Supply and demand in global wine market balances out as glut eases
The global wine industry is rallying after years of a glut of wine and suppressed prices, according to a report in the Weekly times.
It referred to Wine Australia, data which shows supply dipping to around 26 billion litres, from a peak of around 29 billion litres four years ago. At the same time, demand is forecast to steadily increase.
Mark Rowley, a senior analyst at Wine Australia, said there “were more positive than negative” aspects to the world wide market, but it was too soon to say whether farm gate prices would buck up With the Australian crop up by 5% this year, following an average to higher yield in 2016, he said: “There are reports yields are up and prices are up a bit, but are coming off a low base.”
Rowely said the recovery of the British pound would help, as Brexit had “smashed the market”.
“Retailers hold such power and they want the wineries to take the hit on the exchange rates, so that has been holding back prices,” he said. “If that continues to normalize then that will be a positive in Europe.”
He pointed to the situation in Spain, where four years ago the country had a crop 40% higher than average, but the exported value of the wine was the same as previous years.
“They sunk their prices and that sunk the market,” Rowley said. “Prices were subdued for everyone and for people who do not care where their wine is coming from, the prices were down.
“Labels such as Jacob’s Creek and Yellowtail are dicated to by the commodity end of the market, but other branded wine felt it too.” However, he said that the outlook was more positive, as there was generally a better balance between supply and demand.
“That huge crop has diminished over the years.”
Rowley said that China held out much potential for further growth, particularly for red wine, pointing out that 94% of the value of Australia’s exports to China is red.
Meanwhile, total bulk wine imports to China came to around 143 million litres, with Australia accounting for around 25 million litres of that. The vast majority – around 86% of China’s bulk wine imports come from Chile, because the south American country has a free trade agreement with China.