing $30 million in venture capital to biocircular startups in the North San Joaquin Valley over the coming decade.
E. & J. Gallo Winery is among the wineries BEAM Circular and the virtual feedstock project staff have been holding discussions with.
Multi-Crop Waste Combo Is Unique:
“An Opportunistic Paradigm” What makes the Central Valley unique is the diversity of crops and waste streams, experts said. But currently there is no inventory of these wastes.
That’s the problem the virtual feedstocks project is aimed at addressing: centralizing all the information about
available ag wastes together in a database-driven map, or “digital bioeconomy cartography,” so buyers can find out about the timing and volume of available materials.
While finding new uses for ag waste isn’t new, combining a variety of ag waste is, Simmons said.
“So, you're not talking like the conventional sense of one feedstock that has to be available at a certain tonnage that goes into one product, that one product only, and then you're locked into that business model,” he said. Examples of that include corn stover converted to ethanol or corn grain converted to ethanol.
“What we're trying to do is challenge that conventional wisdom and develop technologies that can handle mixed inputs, that take winery waste, ag waste, almond waste, municipal solid waste... and blend them and then convert them. So it's an opportunistic paradigm that's really rooted in fundamental science and technology. We're trying to challenge the conventional wisdom out there. We're just here to prove what's possible. And then it's up to the marketplace to prove what's practical,” he said.
“The whole project is geared around taking a look at available ag resources in
“We are looking at winery waste, which could be trimmings, clippings, and grape pomace... So it's basically those waste streams that are increasingly being paid attention to in California because they don't want to burn ag residues anymore...”
– Blake Simmons, Lawrence Berkeley Lab
north San Joaquin Valley. So we talked with folks like Gallo. We've talked to other wineries as well,” he said.
“We are looking at winery waste which could be trimmings, clippings and grape pomace... So it's basically those waste streams that are increasingly being paid attention to in California because they don't want to burn ag residues anymore, for example.
“We see there's a big opportunity to prove what can be done with them beyond composting, instead being made into something that others use to create products that can be sold out in the marketplace.”
“Feedstocks from agricultural residues, like corn stover, or forestry residues, like sawdust, have potential to become useful products, though the process to get there can be logistically and financially challenging,” said FFAR scientific program director Dr. John Reich. “VIFF focuses on driving collaboration to catalyze innovative solutions.”
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BEAM Circular, funded by the Virtual Institute on Feedstocks of the Future, received more than $9 million for a digital mapping project which will help those looking for available waste sources to transform biomass into alternative feedstocks for biomanufacturing (courtesy Lawrence Berkeley Lab.)
Developing New Technologies to Monitor Virus-Infected Vines in the Vineyard
By EVE LAROCHE-PINEL
| Postdoctoral Researcher, Computational Agriculture, California State University, Fresno, MONICA COOPER | UCCE Viticulture Farm Advisor, Napa County, MARC FUCHS | Dept. of Plant Pathology and PlantMicrobe Biology, Cornell University and LUCA BRILLANTE | Assistant Professor of Viticulture, Dept. of Viticulture and Enology, California State University, Fresno
Diseases like red blotch and leaf roll can alter spectral signatures, an object’s response to light absorption, offering non-invasive means of detection.
One phase of the project involved deploying a dronemounted hyperspectral camera to capture images of ~300 vines during the post-veraison stage. This aerial perspective provided a comprehensive view of the vineyard, enabling it to assess vine health and identify infections across a potentially larger scale.
In viticulture, grapevines face many threats, with virus diseases standing out as insidious adversaries. Among these, leafroll and red blotch pose significant challenges due to their elusive nature and lack of curative solutions. Traditional containment methods involve the laborious and costly process of identifying infected vines and replacing them with healthy ones (i.e., roguing). Identifying virus-infected grapevines is no simple task. It requires the expertise of individuals well-versed in the nuances of virus symptoms. Even for professionals, accurate diagnosis often necessitates sampling vine tissue for laboratory analysis, typically through molecular testing such as Polymerase Chain Reaction (PCR). This process is time-consuming and financially burdensome, underscoring the urgent need for innovative solutions to streamline detection efforts. Recent advancements in technology offer a glimmer of hope, promising more efficient and precise methods of detection and management.
Vineyard management has seen a surge in precision tools to optimize cultivation practices. Central to this trend is the development of sensors capable of delving deeper into the vine's spectral response to stress. These advanced technologies empower growers to monitor vine health with unprecedented precision, offering insights that were once inaccessible through conventional means. In 2019, a groundbreaking project was launched at California State University, Fresno, funded by USDA, CDFA, CSU-ARI and F3, Fresno-Merced Future of Food innovative initiative, and in collaboration with experts from Cornell University and UC ANR. The initiative aimed to revolutionize the detection of leafroll and red blotch viruses using hyperspectral imagery.
Hyperspectral Imagery
At its core, hyperspectral imaging is a cutting-edge technology that enables measuring an object's response to light absorption across a wide range of wavelengths. By analyzing the spectral
signature of grapevines, researchers can glean valuable insights into their physiological and health state. For instance, variations in chlorophyll and anthocyanin concentrations manifest as distinct patterns in the visible spectrum (the portion of light wavelengths we interact with our eyes), while changes in cell structure influence near-infrared wavelengths (which are not visible to our eyes). Furthermore, water content and other chemical compounds (cellulose, sugar) leave their imprint in the shortwave infrared domain. Crucially, diseases such as leafroll and red blotch can alter these spectral signatures, offering non-invasive means of detection.
The project's first phase involved sampling 500 leaves from both healthy and virus-infected plants (by leafroll, red blotch or both viruses). These leaves were then subjected to hyperspectral imaging within the controlled environment of a dark cabinet in the laboratory, capturing images across the 500- to 700-nm range. Machine-vision techniques, particularly Convolutional Neural Networks (CNN), were employed to analyze hyperspectral imagery and detect signs of infection in grapevines. CNNs are a type of deep learning algorithm that excels at image recognition tasks by automatically learning features from raw pixel data. During this phase, the CNN model achieved impressive results. For binary classification, distinguishing between infected vines (with red blotch or leafroll) and healthy ones, the model attained an accuracy of 87% when symptoms were visible at post-veraison and 85.6% when symptoms were not yet visible to the naked eye,
‘BY HARNESSING THE SPECTRAL SIGNATURES OF GRAPEVINES, GROWERS GAIN VALUABLE
INSIGHTS INTO THEIR PHYSIOLOGICAL STATUS AND BIOCHEMICAL COMPOSITION, EMPOWERING THEM TO MAKE INFORMED DECISIONS REGARDING VINEYARD MANAGEMENT PRACTICES.’
The hyperspectral imaging project was project was launched at California State University, Fresno, funded by USDA, CDFA, CSU-ARI and F3, Fresno-Merced Future of Food innovative initiative, and in collaboration with experts from Cornell University and UC ANR (all photos courtesy L. Brillante.)
thus at pre-veraison. This demonstrated the model's effectiveness in detecting infections even before visible symptoms manifested. Furthermore, in a more complex multiclass classification task aimed at identifying the specific virus infecting the vine, thus distinguishing between leafroll and red blotch, the CNN model achieved an overall accuracy of 76.9%. This highlights the model's ability to differentiate between viruses based on subtle spectral variations (Sawyer et al. 2023).
Buoyed by these promising outcomes, the project advanced to its second phase, transitioning from the controlled environment of the lab to the dynamic conditions of the field. Utilizing the same hyperspectral camera, images of the side of 700 vines were captured in the vineyard, focusing specifically on detecting red blotch virus. When symptoms were not visibly apparent, a model achieved an overall accuracy of 68.6%. As the season progressed and symptoms became more pronounced, the accuracy improved significantly, reaching 76.6% with a Support-Vector Machine (SVM) model. This underscores the model's adaptability to real-world conditions and its efficacy in detecting infections even in the absence of visible symptoms (Laroche-Pinel et al. 2024a).
In the third phase of the project, the approach was elevated by deploying a drone-mounted hyperspectral camera to capture images of ~300 vines during the post-veraison stage. This aerial perspective provided a comprehensive view of the vineyard, enabling it to assess vine health and identify infections across a potentially larger scale. Expanding beyond mere detection, the focus shifted toward leveraging the spectral response of the vines to extract valuable biochemical information. Specifically, a model was used to predict the concentrations of three key pigments (chlorophyll, carotenoids and anthocyanins) based on the spectral data captured by the drone. The striking results revealed significant differences in pigment concentrations between infected and non-infected vines. Non-infected vines exhibited higher predicted levels of chlorophyll and carotenoids, indicative of healthier foliage and photosynthetic activity. Conversely, infected vines displayed elevated levels of anthocyanins, a response
Table 1. Machine learning model accuracy and hyperspectral imaging efficacy. The results highlight the model's ability to differentiate between viruses based on subtle spectral variations and adaptability to real-world conditions and its efficacy in detecting infections even in the absence of visible symptoms.
often triggered by stressors such as viral infections. Utilizing the spectral information, machine learning techniques were applied to classify vines as either infected or non-infected by red blotch. The model achieved an impressive accuracy rate of 87% in binary classification, further underscoring the efficacy of hyperspectral imaging coupled with advanced data analysis in disease detection and management (Laroche-Pinel et al. 2024b).
Pivotal Advancement in Vineyard Monitoring
(2024a). Grapevine Red Blotch Virus Detection in the Vineyard: Leveraging Machine Learning with VIS/NIR Hyperspectral Images. (In review)
Laroche-Pinel, E., Singh, K., M., Cooper, M.L., Fuchs, M., Brillante, L. (2024b). Advanced Detection of Grapevine Red Blotch Virus at the Plant Level in Vineyards: A Drone-Based Approach using VIS/NIR Hyperspectral Camera, Machine Learning, and PROSPECT Inversion Model. (In Prep)
M., Cooper M.L., Corrales B., Fuchs M., Brillante, L. (2023) Phenotyping grapevine red blotch virus and grapevine leafroll associated viruses before and after symptom expression through machine-learning analysis of hyperspectral images. Frontiers in Plant Science. 14:1117869. doi: 10.3389/ fpls.2023.1117869
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WINERY FEATURE: DOMAINE HELENA CAN SMALL WINEGRAPE GROWERS SURVIVE IN 2025?
By W. BLAKE GRAY | Contributing Writer
Andre Gueziec presents a good example of why you should never depend on one large client for your wine grapes.
Gueziec, 57, is fairly new to the wine business. He's from Alsace, France. and grew up around wine, but he was a software engineer. He developed traffic-monitoring software and sold it to the Weather Network. That gave him the money to buy, in 2020, Domaine Helena, a 215-acre vineyard and winery in Lake County near the Napa County border.
The Valley Fire had ripped through the property in 2015 but left the 82 acres of vineyards undamaged, though it burned trees that were in the middle
of vineyards. The property just east of Cobb Mountain and just north of Mt. Saint Helena, hence the name, is at 1100 feet of elevation, keeping high temperatures moderate in mid-summer. Gueziec says the soil, at the foot of the two mountains, is volcanic. The oldest vines are nearly 12 acres of Cabernet Sauvignon planted on St. George rootstock in 1992.
"We get a cool afternoon breeze off [Cobb] Mountain," Gueziec said. "It's very clean air. There are no mildew spores from the mountain because there aren't any vineyards there."
Gueziec immediately took his vineyards organic, and in July his vineyard became certified organic. He said
he was most concerned about his own health after reading about the connection between glyphosate and non-Hodgkins lymphoma. A 2019 study led by two researchers at UC Berkeley's School of Public Health reported a 41% increase in the risk of this type of cancer for people with high cumulative exposure to glyphosate.
"I spend a lot of time in the vineyard," Gueziec said. "These people who are at the tradeshows asking, 'Should I be sustainable?' If they were the ones doing the suckering themselves, they'd be organic."
Going organic takes a lot of work, and not all of it in the vineyard. Vegetation on the unplanted hilly parts of the property,
Domaine Helena is a 215-acre vineyard and winery in Lake County near the Napa County border.
which had been seared by the Valley Fire, grew back with such exuberance that he couldn't use the road anymore and had to painstakingly clear it.
"Part of the problem when you go organic is a lot of life comes back, and some of it you have to fight," Gueziec said.
Organic Doesn’t Guarantee Success
Gueziec didn't go organic to make his grapes easier to sell; he really believes in organic farming. He's enthusiastic about taking care of his vineyard. He rips or digs out individual tall weeds himself. Otherwise, he uses a Clemens Radius to trim weeds; it has an attachment that retracts the blade when it hits trellising or a vine.
Moreover, he inherited a large grape client with the property. Gueziec said this winery wanted to be the exclusive buyer of his grapes, though it did allow him to make some wine on his own.
But after the 2022 vintage, the buyer walked away, leaving him with an 82acre organic vineyard in Lake County and no ongoing winery clients.
The old adage about "the way to make a small fortune in the wine industry is to start with a large one" suddenly
became true. Gueziec did make a lot of money in the software industry, but he has already plowed most of it into the property. He has a few clients now for some of his grapes, including T. Berkley Wines in nearby Calistoga, Chacewater in Kelseyville and Lodi's
Andre Gueziec is an ex-software engineer and owner of Domaine Helena. In 2024, the vineyard became certified organic.
Gueziec didn't go organic to make his grapes easier to sell; he really believes in organic farming. However, his story is one that proves going organic doesn’t necessarily guarantee success, at least not in the short term.
Gueziec is struggling to stay afloat. He rents out the property's three-bedroom house when he can on Air BnB and stays in a tiny trailer on the property that doesn't look long enough to sleep stretched out. Without a major grape client for the 2023 vintage, he harvested and made wine at a custom crush in Napa, but now he doesn't know what to do with it.
"I don't want to try to sell bulk wine. Nobody's buying bulk wine," Gueziec said.
But that left him in late August with rapidly ripening grapes and few buyers for them. Gueziec has been advertising his grapes for home winemakers in classified ads on wineindustry. com. There are a lot of grapes to be had: 62 acres of Cabernet Sauvignon, 15 acres of Petite Sirah (Gueziec plans to make this for himself if nobody buys it) and 4.6 acres of Cabernet Franc. Unfortunately, it is the small plot of Cabernet Franc that has attracted the most interest.
While being interviewed for Grape & Wine, Gueziec also had a visit from Steve Sebastian, who oversees development for Restoration Hardware, a Marin County-based upscale furniture store chain that has restaurants in 14 of its stores. That sounds very promising, but Sebastian was only there to bring bins in preparation for buying a ton of Cabernet Franc for the personal wine he makes at his home in Sonoma County.
"I looked into the history of the grapes," Sebastian said. "Some very nice wineries are using them to make very nice wine. I like the elevation. They're very well-maintained vineyards. I've just got a feeling they will make very good wine."
Martin Pohl, one of two consulting winemakers for Domaine Helena, agrees. For his own winery, nearby Beaver Creek Vineyards, Pohl makes completely natural "zero-zero" wines (Gueziec adds sulfites both at harvest and at bottling to his own wines.) Pohl likes Gueziec's commitment to organic farming.
"I'm a promoter of making wines without any chemicals," said Pohl, a native of the Czech Republic. "It's the future. You see the rise in autoimmune diseases. You see the cancer. It's the food chain. If I'm going to consume my own wine I don't want glyphosate in it. If you drink things with chemicals, you end up sick. I want to live a healthy lifestyle. It's the plan of the gods."
Gueziec is in the unusual situation of not making a lot of wine but having two winemakers working essentially with the same grapes. The second is Derek Holstein, the main winemaker for Cache Creek Vineyards and Winery (not to be confused with the casino, which is 40 miles southeast). Holstein makes wine in a more traditional method than Pohl, whose red wines tend to be the "glou-glou" easy drinking style.
As a small organic winegrape grower, Gueziec has struggled financially with high property taxes and electricity rates as well as replanting costs.
"If I farm all my grapes, it's $600,000 income total. I pay $60,000 property tax. It's expensive."
– Andre Gueziec, Domaine Helena
What is most surprising is, though the berries are very small, neither winemaker's wines are as concentrated and tannic as you'd expect. Instead, they are juicy with red rather than black fruit. Particularly surprising is his Petite Sirah, which is a light and pretty version of the varietal that was reminiscent of Pinot Noir, something you rarely hear said about Petite Sirah.
"It's just from what happens in the vineyard," Gueziec said.
Looking Ahead
Making nice grapes, or nice wine, in 2024 doesn't necessarily translate into business success. Gueziec tore out a plot of Cabernet Sauvignon that had red blotch but doesn't have the money to replant. He built a warehouse capable of holding 45,000 cases of wine (that would represent three years production), but he's not sure that he has the money to pay for air conditioning in summer due to high PG&E rates.
He so far has not received a Williamson Act exemption that would lower his taxes.
"If I farm all my grapes, it's $600,000 income total," Gueziec said. "I pay $60,000 property tax. It's expensive."
Currently, Gueziec uses a vineyard management company, but he says the 45% surcharge on services is leading him to think about hiring full-time on-site staff. Currently, he has no employees; however, he knows if he does hire staff instead of using an outside company, he'll lose access to the large, expensive equipment vineyard management companies offer.
"I'm not the only one who will tell you that small farmers are struggling,"
Gueziec said. "What happens when the only person growing food is Bill Gates? My 10-year plan was to make this a winery. But it's hard to live off this much land. I must get this place to work. I've got a lot invested in it."
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Sustainable Story Series
Led by the Land: Nurturing Native Plants and Wildlife in the Vineyard
By WHITNEY BROWNIE | Vineyard Team
Halfway between two lively California counties, Los Angeles to the south and San Francisco to the north, lies one with a far more relaxed pace: San Luis Obispo County. The area boasts an agreeable climate, stunning topography and myriads of natural attractions.
These natural features are more than meets the eye. They are the foundation for the county’s successful economy in agriculture. The region relies heavily upon the land and its abundance of livestock, nursery products, fruit and nut trees, and vegetable crops.
But the farms in this area are not closed systems. Growers use practices that extend beyond their cultivated lands and into the larger ecosystems that encapsulate them.
The soil in which agriculturalists plant their crops; ground water and neighboring water bodies; and native wildlife, plants and insects are all factors that not only influence the farm but are impacted by decisions made on the farm.
Responsible land stewards consider the big picture when making management decisions. When managed sustainably, the native biological activity of an agricultural site contributes to a healthier agricultural system.
share their appreciation for their habitat,
various
The sustainably farmed winegrape vineyards of San Luis Obispo County are teeming with examples of stewards putting conservation practices to work. One such vineyard is located at the southern border of the Santa Margarita Ranch AVA.
Since the region is known for wine, it may be surprising to learn there is only one vineyard in the Santa Margarita Ranch sub-appellation: Ancient Peaks Winery’s estate Margarita Vineyard.
While Franciscan missionaries planted the first grapes on the ranch in the late 1700s, Robert Mondavi planted the presentday Margarita Vineyard in 1999. Today, the vineyard’s management company alongside Founding Winemaker Mike Sinor continue to work with the land and have achieved a 15-year history of SIP Certified® sustainable certification for environmentally and socially responsible practices.
Rooted for Good
California’s native habitats are significant but often overlooked carbon sinks (Center for Biological Diversity 2023). But carbon sequestration is just one of the many positive impacts native plant life has for a farm.
Soil erosion and fertility issues have long plagued agriculturalists across the world. Beyond being a complication for farm operations, poor soil health wreaks
havoc on water quality. Cultivated soils are often treated with supplemental nutrients, but when soil structure is lacking, these lands are prone to erosion. The water runoff that ensues contains soil particles, bacteria and excess nutrients that pose a threat to water quality (NRCD 2019).
Margarita Vineyard uses plants to remedy these issues. In the beginning, the team experimented with planting cover crops, but now they prefer to let native grasses flourish between the rows of vines. These grasses thrive in the ranch’s conditions, and their strong roots hold soil in place and prevent it from washing away. The native cover crops also create a diversity of beneficial soil microbes and nutrients beneath the surface to further improve soil structure and quality. Altogether, the vineyard’s structured, fertile soils stall water’s flow and act as a filter that prevents sediment and excess nutrients from leaching into groundwater.
“There’s one spot near the vineyard we call Turtle Pond,” said Sinor, who has been instrumental in building the winery’s success and continuing Mondavi’s meticulous sustainable vineyard practices. “There are definitely a lot of turtles there, and frogs, too. Around Block 32, you can see the pond and watch the turtles hanging out.”
When Mondavi planted Margarita Vineyard, he wanted to take extra precautions to protect the property’s waterbodies.
To
Margarita Ranch welcomes visitors to the ranch to explore and learn more about their natural wonders. Margarita Adventures offers
educational tours with their dedicated naturalist, Jaquelin Redinger (all photos courtesy Margarita Ranch.)
He took the California Conservation Corps’ prescribed riparian setback distance and doubled it.
Much like the native grasses between their vines, the plant communities that exist in these riparian areas intercept water as it runs away from the vineyard and prevent sediment and excess nutrients from entering the waterbodies. The extra distance gives the water more time to be filtered by roots as it moves underground, further ensuring waters are protected.
Roaming the Ranch
Living in tandem with the critters in Margarita Ranch’s Turtle Pond are 41 mammal and 16 reptile species. Black bears, deer, wild boar, turkeys and bobcats are just a few of the wild animals that roam the rugged land. Even though Margarita Vineyard is only a small fraction of the ranch, these wild animals still call the cultivated land home and need to travel through and around it.
To ensure the ranch’s inhabitants can access resources throughout the property, Mondavi fenced Margarita Vineyard in separate sections. To further assist their furry friends with easy passage, Sinor explained, “The fences are ‘leaky fences.’ They aren’t very tall and have clear space down below to allow animals to migrate and get past them pretty easily.”
Non-permeable fences block access to resources and pose a serious injury risk for animals that attempt to get through,
over or below them. The leaky fences and strategic sectioning at Margarita Vineyard allow the ranch’s wildlife to move safely through the property while keeping the grapes protected from heavy animal traffic.
Nature’s Helpers
While Margarita Vineyard’s team takes great pride in protecting wildlife on the property, they must control certain wild animals to maintain the vineyard’s health.
Vertebrate pests like ground squirrels can severely injure or outright kill grapevines. To protect their vines, Margarita Vineyard’s team decided to make the area less hospitable to these pests by attracting natural predators. 80 owl boxes and 16 raptor perches encourage these birds of prey to hang out and scout the area for their next meal.
But birds aren’t the only predatory animals that help control pests at Margarita Vineyard. Wild cats (not just the ranch’s big cats like mountain lions and bobcats, but wild domestic cats) also share in the rodent patrol.
“The cats on the property really help to cut down the rodent and squirrel populations,” Sinor said. This may at first seem problematic since feral cats are extremely territorial, but this works out at the ranch because it’s spacious and the cats have plenty of room to spread out. Plus, there are many barns on the property to provide shelter and act as a home base for the colonies.
Cattle and eagles make up a fraction of the diverse ecosystem at Margarita Vineyard.
“Each of our barns has its own population,” he said.
Experience the Splendor
To share their appreciation for their habitat, Margarita Ranch welcomes visitors to the ranch to explore and learn more about their natural wonders. Margarita Adventures offers various educational tours with their dedicated naturalist, Jaquelin Redinger.
Redinger guides eager tourists through the ranch to explore the ecosystems, plants and wildlife; scout for majestic eagles; forage for native plants; and even create personal photography collections. Scenic eBike tours invite guests to learn about the ranch’s history as part of California’s iconic Mission Trail and dig deeper into the native wildlife and sustainable winegrowing practices that help protect the ranch’s habitat.
Redinger shares her skills and knowledge about the nature around the ranch with the whole Margarita Vineyard and Ancient Peaks Winery team. “She has shown us how our eagle population has increased in the past few years and how to make salads and herbal tea from plants foraged from the ranch,” Sinor said.
Environmental stewardship is what most people think about when they hear the word ‘sustainability.’ Social responsibility is an equally significant component, and San Luis Obispo County’s sustainable winegrowers have big ways of showing their care. In the next Sustainable Story, learn how a boutique winery in Paso Robles uses their success to support people and animals in need.
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To protect their vines, Margarita Vineyard’s team decided to make the area less hospitable to rodent pests by attracting natural predators. 80 owl boxes and 16 raptor perches encourage these birds of prey to hang out and scout the area for their next meal.
The Sweet Spots
Survey Reveals What Wine Club Members Really Want (and Why 19% Leave)
By PAM STRAYER | Contributing Writer
Wine clubs are the beating heart for many small- to medium-sized wineries since they account for 86% of direct sales for the average U.S. winery, according to industry data. Due to their vital importance, the Wine Market Council commissioned a study this past spring to see just what motivates the average wine club member and came up with some compelling data and insights wine marketers can leverage.
Wine Market Council Research Director Christian Miller estimated that the group’s survey of 9,108 wine club members drew from 24 to 30 individual wineries. It included at least three respondents from every state.
Top Picks: Price and Selection
Unsurprisingly, wine club members’ top four wine club favorites were related to pricing and selection. Specifically, they cited discounted prices on wines and shipping as well as flexibility in choosing their club wines and access to special small lot wines or library selections as key features.
Paradoxically, 57% said club events at the winery were a draw, even though only 32% attended club events. Respondents were more motivated by other socializing features, like the ability to bring friends along to events or having access to club-only rooms or tastings.
While 88% joined when they were visiting the winery or after a visit, remarkably, 5% joined without having visited and 2% joined after a wine dinner or tasting in their region.
Wine Club Members Are Not the Average Wine Drinker
Wine club members stand out from the average wine drinker for their wealth. Said Wine Market Council President Liz Thach, who moderated the online webinar, “46% make over $200,000 per year. When you compare that to the average annual income in the United States, $59,000, that's pretty high.”
An income of $200,000 puts those individuals in the top 12% of U.S. household incomes.
The average wine club member is 59 years old. Though the majority are still working full time (54%), 40% are retired.
Though California had the highest number of club members (36% of the sample), the next four states (New York, Florida, Texas, Illinois) accounted for
17% of club members in the survey. The rest (47%) were from other states, meaning club members are widely dispersed.
Wine club members are also frequent flyers; 72% are members of more than one club.
“These are people who love wine,” said Thach.
The Downside
But it’s not always long-lasting love, the data showed. According to the Silicon Valley Bank DTC survey in 2024, wine club churn rates are up; 19% of members leave. A Wine Business Monthly Tasting room survey found visitation and wine club recruitment declined by 4% in 2023, a cause for concern.
Reasons for leaving a wine club were varied, with 32% saying the expense was
Unsurprisingly, wine club members’ top four wine club favorites were related to pricing and selection (all photos courtesy Wine Market Council.)
Reasons for leaving a wine club were varied, with 32% saying the expense was too high, while 27% said they switched to another club they liked better.
Most respondents visit a winery more than once a year.
too high, while 27% said they switched to another club they liked better.
Tasting Room Visits
Most respondents visit a winery more than once a year, the survey found.
What drives repeat visits? Variety and tasting. 55% of respondents liked to be able to choose from a variety of experiences at the winery, the survey found. 48% liked being able to taste older or rare vintages. Wine and food pairings were also popular, with 42% rating that important, as were personal or private tastings (42%).
22% were interested in owner tours. Another 20% were interested in vineyard tours.
What Tasting Room Visitors Are Looking For
The survey also asked respondents which attributes were most important when visiting a winery. Hospitality was by far the top-rated feature.
Some Hispanic and Asian American respondents were more apt to be looking for kid- and pet-friendly wineries, while 44% of black wine club members said a beautiful winery or tasting room was important. 35% of black wine club members wanted a casual wine lounge for hanging out.
Some Hispanic and Asian American respondents were more apt to be looking for kid- and pet-friendly wineries, while 44% of black wine club members said a beautiful winery or tasting room was important.
Activities like bocce ball, art exhibits and hikes were not highly rated overall, with just 9% citing that as important.
A Positive Demographic Shift in Progress
When it comes to planning to visit a winery, black wine club members outnumbered all other ethnic groups, with 55% saying they intended to visit winery tasting rooms.
Only 15% of boomers said they intended to visit a winery, compared to 31% of Gen X (age 43 to 58) and 36% of millennials (age 27 to 42).
Said Miller, “If you look at those who intend to visit, you are looking at an upcoming wave of quite a different demographic group, much younger, much more diverse... So we could be facing a pretty fast demographic shift here in terms of visitation if these people do what they say they're going to do.”
Wine Club Members as Social Media Ambassadors Researchers said they hoped the data would help marketers to be more effective in attracting and retaining wine club members.
Thach said, “Happily, 78% [of wine club members] purchase more wine from your winery website [in addition to the club shipments]. That's what you want.”
But that’s not all they do, she said; they add value to your brand.
“Even better, in my opinion, 78% have posted a photo image or comment on social media. 77% recommend your wine to a friend.”
“They're loving your wine and they're out there talking about it. I hope you are tracking that. I hope you know what's happening with your social media and people talking about you online,” she said.
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How the U.S. Government Subsidizes Imports to Benefit Big Wineries
By STUART SPENCER | Executive Director, Lodi Winegrape Commission
In the first four months of this year, the federal government refunded over $21 million in alcohol taxes and duties to subsidize imported wine. It is likely most of those dollars went to a few of California’s largest wineries. In the first five months of this year, over 20 million gallons of imported bulk wine poured into California. In the past five years, 1.3 billion bottles of wine have been imported in bulk. This
excess wine has flooded the market and driven down demand for California-grown wines and grapes. Today, many California wineries have tanks full of wine they cannot sell in bottle or bulk. Some growers have been farming all season without a home for their grapes. Vineyards are being torn out across California and many ag workers are losing their jobs. U.S. trade policy, specifically wine duty drawback, has
helped create this mess by subsidizing imports for the benefit of a few global alcohol companies.
U.S. Trade Policy Changed
In 2003, the United States changed trade regulations, allowing for a refund of duties and excise (alcohol) taxes paid on imported wine if the winery exported “interchangeable” domestically produced wine, which
An unpicked Lodi AVA vineyard prepares to be torn out in Acampo, Calif. (photo by Stephanie Bolton, Lodi Winegrape Commission.)
refers to still wine of the same color with less than 14% alcohol by volume, having a price difference less than 50% between the imported wine and the exported wine. (Exports to countries the United States has a free trade agreement with (e.g., Canada, Mexico) do not qualify as matching exports for duty drawback. The data suggest there has been significant diversion of bulk exports from Canada to Europe to qualify for the subsidy.) Simply put, if a winery imports a million gallons of Australian Chardonnay and exports a million gallons of California white wine, they can claim a drawback or a refund of up to 99% of the duties and excise (alcohol) taxes paid on the imported Chardonnay. This imported bulk wine ends up on American store shelves virtually tax free and gives the selling wineries a competitive advantage over the thousands of other wineries trying to sell in domestic markets.
Subsidizing Imports
Table 1 illustrates how duty drawback subsidizes imports at taxpayer expense. Winery A produces one million gallons of California Chardonnay and sells half of it in export markets and half in the United States. Winery B produces 500,000 gallons of California Chardonnay and imports 500,000 gallons of Australian Chardonnay. Winery B also sells half the wine in export markets and half in the United States. Although
both wineries sell the same amount of wine, Winery B receives a $528,650 tax benefit for importing Australian Chardonnay. Duty drawback gives it a competitive advantage over all U.S. wineries that do not import.
Additionally, Winery B has five years to find matching exports to claim the tax refund. So, if Australia, Chile, Spain, Italy, or any wine producing country has excess supply and begins dumping wine, Winery B can import large volumes of bulk wine instead of buying California grapes. They then have five years to match those imports with interchangeable exports, essentially driving down demand for domestically grown grapes. Any emerging shortages for California-grown grapes are quickly tamped down by sourcing overseas
bulk wine. This business practice is legal and is being subsidized by the U.S. federal government.
Federal Policy Drives Down Demand and Price for California Grapes
Figure 1 illustrates total bulk wine imports to the United States and the average price of grapes in Crush District 11 (Lodi) from 1996 to 2023. The shaded blue area represents bulk wine imports and the orange line represents the average price of grapes. The change of U.S. trade policy in 2003 led to an explosion of bulk wine imports from virtually zero in 2003 to 95 million gallons in 2012. That’s the equivalent of 558,000 tons of California grapes that were not purchased while millions of dollars were shipped overseas and not invested in local communities.
Also note the spikes in bulk wine imports coincide with a rise in grape prices. As demand starts to grow for California grapes and prices start to
MANAGEMENT - GW -
Table 1.
rise, many of California’s largest wineries expand bulk imports, driving grape prices down. The pattern is identical across Crush District’s 12, 13, 14 and 17. The grape prices in the graph are nominal and don’t account for inflation. Table 2 adjusts the 2023 grapes prices to 2014 levels utilizing the consumer price index. The loss of economic activity for California grape growers and their local communities is staggering, and all this is happening with the assistance of U.S. trade policy that is subsidizing imports.
Duty Drawback’s Lack of Transparency
Table 3 shows the annual wine duty drawback dollars paid to importers of foreign wine from 2018 to 2024 as reported by the U.S. Customs and Border Protection (CBP). To claim the drawback, the importer must export interchangeable domestically grown wine within five years of importing. Additionally, CBP reported in their 2018 Notice of Proposed Rulemaking, “In fiscal year 2015, CBP paid $54.9 million in excise tax collection from wine imports of $335 million.” That represents 16.4% of all excise (alcohol) taxes collected on imported wine that fiscal year.
This data was not easy to access, and the lack of transparency on this government subsidy does not instill confidence the program has broad benefits. I’ve also been told CBP cannot provide data any further back than 2018 when CBP changed systems.
Multi-Million Dollar Subsidy for California’s Largest Wineries
To understand which wineries are potentially benefiting from substitution duty drawback, we must look at detailed import and export shipments by California wineries. Table 4 summarizes annual bulk wine imports and exports by California’s largest wineries from 2016 to 2022. The table also shows the potential subsidy or duty drawback that can be claimed. Any claim on imports must be matched by interchangeable exports. Currently, California’s largest wineries represent 95% of bulk exports and 79% of bulk imports. More current data is unavailable.
Table 4.
Table 3.
Figure 1.
Table 2.
Table 5.
The $174 million in potential duty drawback subsidies aligns closely with the $204 million in actual duty drawback paid out over the past 6.5 years. The data also suggest it is highly probable that most of the duty drawback payouts are going to a handful of California’s largest wineries. And over half the total could likely be going to one winery.
Bulk Wine Imports Supercharged by Federal Subsidies
The low value of bulk wine imports creates a significant duty drawback subsidy for global wine companies. Table 5 presents a snapshot of international bulk wine prices as reported by Ciatti in their most recent Global Market Report. The $1.0593/gallon subsidy on bulk imports represents a significant percentage of the value of the wine. The lower the cost of the wine, the more substantial the subsidy. For example, the potential duty drawback claims on imported bulk Australian Cabernet Sauvignon represents up to 54% of its value. Comparatively, the average price per gallon of bottled French wine imported in 2023 was $44.24/gallon. The duty drawback subsidy on the bottled French wine would only represent 2.4% of its imported value. The current duty drawback scheme provides a significant stimulus to bulk wine imports.
Proponents of Duty Drawback Suggest It Stimulates Exports
Proponents of substitution duty drawback claim that it helps California exports. The reality is it only benefits those wineries that are also importing interchangeable wine. The data show it is likely only benefiting a handful of global wine companies. Additionally, the downstream damage to the domestic grape and bulk wine market far outweighs the benefits. Millions of gallons of bulk wine are still pouring in from overseas while California bulk wine goes unsold, grapes go unharvested and rural communities struggle.
CBP, the federal agency that manages duty drawback claims, has observed “economic effects of the practice do not support the view that it is an effective or efficient export promotion measure.” The agency continues,
“Imported wine that benefits from double drawback enters the U.S. market with a substantial tax advantage over domestically produced wine.”
In 2018, CBP analyzed wine trade data from 2004 to 2016 to delineate the effects of this double duty drawback. They concluded, “In 2004, imported bulk wine accounted for 0.9% of domestic consumption. By 2016, imported bulk wine accounted for 6.2% of domestic consumption. By volume, imports of bulk wine grew 875% over that time period... the total volume of wine exports only grew by 5.5% over that period.”
Table 6.
Additionally, as the total wine market continued to grow over the past decade, the total California winegrape crush and winegrape purchases from independent growers shrunk. Table 6 details the total California grape crush for the past 10 years. The “Purchased CA Grape Crush” columns on the right reflect tons purchased from independent grape growers and eliminates winery-owned acreage. The “5 Year Average” columns reflect a five-year rolling average of grapes crushed and grapes purchased for wine production. Subtracting 2023 purchase levels from 2014, California wineries have decreased grape purchases by over 500,000 tons annually over the past 10 years. This outsourcing of winegrapes is being aided by substitution double duty drawback.
Other Domestic Wineries Squeezed Out of Export Markets
The data also suggest the duty drawback program is crowding out opportunities for non-importing wineries in export markets. In Table 7, “Other” California wineries’ share of the bulk export markets has dropped from 20% to 5% over the past 15 years. It’s highly probable a bulk importing winery would cut their price to make a bulk export deal work and thus be able to claim duty drawback on excise (alcohol) taxes paid on past imports. This practice squeezes out other wineries and is likely driving down price and value for everyone, including the growers that are told by their largest buyers they can’t pay more for the grower’s grapes because they can’t raise the price of the wine. Only the largest businesses benefit from such a race to the bottom.
Congress Needs to Act
CBP has recognized the double duty drawback loophole and has urged Congress to correct it. On Oct. 15, 2009, CBP and the Tax and Trade Bureau proposed related rulemaking to eliminate the double duty drawback. After public comment, including a statement from 18 legislators, the proposed amendments were withdrawn on March 10, 2010.
On Aug. 2, 2018, CBP proposed rules to implement changes to the drawback regulations as directed by the Trade Facilitation and Trade Enforcement Act of 2015. On Dec. 18, 2018, after public comment, the proposed regulations with amendments were adopted, prohibiting double duty drawback.
However, in 2019, the National Association of Manufacturers and The Beer Institute filed lawsuits against the updated regulations in the U.S. Court of International Trade. The court ruled in their favor, invalidating the regulations that would have ended double duty drawback. “The court notes that defendants made seemingly valid policy arguments for why the ‘zeroed excise tax’ scheme should not be permitted. But statutes cannot be constructively amended through agency action; such power lies with Congress.” That ruling was upheld (Federal Circuit Strikes Down Treasury Regulations Limiting Drawback Refunds on Beer and Wine Exports | International Trade Insights) in the U.S. Federal Circuit Court on Aug. 23, 2021.
Not only did that ruling allow double duty drawback to continue for wine importers/exporters, but it opened the door for beer, wine, spirits and tobacco producers to import interchangeable foreign products virtually tax-free, putting domestic production at a competitive disadvantage and potentially costing taxpayers billions of dollars annually.
The Dirty Secret Must End
Wine substitution duty drawback is an anti-local, antidomestic government trade policy that, for the past 20 years, has stimulated significant damage to the health of the California winegrape market. This destructive policy subsidizes California’s largest wineries to replace California-grown grapes with imported cheap bulk wine. This is not just a Central Valley problem; the excess wine drags the whole industry down, exacerbating all of California’s current inventory and supply challenges.
Additionally, this allows wineries to circumvent California’s environmental and social regulations by importing wine from countries without similar stringent standards. And runs counter to California and the U.S. carbon reduction goals by shipping tens of thousands of containers across the world instead of purchasing local grapes. In no world does it make sense for the U.S. federal government to subsidize imported bulk wine while California grapes go unharvested, wineries go out of business and ag workers lose their jobs. It’s time for this to end.
This article was originally published on the Lodi Winegrape Commission blog.
References
Federal Register, Vol. 83, No. 242, December 18, 2018, page 37898. https://www.govinfo.gov/content/pkg/FR-2018-12-18/ pdf/2018-26793.pdf
Starting in 2023, the state of California passed legislation allowing wineries to opt out of making their winegrower returns public information.
Federal Register, Vol. 83, No. 149, August 2, 2018, Proposed Rules, pages 37894-370901. https://www.govinfo.gov/content/ pkg/FR-2018-08-02/pdf/2018-16279.pdf
United States Court of International Trade, January 24, 2020, pages 19-20. https://www.cit.uscourts.gov/sites/cit/files/20-09.pdf
Federal Register, Vol. 83, No. 242, December 18, 2018. https:// www.govinfo.gov/content/pkg/FR-2018-12-18/pdf/2018-26793.pdf
United States Court of International Trade, January 24, 2020, page 21. https://www.cit.uscourts.gov/sites/cit/files/20-09.pdf
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Table 7.
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