Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Grape Prices Crash in California

One of the great things about living in Northern California is the proximity to Napa Valley, one of the world’s preeminent wine making regions. But as children frolicked in huge tubs of merlot at the annual fall grape stomping ritual, nothing but sour grapes could be heard among the vineyard owners huddled in small furtive groups.  The California  market has crashed, with premium Napa Valley cabernet fetching only half the $4,000/ton achieved only two years ago. The weather hasn’t helped, with alternating hot and cold spells shrinking the harvest by 10%-20%.  The glassy winged sharpshooter pest is an ever present risk, and there are still some holdouts of the phylloxera plague that forced most grapevine roots to be torn up two decades ago. Plunging prices and shrinking volumes do not make a great business model. Napa had its own version of the subprime boom, with nouveau riche pouring in to buy starter vineyards brandishing vanity labels-no experience required. Today foreclosures on these trophy properties are rampant, and you can buy them for a dime a dozen. CALPERS, the California State Pension Fund’s $200 million investment in the sector is starting to smell like a three day old bottle of Thunderbird, not fit for use as salad dressing. The new age of frugality has consumers migrating en masse to the low end of the market, leaving high priced labels like Opus One and Grgich Hills (made famous by the cute movie Bottle Shock) stranded in the marketplace. Central Valley winemaker and low end mass marketer, Charles Shaw, known locally and unaffectionately as “Two Buck Chuck,” is making a fortune buying bulk wine at bankruptcy auctions for 50 cents a gallon, bottling it at his Napa plant, and knocking it out as low end supermarket wine with the Napa appellation for, well, $2. It’s a great time to expand your portfolio to investment grade wine. At least you can drink your mistakes.