The bulk market globally can be characterised as slow, even for what is a traditionally slow time of year when the Northern Hemisphere summer holidays are is in full swing. As well as there being few buyers, some already-acquired wine is being put back on the market by those who no longer need it; these wines are sometimes picked up quickly by an alternative buyer, sometimes not. The reappearance of inventory is potentially symptomatic of a range of factors – problematic shipping; dry goods such as bottles being in short supply and/or high in price; a real or projected slowdown in consumer sales as annual inflation rates remain high.
The inflation rate in the US fell in July, from 9.1% to 8.5%, as a decline in fuel prices offset a continued rise in grocery prices. Hopefully this a sign of inflation starting to cool, but in many other markets fuel prices and energy bills are projected to continue rising for the rest of the year. In the UK, the Bank of England expects inflation to reach 13% in October; Eurozone inflation was forecast at 8.9% in July; inflation in Australia is forecast to be 7.7% by the end of the year.
While the bulk market is currently muted on many wine types, it especially exacerbates the pre-existing slowness on red wine, inventory of which is large in many producer countries. Prices, however, are not necessarily softening, as suppliers must cover rising input costs. In addition, if buyers are reining-in their requirements or seeking to become sellers themselves, there may not be many potential buyers waiting in the wings even at lowered prices.
While other input costs are rising, shipping prices are – in general – moving the other way: data from supply chain advisers Drewry shows the average global price for a 40ft container has fallen for 24 consecutive weeks as of 11th August and, while at USD6,430/container it remains elevated versus the five-year average (USD3,613), it is now well down from the September 2021 peak (USD10,377). We are also finding shipping efficiency is improving at some ports and on some routes, though performance can be patchy. While the price of shipping is thankfully falling, on the horizon looms the prospect of longer shipping times as vessels reduce speeds to meet new International Maritime Organization carbon intensity standards, which come into force in 2023.
Some harvesting is now underway in the Northern Hemisphere. Despite enduring one of the hottest summers on record, the crops in southern France, Spain and Italy still appear to be on course for approximately average sizes. California, meanwhile, tentatively expects a crop size below average, though by how much is still unclear. While Europe has been sweltering, parts of the Southern Hemisphere have been – to much relief – experiencing its wettest summer for many years, with Australia, Argentina and Chile all seeing their precipitation deficits slashed, dams nearing capacity and, in the latter two countries, good snowpack levels finally being put down in the mountains. The Western Cape has so far been experiencing a drier than average winter, but has had a wet 12-15 months overall, and there are still three more months for rain to fall before the dry season.
Anticipating and projecting what will occur on the bulk wine and grape markets in the final quarter of this year, once the Northern Hemisphere is back from its summer holidays, is highly challenging, let alone what 2023 may hold. All the more reason to get in touch with Ciatti who can draw on decades of experience to help you navigate the current and future marketplace. In the meantime, read on for detailed updates from each market.