Wine stocks at lowest point of past decade12th July, 2012 by db_staff
Global wine stocks are at their lowest point of the past decade, and the industry has moved closer to balance after many years of widespread oversupply pressures, according to Rabobank’s latest Wine Quarterly Q2 report.
The report suggested that changing exchange rates continue to shift the competitive positioning of different countries and the economic problems put pressure on demand and constrain market pricing.
“Rising grape and bulk wine prices are good news for many suppliers who have lacked profitability in recent years,” the Rabobank report stated.
“As the balance of power subtly shifts in the supply chain, however, it is creating margin pressure on wineries that are finding it difficult to pass on the cost increases to consumers in the current environment.”
In the US the wine grape market remains tight, as Rabobank reported: “prices have risen quite dramatically, leading many wineries to take measures to secure supply, either via attractive long-term contracts with growers or through acquisition/expansion of vineyards.”
Initial reports on the production season in California indicate that the crop is currently expected to be above average, which would be welcome news for many wineries.
The 2012 European grape crop appears to be off to a relatively good start despite some storm damage, with “the effectiveness of the EU supply rationalisation measures still coming under intense scrutiny.”
The Australian harvest has been estimated at 1.66 million tonnes, up 4% on the prior year and generally viewed to be of a high average quality.
Red wine production recovered by 7% from the rain-affected 2011 harvest, while white wine production remained much the same as the prior year.
The New Zealand harvest has been estimated at 269,000 tonnes, down 18% on the prior year. Production in the Marlborough region, which contributed around 70% of the crop, was even more restricted (-23%).
The South African wine grape crop appears to have come in much larger than expected (1.3 million tonnes) a 3.5% increase over the 2011 harvest. While the Argentine grape crop suffered from hail, high winds and drought this year, leading to a 22% decline in production compared to the 2011 harvest.
In terms of forecasts for the future, Rabobank pointed to “troubles in the eurozone remain the primary influence on the direction of global currency markets for the time being.”