World facing ‘deepest’ wine shortage in 40 years

The world is facing its “deepest” wine shortage in 40 years, according to a report released this week by Morgan Stanley that has raised fears in the industry.

The report by the American financial services firm estimated that the global demand for wine in 2012 exceeded supply by some 300 million cases, with production falling by 5-6% to its lowest levels last year in over 40 years.

Global wine production has been steadily declining since a peak in 2004, while consumption has been rising year-on-year since 2006, save for a fall in 2008-09.

Morgan Stanley predicts that in the short term, “inventories will likely be reduced as current consumption continues to be predominantly supplied by previous vintages.”

However, as consumption turns to the 2012 vintage, “We expect the current production shortfall to culminate in a significant increase in export demand, and higher prices for exports globally,” the report said.“Further growth in consumption in the meantime may exacerbate the shortage when it arrives,” it added.

The report blamed poor weather conditions across Europe for “plummeting production”, which fell across the continent by around 10% last year.

The 2013 harvest has been plagued by difficulties in key European wine regions, from Bordeaux, Burgundy and Champagne to Rioja.

Earlier this week, Jean-Christophe Mau, owner of Château Brown in Pessac-Léognan, described the 2013 harvest in Bordeaux as “the hardest of the past 30 years.”

While August hail storms wiped out the entire crops of around 100 producers in Entre-Deux-Mers, Pascal Amoreau of Château le Puy in AOC Francs Côtes de Bordeaux reported his Merlot crops were down by as much as 60%.

To soften the blow, Bordeaux’s army of négociants are holding onto large amounts of stock of the unpopular 2011 and 2012 vintages, which are now appearing like an increasingly attractively proposition in comparison to 2013.

Over in Burgundy, the BIVB has warned that the 2013 harvest will be up to 10% lower than the region’s 10-year average, with Pommard and Volnay both hit by hail.

Exacerbating the problem, the 2013 decline follows two severely reduced vintages in 2011 and 2012, with the BIVB putting stock in the region down by 15%.

Though it’s not all doom and gloom, with New World countries such as Chile, Argentina, New Zealand, Australia and South Africa set to gain from increasing global demand for exports.

“With tightening conditions in Europe, the major new world exporters stand to benefit most from increasing demand on global export markets,” the report said.

Meanwhile, the International Organisation for Vine & Wine (OIV) was keen to assuage fears of a wine drought, reporting this week that the pressure on wine supplies has eased in comparison to the beginning of the year, with bulk wine prices having gone down by up to 30% since January.

And despite the dismal weather across France this year, the OIV predicts that volumes will be up 7% on 2012, with global wine production reaching a seven-year high this year in spite of the fact that land under vine around the world is shrinking.

France remains the world’s number one wine consuming country, closely followed by the US.

China is fast rising up the ranks and is now the world’s fifth largest wine market in terms of consumption, accounting for 9% of global wine exports.

The US and China are now the key drivers of global wine consumption.

There are currently over a million wine producers around the world making some 2.8 billion cases of wine a year.