By Malinda Geisler, content specialist, AgMRC, Iowa State University, malindag@iastate.edu.

Revised September 2009 by Diane Huntrods, AgMRC, Iowa State University.


Overview
In the colonial and post-colonial period through the middle of the 19th century, the wine industry in the United States and Canada was relatively small, with almost all of the consumption satisfied by imports. Although there was some development in the latter half of the 19th century, wine production in North America only began to develop significantly with the expansion of the California industry early in the 20th century. After the Prohibition era from 1920 to 1933, the industry needed to be recreated. In a sense, the industry was reborn in the early 1970s with an aggressive movement toward higher quality.

Demand
Wine consumption increased steadily in the 1970s and 1980s but decreased in the 1990s. From 1989 to 1995, per capita consumption dropped from 2.3 gallons to 1.7 gallons. It started to increase again in 1996. In 2007 per capita U.S. wine consumption was 2.5 gallons (ERS).

Despite the current economic situation, consumers are apparently switching to lower cost brands rather than significantly reducing their consumption (FAS 2009).  

Supply
Wineries exist in all 50 states. According to the Wine Institute, the number of licensed wineries in 2008 totaled 6,368. These wine producers produced a total of 619.7 million gallons. California is home to 2,843 licensed wineries and accounted for nearly 90 percent of wine production, producing 545.9 million gallons. Other states with large numbers of licensed wineries include: Washington (539), Oregon (329), New York (271), Virginia (169), Texas (168), Michigan (136), Pennsylvania (132) and Ohio (126).

The top six U.S. wine companies in 2008 were E&J Gallo Winery, The Wine Group, Constellation Brands, Bronco Wine Company, Foster's Wine Estates and Trinchero Family Estates. Each of these companies sold more than 10 million cases, with the top two companies selling more than 55 million cases.  (Wine Business Monthly) 

The European Union (EU) is the world's dominant producer of wine. However, production is expected to drop in 2009 as new reforms are implemented to eliminate oversuppy and inefficient vineyards. The United States is the second largest producer. Argentina and Australia are also significant wine producers.  (FAS 2009)

Production
In 2008 California produced 3.4 million tons of wine grapes, which accounted for more than half of the state's grape production. A total of 526,000 acres of grapes were available for wine production, a 2 percent increase from 2007. Of that, 482,000 acres were bearing and 44,000 acres were non-bearing. The leading wine grapes continue to be Chardonnay, planted on 94,712 acres, and Cabernet Sauvignon, planted on 75,0480 acres. The total value of California wine production in 2008 was $1.9 billion.  (NASS 2009)

Wine grape production in Washington totaled a record 145,000 tons, up 14 percent from 2007. The grapes were produced on 32,000 acres. White Riesling was the top variety grown in the state, accounting for 20 percent of the total state production. Chardonnay ranked second, accounting for 19 percent of the total. The total value of Washington wine production in 2008 was $149.4 million.  (NASS 2009)

Like California and Washington, New York and Oregon are significant producers of wine and also increased their production in 2008. New York produced 45,000 tons and Oregon produced 40,600 tons.  (NASS 2009)

Prices
The price for wine grapes differs, depending on how the grapes are used before they are sold. In California, about 1 percent of wine grapes are sold as fresh grapes before being processed. In 2008 the average price per ton for California wine grapes was $565, unchanged from the previous year. The average price for Washington wine grapes was a record $1,030 per ton, up $76.00 from 2007. Like Washington, the price per ton for wine grapes increased to $516 for New York and to $2,000 for Oregon. According to NASS, the average price for U.S. wine was $550 per ton in 2008.   (NASS 2009)

Exports
The United States exported 475 million liters of wine and wine products in 2008 valued at $963.1 million, a 6 percent increase from 2007. The top destination for U.S.-produced wine in 2008 was the United Kingdom, which accounted for $258.8 million and declined nearly 5 percent from the previous year. Canada was the second most important export destination with $244.4 million, increasing 11 percent from 2007. Other top export markets for U.S. wine include Japan ($59.0 million), Italy ($57.0 million) and Germany ($48.9 million).  (FAS)

The EU is the leading exporter of wines, accounting for about half of the world's trade. Other leading exporters include Australia, Chile and South Africa. The United States is the fourth largest exporter. Bulk exports of U.S. wine are expanding faster than bottled wine exports, because they are cheaper to transport (FAS 2009).   

Imports
Despite a faltering economy in late 2008, the U.S. market for imported wines experienced little change. The total value of imported wines for the year was $4.7 billion, just like the previous year. The majority of imports came from France, Italy and Australia. French imports decreased 1 percent and Italian imports increased 2 percent, while Australian imports dropped 12 percent.  (FAS)

As of 2007, imports account for 31 percent of domestic wine consumption, the highest percentage recorded since 1972.
 
Tariff Rates and Policy Changes Resulting from North American Free Trade Agreement (NAFTA)
Depending on the type of wine, U.S. tariffs on imported wine from nations with which the United States maintains normal trade relations range from 5.3 cents per liter to 22.4 cents per liter. Countries without normal trade status with the United States face higher tariffs of 33 cents per liter and $1.59 per liter, depending on the type of import.

Under the Canadian-U.S. Free Trade Agreement (CUSTA) signed in 1988, all Canadian tariffs on wine from the United States were phased out over seven years. Tariffs were reduced 25 percent during each of the first two years of the agreement and then 10 percent a year over the next five years.

Under NAFTA, Mexico agreed to eliminate most tariffs over ten years. Some tariffs were eliminated immediately. Beginning in 2003, U.S. wine exports to Mexico no longer faced tariffs. Most Mexican imports consisted of distilled grape wine products, which faced tariffs from 13.2 cents per liter to 33 cents per liter for different container sizes in 1993. NAFTA eliminated the tariffs immediately.

In 1988 U.S. tariffs on fresh wine imports ranged from 9.9 cents per liter for wine with an alcohol content under 14 percent to 26.4 cents per liter for wine with an alcohol content over 14 percent and 30.9 cents per liter for sparkling wine.


Sources
2008 Wine Report, Office of Health and Consumer Goods, International Trade Administration.

California Grape Acreage Reports, California Agricultural Statistics, National Agriculture Statistics Service (NASS), USDA.

Fruit and Tree Nuts Outlook, Economic Research Service (ERS), USDA, 2008.

Grape Release, Washington Field Office, NASS, USDA, 2009.

The Impact of Wine, Grapes and Grape Products on the American Economy , MKF Research, LLC, 2007 - This report provides estimates of the impact of wine, winegrape, raisin, grape juice, table grape and grape products on the U.S. economy for calendar year 2005.
 
National Association of American Wineries

New York Wine and Grape Foundation

Northwest Wine Promotion Coalition

The Top 30 U.S. Wine Companies of 2008, Wine Business Monthly, winebusiness.com.

United States Customs Service: Trade Data on Web site of United States International Trade Commission.

United States International Trade Commission, Tariff Information Center, Official Harmonized Tariff Schedule of the United States, 2006.

The U.S. and World Wine Situation, Foreign Agricultural Service (FAS), USDA, 2008.

Wine, Food Availability (Per Capita) Data System, ERS, USDA.

Wine, U.S. Trade Internet System, FASonline, USDA.
 
Wine Institute - The voice for California wine.

Wine: World Markets and Trade, FAS, USDA, 2009.