Market Analysis: Raisin Industry Overview

The relative stability of the raisin industry from 1987 through 1998 has resulted in an increase in overall sales activity, as well as an increase in the current market values of raisin vineyards within the central San Joaquin Valley.  Values have increased over average values exhibited in the prior years, with instances of much stronger values for above average vineyards.  Smaller acreage vineyards (such as 20 and 40 acres) are consistently selling for premium prices and have steadily trended upward during this time frame, with more recent large acreage sales now indicating a similar trend.  Historical conditions and trends in the raisin industry may be summarized as follows:

• Thompson Seedless Raisins: Table 1

Raisin Advisory Board Raisin Advisory Committee

California Agricultural Statistical Service

This data reveals the dramatic decline in raisin prices during the 1983 crop year due to steadily increasing bearing acreage and production, which, coupled with a corresponding increase in production in California wine grapes, and severe competition from low-priced, imported, wines, caused a devastating oversupply situation.  With the implementation of the raisin diversion program from 1985 through 1995, in addition to an aggressive marketing program both domestically and abroad, the raisin market has shown signs of recovery and stabilization.

The 1997 crop year was characterized by relatively good weather and growing conditions, which resulted in a large crop of 374,832 tons, up 38% from the previous year.  Preliminary estimates for the 1997 crop year were announced at a free tonnage percentage of  61% and a RBA field price of $1,250 per ton.  The final percentages were set at 66% free tonnage with 34% reserve, based on demand for natural Thompson Seedless in the 250,000+ ton range.  Although the overall average price per ton was down for 1997 in comparison to the 1996 season, overall average grower returns per acre were higher, primarily due to above average production.

The 1998 season was characterized by very poor weather conditions throughout the growing season, as well as rain-related damage to the raisin crop during harvest.  Both of these factors, as well as continued labor problems during harvest, all contributed to a significant decline in production for Thompson Seedless raisins.  The final percentage was set at 100% free tonnage at the RBA field price of $1,184 per ton.  The final tonnage for the 1998 year was reported at 278,483, down approximately 102,000± tons of from the previous year. Although production and price were down for the 1998 season, the 100% free tonnage percentage resulted in relatively stable grower returns for producers, which may result in continued stability in the industry. 

• Raisins: Graph 1 - Average Return per Ton @ 100%

Review of average prices received illustrates the impact of the reserve program in the 1980’s. Also noteworthy is the similarity between 1998 and 1982, which ushered in the disaster of the agri-recession of the mid-1980’s.

The price of raisins is clearly impacted by external factors, other than merely the size of the annual crop, as evidenced by the average return per ton, on a 100% basis, versus total raisin production.

• Graph 2 - Average Return per Ton vs. Production

The market for vineyards is clearly driven by demand from expanding local growers. Values for raisin vineyards in the area of the subject property continue to range from a low of $5,500 per acre for older vineyards with very low production histories to a high of $11,000+ per acre for smaller acreage vineyards, or vineyards with above average production histories. Market values for raisin vineyards in the area of the subject property have remained very stable to increasing over the last several years due to consistent returns.  The market trends for raisin vineyards in the Fresno-Madera areas are characterized by very high demand by local buyers and investors and a very limited supply of good quality vineyards on the open market.

This type of trend fuels the market, resulting in higher market values for vineyard properties, especially for the marginal, lower producing vineyards. The majority of good quality vineyards are being purchased by adjoining property owners or tenants, who negotiate the sale directly with the sellers, and not by being listed with local brokers on the open market. Many of the above average, good quality vineyards on the open market are listed at values ranging well above $10,000+ per acre.

The critical factor which attributes to higher market values for raisin vineyards in Fresno and Madera Counties is the extremely high demand brought on by stable raisin prices to growers as a result of lower industry production or supply. Lower production has either been the result of weather related damage, or stronger demand by wineries for the use of Thompson Seedless grapes for the juice or concentrate markets. The current market for Thompson Seedless vineyards is reminiscent of the early 1980’s when raisin vineyard values rocketed to highs of $13,000 per acre.  The oversupply situation which followed plummeted vineyard values to the $3,500 to $4,500 per acre range, an overall decline of 65 to 75%.

Once supply and demand factors equalize in the wine grape market, demand could potentially fall for Thompson Seedless grapes utilized for juice and concentrate.  This would, then, likely result in more Thompson Seedless grapes utilized for raisin production.  Upward pressure on supply in the raisin market could potentially result in a down turn in overall average grower returns, and correspondingly in market values for raisin vineyards. Current acreage figures for the raisin industry indicate a productive capability in excess of 400,000 tons of raisins in any given year. However, production levels have failed to meet their potential over the last several years, due to weather related damage and increased demand by wineries for Thompson Seedless grapes for the juice or concentrate markets. Once these factors shift, total raisin production could potentially reach the 400,000 to 450,000 ton range.  At a stable demand level of 237,000 tons, this equates to an overall free tonnage percentage of 52% to 59%. At current raisin prices this would translate to a 100% return price of $634 to $719 per dried ton to the grower, in comparison to the current ten year average of $968+ per dried ton.