End to cheap wine prices is near: global decline in grapes

A massive global over-supply of wine from 2004 to 2010 that caused prices to plummet looks set to end this year.

Ronobank has released its wine quarterly report for the three months to October this year, which reveals the global wine grape production throughout the world has dramatically reduced between 2004 and 2006.

It also found that demand has begun to increase again following the slump during the global financial crisis.

The massive global oversupply of wine for four years up to 2010 that caused prices to plummet let to many growers to ripping up vines.

Now, the Robobank report says due to the extremely low wine grape harvests in Europe, prices will once again trend upwards.

While Californian grape growers in particular are expecting bigger and better than average harvest in 2012, the bank’s analysts say this will not be enough to make up the gap from the European market.

France, Italy and Spain are all expected to report wine grape harvests drastically lower than 2011 levels.

The reduced harvest in those countries amounts to the total annual production of Chile’s wine.

The wine production from the whole of the Southern Hemisphere, besides Chile and South Africa, was quite low in 2012, Robobank found.

It could mean Australian producers, particularly in the south-east of the country, where good yields are expected for the 2013 harvest, will have a chance to make up the wine shortfall.

In further good news for Aussie growers, grape prices have posted their first significant rise in four years, and there was a rise in wine export volumes of 3.6 per cent in the first half of 2012.

But the value of wine exports did fall almost three per cent per cent wine bottled locally struggled to compete with bulk shipments.

Bulk exports is cheaper than bottled wine exports, with average import rates as little as 43 cents a litre in France up to $184 per litre in Sweden in 2011.

Rabobank noted that Australia's wine export data has been skewed Treasury Wine Estates decision earlier this year to ship its wine in bulk to the UK for bottling there.

In July, the world’s largest glass packaging supplier, Owens-Illinois (OI), revealed some Australian employees could lose their jobs, as the US-based company reassesses the business in light of slower beer and wine markets.

The company’s second quarter report revealed the slowdown of beer and wine sales in Australia could force the company to reconsider closing local plants and offering redundancies.

''Given the continued sluggishness of the Australian wine and beer markets, as well as the fact that we are still negotiating major customer and union contracts, further capacity actions may be necessary,” O-I Glass chief executive Al Stroucken said.



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