1. What’s Ahead for the Central California Grower December 9, 2004 Fresno, California Presented By By Mechel S. Paggi & Fumiko Yamazaki Director, Center for Agricultural Business CSU, Fresno Grape Juice Concentrate Study Update* * In collaboration with the Agricultural Issues Center, UC-Davis. Funding for the preparation of this presentation has been made available in part by the Governor’s Buy California Initiative, the California Department of Food and Agriculture (CDFA) and the U.S. Department of Agriculture (USDA). The content of this presentation does not necessarily reflect the views or policies of CDFA or USDA, nor does any mention of trade names, commercial products and organizations imply endorsement of them by CDFA or USDA.

2. Grape Juice Concentrate Industry Profile Today’s Discussion U.S. Grape Juice Concentrate Supply & Demand Industry Views Price Analysis Cost of Production Studies Summary & Implications Trends in U.S. Trade in Grape Juice Concentrate Competition in Domestic & Global Markets Factors Effecting Global Competition: Exchange Rates and Tariffs Industry Trends and Consumption Patterns Red vs. White GJC markets Demand Enhancement Strategies Ongoing Research Areas

3. (-) * Prices are calendar year average Basis and may be greater than crop year averages. *

4. Data on Carryover Stocks Not available *

5. Industry Views The Market for California Grape Juice Concentrate is Mature While overall demand for grape juice and other fruit juice concentrates for use in production of beverages and foods may continue to increase unless things change most of that increase will be captured by lower priced imports (grape, apple, pear, etc)

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7. Apparent

11. Potential Returns from Grapes Grown For Concentrate

12. NET RETURNS PER ACRE ABOVE OPERATING COST Thompson Seedless for Concentrate PRICEYIELD (ton/acre) $/ton9101112131415 14027157287417547676806 1602073575076578079561,106 1803875577278971,0671,2361,406 2005677579471,1371,3271,5161,706 2207479571,1671,3771,5871,7962,006 2409271,1571,3871,6171,8472,0762,306 260 1,1071,3571,6071,8572,1072,3562,606

13. NET RETURNS PER ACRE ABOVE OPERATING + OTHER CASH COST Thompson Seedless for Concentrate PRICEYIELD (ton/acre) $/ton9101112131415 140-381-251-1219139268398 160-201-5199249399548698 180-21149319489659828998 2001593495397299191,1081,298 2203395497599691,1791,3881,598 2405197499791,2091,4391,6681,898 260 6999491,1991,4491,6991,9482,198

14. NET RETURNS PER ACRE ABOVE TOTAL COST Thompson Seedless for Concentrate PRICEYIELD (ton/acre) $/ton9101112131415 140-1,541-1,411-1,281-1,151-1,021-892-762 160-1,361-1,211-1,061-911-761-612-462 180-1,181-1,011-841-671-501-332-162 200-1,001-811-621-431-241-52138 220-821-611-401-19119228438 240-641-411-18149279508738 260 -461-211392895397881,038

15. FOR CONCENTRATE NET RETURNS PER ACRE ABOVE OPERATING COSTS * PRICEYIELD (ton/acre) $/ton9101112131415 140-7123253383513643773 1601733234736237739231,073 1803535236938631,0331,2031,373 2005337239131,1031,2931,4831,673 2207139231,1331,3431,5531,7631,973 2408931,1231,3531,5831,8132,0432,273 260 1,0731,3231,5731,8232,0732,3232,573 * UC-Davis cost and returns study based on no specific variety, data refers to spur pruned varieties, such as white varieties - French Colombard, Chenin Blanc - and the red varieties – Rubired, Royalty, Salvador.

16. FOR CONCENTRATE NET RETURN PER ACRE ABOVE OPERATING COST + CASH COST PRICEYIELD (ton/acre) $/ton9101112131415 140-419-289-159-29101231361 160-239-8961211361511661 180-59111281451621791961 2001213115016918811,0711,261 2203015117219311,1411,3511,561 2404817119411,1711,4011,6311,861 260 6619111,1611,4111,6611,9112,161

17. FOR CONCENTRATE NET RETURNS PER ACRE ABOVE TOTAL COST PRICEYIELD (ton/acre) $/ton9101112131415 140-1,598-1,468-1,338-1,208-1,078-948-818 160-1,418-1,268-1,118-968-818-668-518 180-1,238-1,068-898-728-558-388-218 200-1,058-868-678-488-298-10882 220-878-668-458-248-38172382 240-698-468-238-8222452682 260 -518-268-18232482732982

18. Implied price range Using Apparent Margin For White GJC Observed Implied Grape Price Margin GJC Price 140/40 = $3.50 + $2.67* = $6.17 to 260/40 = $6.50 + $2.67 = $9.17 199920002001200220032004 6.705.814.604.944.877.67 est.

19. The California industry has an advantage in transportation arising from geographic proximity and increased constraints on imported products resulting from increased security measures applied to imports and ocean shipping conditions. The California industry should market more aggressively the positive attributes associated with the health and safety standards applied by the industry (traceability), relative to imports Grape juice concentrate will continue to be an industry that is needed by producers as an outlet for product and by wine companies and food & beverage companies as input into production, but GJC companies will have to adjust to increasing competitive pressures from other commodities and countries and increasing cost of doing business (regulatory compliance, energy cost, etc.) Opportunity exist, but a shift in attitude from marketing a commodity to marketing a product with specific and unique attributes may be important Examine ways to grow demand working with industry on development of Alternative uses and new products Industry Views and Implications

20. Implications for Growers Grapes “for concentrate” success depends on being able to produce quality, high yields, at low cost Grapes for other uses that can find a home in the concentrate market need the same Research and development on management practices and varieties etc will be crucial to achieving and maintaining viable production systems Market fundamentals suggests GJC prices are not likely to increase significantly from current levels and are linked directly to what can be paid for grapes for concentrate