The 2020 Southern Hemisphere harvests are underway and lack of water is a concern in Australia, Argentina and Chile. The incredibly high temperatures and bushfires of the Australian summer have been well-documented, while a precipitation shortfall in Mendoza – combined with restricted funds for vineyard work due to the nation’s economic woes – is expected to have an impact on Argentina’s final volumes.
Chile’s growing areas, meanwhile, are also in longstanding drought and a recent proliferation in deep well installation – in the hunt for water – has led to a shortage of the requisite piping. Conversely, the Western Cape has been experiencing its most straightforward growing season of recent years, with water stocks good and vineyards looking healthy.
An abiding theme through all producer countries – in both Hemispheres – is a high degree of market uncertainty and concern regarding the sales picture. The Italy page this month probably speaks for all: “January and the start of February were quiet […] with the Coronavirus outbreak in Asia adding to the pre-existing worry regarding sales induced by the hike in US import duties since October and the Brexit saga in the UK. Companies do not wish to close big contracts because the future sales and consumption picture is so uncertain.” The Coronavirus outbreak is compounding a preexisting softening in bulk wine sales in China – induced by the economic slowdown there and its trade war with the US – which has been particularly felt by Australia, Chile and France. Italy, France and Spain must also contend with the aforementioned jump in US import duties on its bottled wines – at or below 14% alcohol – while also navigating what has been a tricky UK market for three years now.
The UK finally exited the European Union without fanfare at 11pm GMT on 31 January. Brexit was made inevitable by Boris Johnson’s general election victory in December, while – in terms of trade – nothing has changed: the UK remains in the EU’s Single Market and Customs Union until at least December 2020 while a new trade relationship is negotiated. Johnson says he would be seeking a “Canada-style” (i.e. loose) or “Australia-style” (i.e. very loose) trading relationship with the EU. Expect Brexit to return to the headlines in Q4 2020 as the trade deal deadline looms.
A recurring theme in recent months is the big inventories of red wines around the world –varietals in Argentina, California, France and Spain, generics in Australia. This is in contrast to whites, which seem in better supply-demand balance, and potentially symptomatic of too many acres of red grapes versus white, now compounded by the sales slowdown in China. With red wine available, and preferred to white by consumers in most countries (the UK and Australia notable exceptions), there are opportunities out there for the entrepreneurial thinker.