By Matthew Boesler May 25, 2012
Business Insider
Bad news for wine drinkers from BofA Merrill Lynch's "Spirits, Wines, and Ciders" coverage group: supplies around the world are tightening, which means prices are going up.

In a note to clients, the equity research analysts lay out three key reasons for their call:

1) Global supplies appear to be tightening simultaneously and thus have less of an impact on specific market supplies.

2) Global wine demand is pretty strong, with Asia having more of an impact than ever before.

3) Recent U.S. beer industry price increases and emerging signs of higher prices on Spirits creates a supportive competitive environment.

Moreover, the analysts project that we could just now be entering a "long duration up cycle" that could extend all the way through 2018:

The note explains that California, a major wine producing region globally, has been dealing with declining production for the past few years already. Typically, wine imports from Australia, Chile, and Spain have stepped in to fill the gap, but government policies aimed to reduce production in Australia and Europe coupled with bad weather for growers in South America means that those days are likely over, according to BofA.