The global bulk wine market is heading into the second quarter of the year looking more "normal" than it has done for some months: rather than each market united in slowness, some have seen an uptick – however slight – in activity (Chile and California), some are unable to meet demand on at least some wines due to short harvests and/or limited carryover (Italy and South Africa), and some markets are mainly slow because of buyer perceptions that prices are elevated (Argentina, Italy, Spain).
Buyer interest is there, it is simply price and volume-sensitive during what remains a fragile period for the global economy.
There have been strong indications that China will be repealing its import
tariffs of up to 218% on Australian wine imports in the coming days or weeks,
and there is a hope in other producer countries that the draining of some ultra
competitively-priced Australian red wine into the Chinese market will help
stabilize red wine demand and buyers’ pricing expectations globally. The not
inconsiderable caveat is that Chinese demand for all international wines has
been on a rapid decline in recent years – as some key red wine-producing
regions of France can attest – and the country’s economy is currently
struggling.
France
- Harvest: Below-average rainfall continues in southern France
- Buyers requiring southern French generic, non-vintage Vin De France wines – especially whites and rosés – are urged to move onto the market if they wish to harness the best price opportunities as prices are starting to experience upward pressure due to high demand levels domestically and from across Europe.
- The IPG varietal market is proceeding more sluggishly, with incremental purchases occurring on whites and rosés; current pricing on good quality wines represents an excellent opportunity, in southern France as well as across other regions.
Spain
- Harvest: 2023 crop estimated at approx. 35.29 million hectoliters
- Prices on Spain’s 2023 white wines remain at elevated levels versus six months ago, although still competitive in a global context.
- White wine in large volumes is currently hard to find.
- Vintage 2023 rosé supply has been drawn down and what remains is high in price.
- Red wines remain in good supply and pricing remains highly competitive.
- The sulfated must and GJC markets mirror the bulk market, with some higher pricing deterring purchases.
- Dryness persists in La Mancha and good spring rainfall is needed to boost confidence in the 2024 crop potential.
Italy
- Harvest: 2023 crop confirmed at 23% short of average
- Prices remain elevated on all of Italy’s bulk wines following a 2023 crop some 23% short of the average.
- Demand for white wines, as well as specific appellation red wines and varietal reds, remains good.
- Bottling of Prosecco and Pinot Grigio DOC were in positive territory in February and – as northern Italy’s 2023 harvest was not as short as central and southern regions – supply should be sufficient to last until vintage 2024.
- Northern Italy received rainfall through an unseasonably warm February but drought concerns persist in the south.
California
- Harvest: Final 2023 crop figure of 3.68 MT; wet Feb and March
- A large bulk wine inventory and reduced depletions at US distributors have kept California’s bulk wine and grape markets sluggish.
- Consequently, some pricing has softened, allowing domestic buyers to reassess their sourcing options and international buyers to potentially harness excellent price-quality opportunities for export, both in the Coast and Interior.
- California can also offer low-alcohol wines.
- Bud-break is underway and the grape market will wait for the frost risk to pass before establishing pricing.
- The wetness of last February and March is getting repeated, leading to confidence that much of California will be drought-free through 2024.
Argentina
- Harvest: Estimated to be 24% larger than short 2023 crop
- Domestic and international demand for Argentina’s bulk wines remains slow and we estimate a carryover stock of 250 million liters when the 2024 vintage becomes available.
- Malbec export pricing is already softening and could soften more significantly if Argentina’s new government enacts its second peso devaluation, potentially sometime mid-year.
- The 2024 crop is forecast to come in 24% larger than 2023’s short crop but still down from the average; other than a heavy hailstorm affecting a limited area in February, picking conditions have been good.
Chile
- Harvest: Picking timetable delayed; shorter crop expected
- Positive bulk wine demand levels in the first three months of 2024, and
expectations of a shorter-than-average 2024 crop, ensured all grapes were
ultimately allocated and pricing on remaining 2023 wines has firmed up. - Therefore, prospective buyers are recommended to move sooner rather than later.
- Supply of 2023 Sauvignon Blanc and Chardonnay has been drawn down.
- Availability of reds – representing 77.9% of Chile’s large wine inventory at the turn of the year – remains high.
- Chinese demand for generic reds has been robust, even after a modest price increase.
- The 2024 harvest is still proceeding around 15 days behind normal following the wet spring.
South Africa
- Harvest: Coming in notably lighter than expected
- With the 2024 crop coming in lighter than widely expected, wineries have paused offering 2024-vintage volumes while they wait to assess the final production.
- Availability may then arise from late March onward.
- Some wineries are in discussions regarding revising downward their pre-harvest contract volumes.
- Varietal whites – except perhaps Sauvignon Blanc – and Pinotage appear to have come in notably shorter than expected.
- Pricing remains stable following a sensible uptick between vintages and represents an excellent opportunity, leaving the industry frustrated that it may not have the volumes it needs to meet demand and grow export avenues.
- Carryover of 2023 wines is negligible.
Australia & New Zealand
- Harvest: Red grapes coming in shorter in AU; shorter crop expected in NZ
- Australia’s 2024 harvest is in full swing and vintage quality appears good.
- The red wine-grape crop appears shorter than estimated but the downward trend on red grape prices continues.
- Some shipping of wine to China is underway in anticipation of the repeal of China’s import tariff hikes, expected to occur as early as this month.
- Domestic wine consumption in Australia is up significantly, with an extra 1.0 million people consuming wine in 2023 versus pre-pandemic.
- Domestic consumption in New Zealand also ticked up in 2023, while the value of exports to the US (+4%) and UK (+3%) remained robust.
- The 2024 crop is expected to be shorter, leading to markedly higher prices on 2024 wines versus where 2023-vintage prices ended last year.
Conclusion
It is a mixed outcome for growers battling squeezed margins: fewer grapes
potentially mean a reduced income but also perhaps the ability to seek higher
grape prices in turn. But for that, there needs to be a firm stabilisation in global
wine demand which will only come once there is some belated, concerted
macroeconomic strengthening in Europe and North America.
Source: Ciatti Global