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 stabilise 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.
Another caveat is that just as Australia-China trade flows re-open, the Argentinian peso could receive another devaluation – widely seen as likely sometime mid-year – which will lower export prices on the 250+ million litres of carryover we estimate Argentina will possess going into June, of which the great majority is red wine. In addition, red wine supply in Spain could start to swell the global supply if prices on it start to soften.
White wines continue to be in a better supply-demand balance than reds, globally-speaking, though demand was starting to look somewhat lethargic in the second half of 2023, with availability higher than normal at the turn of the year and even high-quality varietal whites such as Marlborough Sauvignon Blanc struggling to find a home. Demand has picked up on Chile’s white varietals in the first three months of 2024, however, so that 2023-vintage whites are finally becoming sold out. In South Africa, signs of another harvest shortfall – following the very short crop of last year – have paused the market while wineries wait to see if they will have enough whites to fulfil new orders.
In fact, all the major Southern Hemisphere producer nations expect harvest sizes below average this year, potentially no bad thing for the health of the wine business as a whole given the current global supply-demand imbalance. 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.
Identifying sourcing and selling opportunities that provide margin and cashflow in these challenging times: this is where Ciatti can bring its decades of knowledge and experience to bear. Don’t hesitate to get in touch. In the meantime, read on for detailed updates on each market.