World Wine Output to Fall to 37-Year Low, Depleting Stocks

By Rudy Ruitenberg October 30, 2012
Global wine production will slump to the lowest in 37 years after weather damage to grapes from France to Argentina, forcing a drawdown of stocks, the International Organisation of Vine and Wine said.

Output may fall to about 248.2 million hectoliters (6.56 billion gallons) this year from 264.2 million hectoliters in 2011, according to the group, known as OIV. That would be the lowest since at least 1975, Federico Castellucci, director general, said at a press conference in Paris today.

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 said in an interview. "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.

Biggest Suppliers

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 (0.26 gallon) of Italian pinot grigio from the 2012 vintage rose to 1.30 to 1.45 euros ($1.69-$1.88) 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 percent 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. Wine Shortage

The world faces a wine shortage of at least 10 million hectoliters, the equivalent of 1.3 billion bottles, Bertrand Girard, chief executive officer of Groupe Val d'Orbieu, France's biggest wine cooperative, said on Oct. 18.

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

Production in Spain will slide 5.7 percent to 31.5 million hectoliters, while Italy's wine output is seen dropping 3.4 percent to 40.8 million hectoliters. Italy would pass France as the biggest producer in 2012, based on the OIV estimates.

U.S. wine output, the world's fourth-largest, is predicted to increase 7.1 percent to 20.6 million hectoliters. Production in Hungary fell 32 percent and dropped 17 percent in New Zealand, according to the OIV documents.

The OIV has its own data for world wine production going back to 1975, according to Magalhaes. Before this year, the lowest production in the period was in 1995, when global output was 254 million hectoliters, he said.