Warning: the wine glut may have ended.  Have you stocked your cellar yet?

For the last six years, the wine industry has been awash in a tide of wine.  For the most part, that was due to the incredible record of success and growth the industry had seen through recent decades.  Existing wineries expanded aggressively to meet anticipated demand.  Beyond that, too many people with excess money thought it had become fashionable to own a winery, and too many farmers looking for a cash crop saw wine grapes as a sure bet (or their only bet).  Improving technology and techniques helped.  Mother nature seems to have added to the bounty with excellent growing conditions in many areas.

The natural result was too many grapes.  Given the several year lead time from planting vines to a worthwhile crop, forecasts of demand and supply is even vaguer than in most industries.  As all those new vineyards and wineries started to produce, there were suddenly too many tanks of wine that could not be sold.

The news was not all bad if you were a consumer.  The glut kept prices down for most, and even brought some wine down in price.  "Two Buck Chuck", a low-cost line of wine from a major winery conglomerate, sold for $2/bottle in California and about $3 in many other places, was a sudden success, introducing drinkable wine to new consumers.  With growers avid to find buyers for their grapes, much of the glut was consumed this way, as large market wineries bought at rock-bottom prices to market inexpensive wine against it.  Wine that could not be sold was sometimes simply poured out, and some grapes were left to rot in the fields when the cost of harvest seemed unjustified.

This was not just a California phenomenon.  The glut seemed to spread around the world, as more and more acerage came into production and the expanding lake of wine threatened to become an ocean.  Chile, Australia, New Zealand and others were elbowing in, fighting for market share.  

The glut may be ending now.  This weekend, the results of the 2006 California harvest were announced at the annual Unified Wine and Grape Symposium in Sacramento.  The total came in at just under 3.5 million tons of grapes -- down almost 20% from 2005's record 4.3 million.  At the same time, a drought-driven shortfall in the Australian 2007 harvest now underway is expected: a 40% drop from 2 million tons in 2006 to 1.2 million.

There are many stories behind that.  Newcomers to the business dropped out.  Some vineyards had their vines ripped out to put the land to other use.  From France we saw stories of wine sold in bulk for conversion to ethanol.  Between nature and economics, the growth in supply dropped off.

At the same time, other factors led to a continuing growth in wine consumption, particularly in America.  Reasonable prices made it affordable.  Medical research and news stories made many feel drinking wine, particularly red wine, was a part of a healthy lifestyle.  The wine industry sought to promote wine-drinking, and it became a social event for many who had never sampled wine in other days.

Not every part of the glut is over.  There was mention at the Symposium of Merlot grapes left in the fields, and indeed the Merlot harvest was down slightly as a percentage of the crop.  Pinot Noir, meanwhile, grew from 2.2% in 2005 to 3% in 2006 (the Sideways effect continues).  The 2006 California crop is actually normal in size, while the 2005 crop was abnormally large, so we should not anticipate any drastic effect from this, but there will be an effect.

Naturally enough, the representatives of the wineries and growers cheered this news.  Consumers may not be quite so happy, but this change will not force prices up quickly.  The 2006 California harvest will generally not hit your wineseller's shelf for two or three years.  Other areas and nations will gladly sell us more wine: Chile and Argentina certainly want our business along with several others, and the French wines have not been selling quite the way they always have.  A rise in prices will probably be gradual and still a little ways off.  For now what we should expect is that prices have already hit bottom.

While there is no rush to buy now, it is probably a good idea to keep an eye out and take advantage of any special bargain you might see for long-term cellaring.   The future is coming.