Grapes of wrath: Fires in wine country

California vineyard fires threaten winemakers

The last time Adawn Wood saw her home and winery was a week ago, in the rearview mirror of her open-air Jeep as she fled for her life. "Everybody was screaming and yelling," she said. Flames were racing down the mountains toward her property outside Middletown, California. "It started to sound like a freight train and a firestorm. Propane tanks were blowing up everywhere."

Wood has yet to go back. When she does return, she'll discover it's all gone: The house, the original Shed Horn Cellars Winery she started with her husband, Michael, and their library of award-winning wines, including a 2009 Petit Verdot. "Mike always said that was the best wine I ever made, and now it's all gone, so it's kind of heartbreaking."

Fortunately, most of Wood's wine was in storage in another town, which was out of the path of the destructive Valley Fire. That blaze, along with two others, continues to burn across Northern California. However, some residents in places such as Middletown are finally going home to assess the damage, insurance adjusters are fanning out, and vineyard owners are harvesting days late, with smoke in the air.

Buildings at Shed Horn winery in Middletown, California, were destroyed by wildfires.
Jane Wells | CNBC


"At this point we believe that there's been minimal number of acres of grapes burned," said Terry Dereniuk, executive director of the Lake County Winery Association. While wines in this rural community may be lesser known than those from their famous neighbor to the west—Napa Valley—Lake County has a thriving wine industry of 160 growers and 35 wineries. "The 2014 harvest was 38,700 tons," said Dereniuk. "Gross value was $60 million."

The problem this year is that the fire hit just as harvest began. Many grapes had to stay on the vine for a week longer than normal. "We were scheduled to harvest Sunday, and the fire broke out on Saturday," said Julie Candelaria of Cimarron Vineyard. She grows 25 acres of Cabernet Sauvignon, Petite Syrah, Merlot and Zinfandel grapes for Hess Collection Winery out of Napa. Flames came within five feet of her vineyard before firefighters stopped them. Candelaria didn't lose a single vine. "I think it was a gift, really."

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Now the concern for growers and winemakers has been whether the surviving grapes will suffer from smoke taint. So far, most say tests show no signs of it.

"Our vendors are being really helpful by extending terms or giving us some credits," Adawn Wood said. Shed Horn Cellars was insured for the cost, not the replacement, of lost equipment and production. Sitting in her tasting room in downtown Middletown, she fought back tears remembering how the community has pulled together. "I'm just looking forward to seeing the little green sprouts coming out of the ground this spring, because that's the kind of stuff that makes me happy. It'll be there."

Power crews put up new poles for power lines on Shed Horn Cellars in Middletown, California.
Jane Wells | CNBC


Green sprouts will come more quickly for some than others. It appears the fire was kinder to grapes than to homes. Over 1,600 houses were destroyed and hundreds more damaged from the three major fires burning in the northern part of the state. In Middletown, residents who fled the Valley Fire crowded the senior center this week to meet insurance representatives. In some cases, they received checks on the spot worth $1,500 to cover short-term living expenses.

"We've had roughly a thousand claims from this event," said Rod Harden, the head of Catastrophe Claims for Farmers Insurance. One of his adjusters, Tom Clifford, met with resident Jim Westrich, who lost his mobile home. Westrich said he evacuated last week with "three pairs of underwear, three pairs of socks and three pairs of Levi's. Everything else is gone."

Sandler O'Neill says insurance companies usually carry the highest level of reserves to cover catastrophes in the third quarter "because that is when hurricanes typically strike." This year, instead of hurricanes, there have been fires. "Wildfire natural disasters do create headline risk that can temporarily reduce stock prices," said Sandler analysts. "We would generally recommend using dips in the stock prices due to catastrophes like wildfires as opportunities to buy stocks that one already thinks are inexpensive."

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Munich Re reports that in 2013, there were 17 catastrophic wildfires in the U.S., causing $385 million in insured losses. But this year has been especially bad for fires. Through the first eight months of this year, which does not include the latest fires, 8.4 million acres burned across the U.S. That is three times more than a year ago, according to the National Interagency Fire Center.

"The drought in California does create a higher propensity for fire damage," said Farmers' Rod Harden. "We certainly recognize that and do shift resources and have the ability to respond to those events in that geographic area where we think it's most likely."

Homeowner Jim Westrich said he is insured for $170,000 and plans to rebuild. "We'll have a new house, not a new home," he said, gesturing to the blackened debris behind the remains of a white picket fence and "Welcome" sign. "This was a home."