December 2016

Growers Celebrate End of 2016 Season at LDGGA Harvest Social

Larry Mettler, Mettler Family Vineyards, Doug Fritz, and Kyle Collins, E & J Gallo. More Harvest Social coverage on page 5.

Diego Olagaray, Past LDGGA President (1999-2000) and current board President Kris Gutierrez visit during the social.

It’s a Wrap, Now What? By Erica Moyer, Turrentine Brokerage The 2016 season is over and now prep begins for 2017. So how did things shape up and how does it look for Lodi in 2017? In 2015, the Coastal Regions were significantly down from 2014, and Lodi was slightly down from 2014 to 2015. The only region that was in the positive was the Southern Interior, mainly from large production in Rubired, Muscat Alexandria and French Colombard. But 2016, is a flip from 2015. The Coastal regions had a better year, and production will be up from 2015, primarily on Pinot Noir, Chardonnay and Cabernet Sauvignon. In contrast, the Lodi area could only be at 2015 production levels or perhaps less. For the Southern Interior, production levels will be less than 2015, due to years of below average rainfall, poor water quality, salt accumulations in the soil and the “dozer.” The impact from the lighter 2015 crop is reflective in the bulk wine inventory listed with Turrentine Brokerage with the downward slope from 2015. It is important

Tons Crushed by Region Tons Crushed 2015

Tons Percent Percent Crushed Net Gain/Loss Equivalent Gallons Change vs. Change 2014 5-Year Avg.

2016?

North Coast

420,399

555,149

(134,750)

(22,235,000)

-24%

-18%

+2015

Central Coast

370,987

559,753

(188,766)

(31,145,000)

-34%

-30%

+2015

Northern Interior

857,779

870,224

(12,445)

(2,055,000)

-1%

-1%

~/- 2015

2,033,858 1,882,298

151,560

25,000,000

8%

8%

-2015

Southern Interior

to note the volume of California appellation wine, which also includes the Lodi appellation versus the lack of inventory from the Coastal Regions. Also, the largest percentage of bulk wine available is Zinfandel and Merlot. After the v2016 wines get finished, we expect to see a slight uptick in Coastal wines available on the bulk market, along with an uptick from California appellation that will hit the bulk wine market. The Key Varietals The pendulum swung the other di-

rection for Chardonnay in 2016, with contracting starting in the first quarter. Because of the light 2015 harvest in the Coastal regions, programs that were built on excesses from the 2013 and 2014 harvest for their California Appellation programs needed supply and prices in the Coastal regions were too high for their programs. These buyers ventured into Lodi and the Delta to source Chardonnay. Another increase in demand was from “bubbles.” As Prosecco Continued on page 6

Lodi District Grape Growers Association Update Page 2

Kris Gutierrez,

LDGGA President



As the year 2016 is coming to an end I see a need for our members to speak out to the public that farmers and ranchers are sincerely at work, supplying the world with the most affordable and safest products we can provide. There has been a lot of legislation that will be affecting how we proceed in running our businesses into the future. Today’s consumers have had an abundant and inexpensive food supply for quite some time. This is a result of our ability to overcome and adapt to the challenges that come in

front of us. The growers in the Lodi area have always been leaders in finding ways to stay one step ahead of the challenges that face us. Except now our competitiveness is at stake due to the legislature ignoring the warning signs and continuing to heap more and more regulations and costs on agriculture. Business as usual is no longer an option. We have to move beyond the unintended social and environmental consequences of our past. We need a shared approach. Goals should be placed to inform consumers that we are more than just a farmer, we are care takers of our land and understand how important the land is to

us and future generations. We have to point out that employment tied to agriculture goes well beyond the farmer and his laborers. We are the businesses that keep the entire economy moving forward. The Lodi District Grape Growers Association will continue to stand up and be leaders in our community demanding that solid, truthful, information is passed along not only to our members and legislators, but to the entire public that surrounds us. Have a Happy New Year. Kris Gutierrez

Amy Blagg, LDGGA Executive Director 2016 will likely be remembered as a year of challenges for California farmers. Legislation providing for a steep increase in minimum wage and new overtime rules will greatly increase the cost of doing business into the future. Changes to California’s Worker Protection Standards were finalized in 2016. These changes will align WPS with new federal requirements; enforcement of these rules will begin in 2017. We finished the year providing comments on behalf of our members on a number of issues. We voiced our concerns with TTB Notice No. 160, Proposed Revisions to Wine Labeling and Recordkeeping Requirement which would change labeling rules for out of state wineries. We believe that these changes would have a negative impact on the Lodi AVA and on the numer-

ous out of state vintners that purchase grapes from this region. LDGGA also submitted comments on the California DPR proposal to regulate pesticide applications within one-quarter mile of schools and child day care facilities. We feel that the existing rules already provide multiple layers of protection and that the proposed action would over-reach without actually improving safety. There is still time to comment on the State Water Resources Control Board’s 2016 Bay-Delta Plan Amendment & SED which would make changes to San Joaquin River flow and southern Delta water quality objectives. Comments are due on January 17, 2017. More information can be found at www.waterboards.ca.gov. Membership invoices were sent last month. Thank you to all who

have already renewed for 2017. If you chose to take advantage of the free LDGGA logo wear offer, I will be ordering and distributing those items in early January. Membership applications are available at www.ldgga.org for any growers or associated businesses interested in joining LDGGA. Watch your mail for invitations to the 64th Annual Meeting and Dinner to be held on February 23, 2017. This year’s dinner speaker is Assemblyman Jim Cooper who represents the 9th Assembly district, which includes the cities of Sacramento, Elk Grove, Galt, and Lodi. In his first term in the Assembly, Mr. Cooper has proven to be an advocate for agriculture and those that he represents.

Lodi District Grape Growers Association Update Page 3

News Briefs New Form I-9 Released On November 14, U.S. Citizenship and Immigration Services (USCIS) released a revised version of Form I-9, Employment Eligibility Verification. Employers may continue using Form I-9 with a revision date of 03/08/2013 through January 21, 2017. By January 22, 2017, employers must use the revised form for new employees. The updated form is available at https://www.uscis.gov/i-9. The revised Form I-9 does not require any additional information be provided by the employee or employer. The new I-9 contains further prompts and instructions intended to make it easier to complete electronically. Employers should continue to follow existing storage and retentions rules for all previously completed I-9s.

Potential Routes Identified for PG&E Project After a round of open houses in June, the Northern San Joaquin Power Connect team has continued to make progress in the planning of the project. The project will include the construction of new high capacity transmission lines, enhancements

to and potential expansions of existing substations and upgrades to existing transmission lines With feedback gathered from the community on 20 potential transmission line corridor segments, along with additional findings from field surveys and environmental analyses, the project team is working to identify potential transmission line route segments. These potential routes were recently presented at community open houses. An interactive map of the proposed route alternatives can be found at http://maps.pge.com/northernsanjoaquinpowerconnect. Additional informaiton on the project is available at http://pge.com/ northernsanjoaquinpc.

Minimum Wage Increase to Increase January 1 On January 1, 2017, California's minimum wage will increase from $10 per hour to $10.50 per hour for businesses with 26 or more employees. This requirement will apply to employers with 25 or fewer employees in one year. The increase is a result of Senate Bill 3, signed into law in April of this year. Minimum wage will increase each year until the wage reaches $15 per hour in 2022.

We Help Agribusinesses

Grow Faster.

John D. Lozano Local Area Manager | Director of Agricultural Lending 209.334.7405 | CommunityBizBank.com

A real friend is there for the long haul. Does 147 years count?

Les Schwab - Lodi 615 E. Lodi Ave., Lodi CA (209) 334-3961

Eric Daegling VP, Business Banking Center Manager Lodi Business Banking Center 120 W. Walnut Street, Lodi, CA 95240 209-340-2301 bankofstockton.com Friends you can bank on. Member FDIC

NICHOLAS PODSAKOFF

BRAD SPORLEDER (209) 810-5796 * Complete Harvester Pre-Season * Harvester Replacement Parts

*Welding & Fabrication Shop *Equipment Repair

24-HOUR (Seasonal) Shop & Mobile Service

Sales Representative CELL: 209.456.0697 [email protected]

P.O. BOX 279 / 27920 MCCOMBS AVE. / WASCO, CALIFORNIA 93280 OFFICE: 800.4999019 / FAX: 530.746.2236 / VINTAGENURSERIES.COM

Water Coalition Meetings As required by the Regional Water Quality Control Board’s regulations under the Waste Discharge Requirements for Agriculture, members of the San Joaquin County and Delta Water Quality Coalition, or their representative, must attend at least one Coalition approved grower meeting per year. The Coalition will be holding a series of grower meetings during the months of January and February to help growers meet the requirement of attending at least one Coalition meeting per year. These meetings should be attended by those who are operating and making the management decisions for the farming operation. All of the annual grower meetings will be held at the San Joaquin County Robert J. Cabral Agricultural Center, 2101 E. Earhart Avenue, Stockton. Dates include: January 19, January 23, February 7, and February 10, 2017. All meetings begin at 9:00 am. For information visit: http:// www.sjdeltawatershed.org/

Mickie Nuss Senior Vice President Lodi Market Manager

o: 209-367-2444 c: 209-263-2194 f: 209-334-6817 [email protected] 121 West Pine Street Lodi, CA 95240

Lodi District Grape Growers Association Update Page 4

Tax Opportunities for Wineries & Vineyards By Chris Crifasi & Michael Ricioli, Moss Adams Our long and fraught national election has finally come to an end, and as with any political change, there is some uncertainty about how taxes will be calculated in the coming four years. As we keep an eye on what our new president and Congress may do to overhaul the country’s tax system, there are some basic tax considerations for winery and/or vineyard owners to keep in mind. At the most fundamental level of tax planning, your overall accounting method—cash or accrual—is important. Vineyards, as farming operations, are generally permitted to use the cash method regardless of their size if the activity is held by a sole proprietor or through a flowthrough entity. This assumes the vineyard activity doesn’t meet the tax shelter rules defined in Internal Revenue Code Section 448. There are additional, though fairly rare, situations that would exclude an entity from using the cash method, so please consult with your CPA. Wineries generally must use the accrual method due to the creation of inventory, although there’s a small-taxpayer exception that allows some to use the cash method. To meet this requirement, the winery’s average annual gross receipts for the prior three tax years must be less than $1 million. If a winery can meet the smalltaxpayer exception, it may want to consider using the cash method as well as accounting for inventories in accordance with Revenue Procedure 2001-10. This allows a winery to treat as inventory only raw materials (grapes, glass, corks, purchased bulk

YOUR VIT EXPERTS Wilbur-Ellis Company | 916-776-2113 ag.wilburellis.com WILBUR-ELLIS Logo and Ideas to Grow With are registered trademarks of Wilbur-Ellis Company. K-1215-898

wine, etc.). All other costs, such as labor and custom crush fees, are expensed as they’re paid. The cash and accrual methods each have their benefits (depending on your long-term goals), but cash is generally favored. From a vineyard perspective, your ability to use the cash method provides you the option to either capitalize or expense preproductive costs on your vineyard. These are the costs incurred from the time you plant a new vine until you’re able to harvest a commercially viable crop (typically three crop years). The cash method allows these costs to be deducted in the year they’re paid, reducing your taxable income right away. One downside is that you’re required to use slower depreciation methods and longer recovery periods under the alternative depreciation system. Second, once you’ve elected to expense your preproductive costs, the election applies to all future vineyard and permanent crop development activities in which you incur preproductive costs, regardless of the entity that holds it. Under the accrual method, these costs must be capitalized (similar to generally accepted accounting principles), which provides no immediate benefit but permits faster depreciation methods and shorter recovery periods. If you have a combined vineyard and winery operation in a single entity and the vineyard is eligible to use the cash method, then you have some additional tax planning opportunities to consider. The first is the ability to deduct all estate-farming costs in the year paid rather than capitaliz-

ing them as a component of inventory. Estate-farming expenses aren’t deducted until the inventory is ultimately sold. Depending on the time frame in which a taxpayer ages and ultimately sells their inventory, deducting these costs up front could accelerate the deduction by one to four or more years. If you’ve examined your overall accounting method and determined the other option would be more advantageous, you aren’t out of luck: You can choose to change your accounting method by filing Form 3115 with the IRS. Various requirements apply depending on the type of change, so work with your CPA to determine whether a change is feasible and what you need to do to execute it. Chris Crifasi has worked in the field of accounting for over 20 years. He provides tax services for corporations, individuals, as well as flow-through entities in the food processing, manufacturing, and wine industries. He can be reached at (707) 535-4103 or [email protected]. Michael Ricioli has been in public accounting since 2000. He provides wineries and other agricultural businesses with tax services related to complex, consolidated, and multistate tax returns; quarterly tax projection calculations; federal and state tax credits; and ASC 740 deferred tax calculations. He can be reached at (707) 535-4152 or michael.ricioli@mossadams. com. A version of this article previously appeared in Vineyard & Winery Management Magazine.

Call for all Wine Industry Trucking Services 800-285-8581 www.tigerlines.com

Lodi District Grape Growers Association Update Page 5

Lodi District Grape Growers Association Annual Harvest Social

Stephanie Bolton, Lodi Winegrape Commission, Marianne Broderick and Robert Broderick, San Joaquin Sulphur.

John Hospenthal, F&M Bank, Jesse Pataria, F&M Bank, Tyler Blagg, Petersen & Company, with Assemblyman Jim Cooper.

Event Sponsors Acampo Machine Works American AgCredit Big Valley Tractor Bowman & Company Casa Cristal Nursery Duarte Nursery E & J Gallo F& M Bank G3 Enterprises Garton Tractor Lodi Pump & Irrigation Oak Ridge Winery Pan American Insurance Petersen & Company San Joaquin Sulphur Silva Trucking Valley Vineyard & Orchard Supply Vintage Nurseries Watermark Labels Wells Fargo Wilbur Ellis

Participating Wineries Estate Crush Klinker Brick Winery LangeTwins Mettler Family Vineyards Oak Ridge Winery Thomas Allen Van Ruiten Family Winery Viaggio Estate & Winery

Lodi District Grape Growers Association Update Page 6

Turrentine continued from page 1 gains in popularity, California producers are competing for the bubble market. And let’s not forget, Chardonnay is the LARGEST wine category, growing at a good clip, with the largest growth in the $12 and below category. Other white varieties, Sauvignon blanc and Pinot Grigio saw increase demand in 2016. However, there is caution in the wind with Sauvignon Blanc and Pinot Grigio. Why? New Zealand and Chile for Sauvignon blanc and new acres of Pinot Grigio in Clarksburg and from Modesto south. Zinfandel and Merlot are taking a back seat to higher color reds like Petite Sirah, Petit Verdot and Teroldego, as red blends gain in popularity with the consumer. Lodi is a region that is recognized for these high color red blenders. The sales of Zinfandel and Merlot have not been growing, but instead moving in a negative direction. There are some local brands which have good growth but not enough for all the available supply in the Lodi region and elsewhere. Because of the lack of sales and the increase in production of “high color reds,” demand for Zinfandel and Merlot is very soft. In addition, Pinot Noir and Red Blends have been cannibalizing Mer-

Bulk by Region

lot and Zinfandel sales. It is going to be a tough road to hoe for Zinfandel and Merlot in 2017. And then there is Cabernet Sauvignon. Lodi has earned the reputation for quality Cabernet Sauvignon, particularly from Borden and Clements Hills. Like Chardonnay, there are Cabernet Sauvignon programs, which are California Appellation, that were built on the excesses from 2013 and 2014. As supply tightened in 2015, and prices increased in the Coastal region, programs that did not have long term supply looked to Lodi for grapes or

bulk wine. Quality was the driver for demand. As new acres of Cabernet Sauvignon from Lodi to Merced come into production, it will be interesting to see if this new tonnage will offset what is short from the older vineyards still in the ground. Where did the harvest of 2016 leave us? IN BALANCE. What lies ahead for 2017? Call me and I will tell you! Erica Moyer is a Broker/Partner of Turrentine Brokerage.

novavine I N N O VAT E .

P R O PA G AT E .

GENE GLAESER

WE HAVE 1,600 TRAILERS WITH REAL�TIME TRACKING, BUT WE TRUST IN MIKE FOR YOUR PRECIOUS CARGO. 800-321-8747 g3enterprises.com

sales manager

THRIVE.

6735 sonoma hwy santa rosa, ca 95409 [email protected] MOBILE: 916.747.2131 TEL: 707.539.5678 FAX: 707.539.2819 w w w. n ov av i n e. co m

DSW Ag Inc. Donald S. Wortley 4580 West Highway 12 Lodi, CA 95242 888.707.WINE www.MichaelDavidWinery.com

PO Box 311 Lodi, California 95241 209-369-2914

Lodi District Grape Growers Association Update Page 7

Upcoming Events Federal Policy Update

Join the LDGGA & the California Association of Winegrape Growers on Tuesday, January 10, 2017 where representatives from CAWG’s federal lobbying team will provide an inside view of the unfolding policy agenda under the Trump Administration. Topics that will be covered include: tax reform, trade policy and wine exports, immigration and farm labor, Farm Bill, water infrastructure, and Waters of the US (WOTUS) Rule. Presenting will be Louie Perry & Jim Richards of Cornerstone Government Affairs. The meeting will be held in Burgundy Hall of the Lodi Grape Festival Grounds, 413 E. Lockeford St., Lodi. Registration, wine & cheese will begin at 2:00 pm, with the meeting at 2:30 pm. This meeting is free of charge to all LDGGA & CAWG members. RSVP to [email protected] or (209) 339-8246.

CPR First Aid Training

On Thursday, January 19, 2017 LDGGA will host a First Aid & CPR Training by Pan American Insurance. The training will be held at Burgundy Hall of the Lodi Grape Festival Grounds, 413 E. Lockeford St., Lodi. State and Federal law mandates that one person per every 20 employees is trained in providing emergency medical Care including proficient in CPR and First Aid. LDGGA is offering a CPR, First Aid

Josh Elson (209) 368-6618

[email protected]

homesite parcels property surveys HOHYDWLRQFHUWLÀFDWHV vineyard layout

BAUMBACH & PIAZZA, INC. civil engineers~land surveyors

www.bpengineers.net

and AED (Automated External Defibrillator) course for our members and their employees. Attendees will receive a comprehensive book of the training provided and a CPR and First Aid card valid for two years. Training will be offered in Spanish and English. The Spanish session will go from 8:00 am to12:00 noon, followed by English from 12:30 pm to 4:30 pm. The cost of the training is $40 per person. Snacks and beverages will be provided. Registration forms are available on www.ldgga.org. Please register before January 15th. For more information, contact LDGGA at (209) 339-8246 or info@ ldgga.org.

LDGGA 64th Annual Dinner The Lodi District Grape Growers 64th Annual Meeting and Dinner will be held on Thursday, February 23, 2017 at Hutchins Street Square in Lodi. The wine social will begin at 5:30 pm, with guests seated for dinner at 6:30 pm. The event will include the annual business meeting, and keynote address by Assemblyman Jim Cooper. 2016 recipients of the Jim Kissler Memorial Scholarship will also be recognized. Funds will be raised for future scholarships through the annual scholarship raffle. Raffle tickets can be purchased for $20 each or 6 for $100. Need not be present to win. Dinner tickets are $65 per person or $520 for a reserved table of eight. For more information on the Annual Dinner & Meeting or the scholarship raffle contact LDGGA at (209) 339-8246 or email info@ ldgga.org.

Lodi District Grape Growers Association

Board of Directors

President Kris Gutierrez Vice President Jason Eells Secretary Matt Manna Treasurer Vic Mettler Directors Curt Gillespie Scott Pierovich John Shinn Jennifer Spaletta Mike Stokes Directors at Large Tracy Holmes Tobbie Wells Executive Director Amy Blagg

Lodi District Grape Growers Association P.O. Box 2004 Lodi, California 95241-2004 (209) 339-8246 • www.ldgga.org