MercoPress. South Atlantic News Agency

Global wine production down with a tight market in the next twelve months

OIV Director General Castellucci: “countries that are large producers of must and juice all face a shortage this year”

Global wine production will slump to the lowest in 37 years after weather damage to grapes from France to Argentina, forcing a draw down of stocks, the International Organization of Vine and Wine, OIV, said.

Output may fall to about 248.2 million hectoliters this year from 264.2 million hectoliters in 2011 (down 6%), according to OIV. That would be the lowest since at least 1975, Federico Castellucci, director general, said at a press conference in Paris.

Drought and hail harmed vines and grapes in France and Italy, the biggest producers, while Argentina also suffered weather damage to its vineyards, according to Castellucci. The production slump will deplete stocks and result in a “tight” market for wine to make spirits and vermouth, the OIV head said.

“We’re dipping into the reserves for supply” Castellucci pointed out and added that “there’s a lack of product in bulk. Merchants worldwide are starting to turn to the small countries for bulk wine: that shows there’s real tension.”

World wine consumption in 2012 is estimated at 235.7 million to 249.4 million hectoliters, with an additional 30 million hectoliters of wine used to make spirits, vermouth and vinegar, according to the OIV.

Castellucci declined to provide an estimate of global wine stocks, citing a lack of data. Market feedback suggests bulk wine availability is falling and prices are climbing, he said.

“If we don’t have availability in the market, there’s a strong chance some products will increase in price” Victor Magalhaes, an OIV statistician, said in an interview, citing wine vinegar as a product that may become more expensive.

“Countries that are large producers of must and juice all face a shortage this year,” he said, referring to young wine.

Bulk-wine prices in France, Italy and Spain, the biggest suppliers, are rising due to the harvest slide, broker Ciatti Co. wrote Oct. 8. The cost for a liter of Italian pinot grigio from the 2012 vintage rose to 1.30 to 1.45 Euros from 1.20 to 1.30 Euros last month, Ciatti said.

This year’s smaller harvests may reduce the supply of wines with a protected designation of origin, known as AOC in France, according to Magalhaes. “For some AOC stocks there is already a shortage of exports,” he said. “The shortage of Burgundy wine is a fact.”

Wine production in France may slump 20% this year to the lowest in at least four decades after winter drought, cold and wet weather, hailstorms, a heat wave, and summer dryness damaged vineyards, the Agriculture Ministry reported earlier this month.

The OIV forecast France’s wine production will slide 9.3 million hectoliters or 19%, to 40.5 million hectoliters. Argentina’s output is estimated at 11.8 million hectoliters, falling by 3.69 million hectoliters or 24%.

Production in Spain will slide 5.7% to 31.5 million hectoliters, while Italy’s wine output is seen dropping 3.4% to 40.8 million hectoliters. Italy would pass France as the biggest producer in 2012, based on the OIV estimates. However Greece is expected to grow 15% and Portugal, 4%.

US wine output which is the world’s fourth-largest, is predicted to increase 7.1% to 20.6 million hectoliters. Production in Hungary fell 32% and dropped 17% percent in New Zealand, according to the OIV documents. But in the southern hemisphere Chile and South Africa will see production increase by 4%.

Castellucci said that the wine industry health condition is “complex”, who anticipated that the world area dedicated to wine production is falling although partly compensated by an increase in the US and southern hemisphere, “but it is insufficient” to cover the EU decline.

“In the last three years 40.000 to 50.000 hectares of vines have been lost because of the EU plan to reduce the area and limit surpluses”, said Castellucci who added that a generation change is taking place with many of the small EU wine producers abandoning the industry.