Lafite 09 pre-release trading prompts fraud fears

News that Lafite 2009 has already been sold on Liv-ex’s trading platform has exacerbated concerns of fraud and overpricing for this much-hyped vintage.

The wine appeared on the trading platform a fortnight ago at £11,750, although the actual sale closed at £10,000 for the single case.

What is seen as most scandalous is that Lafite has not yet released any prices for the 2009 vintage and there are fears this sort of speculation could encourage fraudsters and uncontrollable overselling.

Several merchants have branded the move a “disgrace” and “reckless” but others have greeted the news with resignation, saying that such an action was inevitable at some point and completely in line with wine’s emergence as an asset.

Gary Boom, managing director of Bordeaux Index, explained to the drinks business that, more than anything, it was an irresponsible move, albeit ultimately irrelevant as it was only one case.

“It was not the smartest thing to do in the world and slightly irresponsible,” he said.

“I think that it’s bad enough with en primeur when you should only be dealing directly with people and where the sale can be backed up by the underlying promise of being able to deliver.

“In the trade we’ve had quite a lot of scandals with people selling wine they didn’t own. This is a physical delivery market at the end of the day. If you trade in oil futures you don’t end up with 500 barrels of oil being delivered to your house.”

“The two best words that sum it up are irresponsible and irrelevant,” he concluded.

In its own defence Liv-ex stated in its blog: “It is important to stress that although this trade happened on the Liv-ex exchange, it was in no way initiated by us. To be frank, Liv-ex has never encouraged, nor even imagined, that a pre-release trade would occur on the platform.

“So if there is any innovation here, then we cannot claim the credit. This was entirely market driven.

“To many – outside of the wine trade – pre-release trading will barely raise an eyebrow. This kind of speculative activity plays a vital part in price discovery in most markets.

“Indeed, many involved in en primeur have long complained that the châteaux regularly set prices with no reference to the market. We are currently listening to the views of our members rather than pushing a position.

“There has been no further trade since last Friday’s and there may not be another one prior to release. If the market has spoken, it has not been emphatic.”

Justin Gibbs, director of Liv-ex, told the drinks business that bids have been appearing on the platform for some time now despite there being no wine or prices available.

One member took the chance to trade one case and as Gibbs stated, because of the strict rules and regulations Liv-ex abides by, “The trade will be honoured.”

“The seller has taken a risk but there is always an inherent risk with en primeur buying anyway,” he added.

As for accusations that the sale would encourage Lafite to drive its prices up, Gibbs said: “I doubt it. Lafite will release at the price they feel is warranted. They do have some 19,000 to 20,000 cases to sell, this is just one case so it won’t have any effect.”

Simon Staples, wine director at Berry Bros & Rudd, was more measured when he talked to the drinks business, describing the squabble as a “bit of a storm in a tea cup”.

He said that he would have been more concerned had it been hundreds of cases being traded rather than just one but he didn’t support the sale saying: “I think it’s a very very dangerous game to play and it’s not to be encouraged.

“I’ve no doubt they (the buyer) will get the wine because Liv-ex are a reputable bunch but I had to ask myself ‘is this a foolish step too far or is it what customers want?’”

He doubted such trading was going to become common practice even for the most popular first growths such as Lafite due to the “games” involved in en primeur dealings between the châteaux, négociants and merchants.

He added that the dangers of short-selling or indeed over-selling wine en primeur was fraught with difficulties and pitfalls, particularly for the emerging Asian buyers who are all too vulnerable to scams due to their inexperience of futures buying.

“My real concern is that it will add fuel to the fire surrounding ’09 and increase the chances of it being fraudulently sold,” continued Staples.

“We know from our outlets in Hong Kong that the Chinese are gagging to buy this vintage. Lafite is already being traded in Asia, where is it coming from?”

Staples finished on a word of warning: “There is a danger that 2009 will be oversold and that will come back to bite us, I can absolutely guarantee that it will happen this year.”

Rupert Millar, 03.06.2010