The Grape, Wine, & Ornamental Situation and Outlook 2019

1. The Grape, Wine, & Ornamental Situation and Outlook 2019 Miguel I. Gómez and Jie Li Dyson School of Applied Economics and Management Cornell University Cornell Agribusiness Economic Outlook Conference Ithaca, January 18th, 2019

2. Situation & Outlook for Grapes and Wine

3. Value of Utilized Production of Grapes, New York, 1997-2017 Source: New York Agricultural Statistics, 2018

4. New York Grapes Utilization, 2014-2017 Source: Fruit Report, New York Field Office, NASS, USDA, 2018

5. Grape Prices in New York, 2008-2017 ($/ton) Source: Fruit Report, New York Field Office, NASS, USDA, 2018.

6. Grapes Grown and Processed in NY Received by Wineries and Processing Plants, 2013-2017a Source: New York Agricultural Statistics, 2018.

7. 2017 NY Wine Industry Economic Impact • 450 producers, 11,684 acres of vineyards • 62,450 direct employees, 14,359 additional jobs created in suppliers and ancillary industries • $5.2 billion total wages generated by direct, indirect, and induced economic activity • 4.5 million tourist visits and $1.8 billion in tourism expenditures Source: WineAmerica, 2017

8. Total Wine Consumption, U.S. 1999-2017 Source: Wine Institute, 2018

9. Overview –Wine • Shipments into US trade channels increased in 2017 - retail value of $62.6 billion • Direct-to-consumer shipping (E-commerce) reached a record high $2.69 billions, reflecting 15.5% annual grow • Shipments of sparkling wine and champagne continue growing - up 8% from the previous year • Sales of Rosé are substantial, with volume jumping 60% from the previous year Source: Wine Institute. 2018

10. Outlook – New York Grapes Crop production expected to be down 2.2% in 2018 • Most challenging year ever, • Northern counties:humidity and drought conditions, yields may be up due to lack of winter/spring damage • Other counties: humidity, rain, rot and fruit flies, yield will be down, and quality will not be the ideal Source: Veraison to Harvest, 2018

11. Outlook – U.S. Grapes • U.S. grape production likely to up 4% in 2018/2019 • Primarily due to higher production in California • Wine- table- and raisin grapes all likely to increase • Washington wine grapes and table grapes are likely to increase about 14% • Expected lower grape production in New York (down 2 percent) and Pennsylvania • Larger production likely to put downward pressure on growers price for wine grapes; price of juice grapes are likely stable (smaller production in NY and Penn)

12. Outlook – U.S. Wines • Sales are expected to grow (slowly) by 2 to 4 percent, premium wines are likely to grow by 4 to 8 percent. • Price are likely to be flat due to the low-growth and low-inflation environment • Consumer preferences likely to change due to the retiring baby boomers and frugal millennials • Likely to have more foreigners purchasing of US wineries Source: State of the Wine Industry, 2018

13. Opportunities and challenges • Per capita consumption is likely to be stable in 2019 • Demographic shift will impact the wine industry, with the retiring wine-loyal baby boomers being replaced by less affluent millennials • Labor costs and shortages --- dominant concerns • The boom may taper off in the wine industry, owners need to be market-savvy and adaptable

14. Ornamental Crops: Situation and Outlook

15. Nursery Crops: Outlook Average Profit Margins, 2015-2018 Source: Nursery Management’s 2018 State of the Industry Report

16. Nursery Crops: 2019 Outlook • 65% of growers are confident that profits will increase • 78% raised prices in 2018, and 76% plan to increase prices again in 2019 • Increasing production of propagation materials, container-grown perennials and shrubs • Expected some shortages in 2-in and 30-in caliper field-grown trees; industry should plan smart and not over producing Source: Nursery Management’s 2017 State of the Industry Report

17. Ornamental Crops: Present and Future • A period of steady growth over the past 10 years • Industry expects modest growth in 2019 • Challenges: labor shortages, increased production expenses, and weather • Other uncertainties: • Demographic shifts • Structural changes---consolidation Source: Nursery Management’s 2018 State of the Industry Report

18. What’s important for growers? • Diversify product varieties and improve the product quality (not volume anymore) • Better brand management skills • More detailed analysis of SKU movement and replenishment levels • Greater efficiency in distribution and logistics • Have a succession plan! Source: Nursery Management’s 2018 State of the Industry Report

19. Research Update Strategic FEW (Food-Energy-Water) and Workforce Investments to Enhance Viability of Controlled Environment Agriculture in Metro Areas Funded by National Science Foundation (NSF) Cornell University – Rensselaer Polytechnic Institute

20. High Tunnels Modified Environment Agriculture

21. Controlled Environment Agriculture

23. Plant Factories / Vertical FarmsBrightboxVenlo, NetherlandsResearch Vertical Farm

24. Strategic FEW (Food-Energy-Water) and Workforce Investments to Enhance Viability of Controlled Environment Agriculture in Metro Areas • Develop novel systems to reduce the energy and water footprint and increase nutrient content of selected vegetable crops produced in CEA systems using advanced lighting • Model the existing and future footprint (energy, carbon, and water) of CEA systems • Compare economic and environmental impact of selected metro CEA and conventional field-based vegetable supply chains to identify challenges and opportunities for improvement • Foster industry-research networks that accelerate the acceptance, adoption and continued improvement of metro CEA systems • Create structured workforce development to support metro CEA growth Supported by the National Science Foundation (NSF) Cornell – RPI consortium

25. Book Chapter in – Food Supply Chains in Cities: Modern Tools for Circularity and Sustainability • Objective: compare the landed costs and selected environmental outcomes of conventional field-based and CEA supply chains for leaf lettuce to two US metropolitan areas (New York and Chicago).

26. System Boundary

27. Lettuce Analysis Systems compared: • Field production in Salinas, CA • Greenhouse (GH) and Plant Factory (PF) operations in New York and Chicago • NYC in city, Chicago in peri-urban area • Costs and environmental outcomes to deliver to wholesale produce markets • Not direct sale of high value product

28. Lettuce Analysis Outcomes compared: • Landed (delivered) cost • Gross Energy Demand • Water Use (growing, excluding cooling) • Greenhouse Gas Emissions (CO2eq)

29. Lettuce Analysis: Cost Results CEA have much higher landed costs—but may still be profitable if can sell for higher price

30. Lettuce Analysis: Environmental CED and GWP depend on both operations and transportation Water use unambiguously better for CEA operations

31. Lettuce Analysis: CED / Unit Structure of energy use differs. Field < CEA for Chicago, Field > GH for NYC Transportation costs less for NYC CEA because in-city (2km), higher for CHI CEA because peri-urban (75km)

32. Lettuce Analysis: Best Performance

33. Thank you for your attention!QUESTIONS? Miguel I. Gomez Dyson School of Applied Economics and Management Cornell University mig7@cornell.edu 301G Warren Hall