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Oct 30, 2020

World wine production remains stable, but consumption is expected to fall next year.

Wine production was down in Europe and South America in 2020, but this might not be a bad thing, because worldwide wine consumption is predicted to drop in 2021.

These were some of the findings presented Tuesday by the OIV (International Organization of Vine and Wine) in its annual post-harvest press conference.

Overall, 2020 world wine production is expected to be about the same as in 2019, but below the average of the last 20 years and much less than the huge harvest of 2018.

"This is not necessarily bad news with wine stocks still high," OIV Director General Pau Roca said.

World production numbers might drop as we learn more about the harvest on the US West Coast. The OIV used a preliminary estimate of a 5 percent increase in production of wine from the US, which is the world's fourth-largest wine producer by volume, after Italy, France and Spain. But many wineries in California and Oregon will make less wine than expected after the impact of wildfires and potential smoke taint.

Spanish wine production was up 11 percent over 2019. French wine production was up 4 percent and would have been been higher if not for government efforts to reduce the amount of wine made.

"This year, good weather conditions favored a potentially large harvest," Roca said.

The two big South American producers both had difficult harvests, with volume down 17 percent in Argentina and 13 percent in Chile. Roca blamed El Niño weather conditions and persistent drought in Chile.

Australian total production was down 11 percent, with bushfires being partly responsible. But South Africa overcame two years of serious drought to bring production back up by 7 percent. Unfortunately, a nationwide embargo on wine sales made it difficult for producers to sell it, and port restrictions led South African exports to drop by 40 percent in the first six months of 2020.

As for world wine consumption, "many analysts expect a drop in sales volume of about 10 percent by volume and between 15 and 20 percent in value in major markets", said Giorgio Delgrosso, head of OIV's statistics department. "If lockdown measures will persist in the fourth quarter and the first quarter of 2021, the situation could worsen."

China crisis
One reason for the pessimistic sales forecast is that analysts expect sales of imported wine to continue to plummet in China. Wine imports were down 32 percent by volume in China over the first six months of 2019, and China is having a bit of a trade war with Australia, one of its main sources of imported wine, so volumes may drop even further. Russia is also importing significantly less wine: 19 percent less by volume in the first six months of 2020.

In the UK, importers are preparing for Brexit impoverishment. Wine imports are only down 2 percent by volume but 12 percent by value. Sparkling wines have been particularly hard-hit, with British imports of bubbly dropping 27 percent by value.

The US, the world's largest wine importer, is similarly getting more parsimonious: imports were down only 1 percent by volume in the first six months of 2020, but 8 percent by value.

Apparently the only major wine importing country feeling good about the economy is Sweden, where imports were up 3 percent by volume and 5 percent by value. Canada, the Czech Republic and the Netherlands also imported more wine by volume, but they paid less for it.

The worldwide drops in imports are reflected in challenging years for major wine exporting countries.

France, Germany and Spain were the targets of US tariffs on wine, and their worldwide export figures have dropped 10 to 11 percent each by volume. Italy was not targeted by US tariffs and its worldwide exports have dropped only 2 percent.

Expensive French wine has been particularly hard hit; French wine exports worldwide are down 21 percent by value. Roca said French sparkling wine exports worldwide were down even more: 23 percent by volume and 28 percent by value.

Prosecco continues to sell, but people are paying less for it. Italian sparkling wine exports increased 4.7 percent by volume, but dropped 7.6 percent by value.

Argentina superficially shows a huge increase in exports, but Roca said bulk wine exports to Spain account for much of it, though he also said Argentina exported more bottled wine to the US. Otherwise, New Zealand is the only major wine exporting country to increase exports in 2020, going up 6 percent by volume and 2 percent by value.

"Covid-19 has generated a recession that is having a direct impact on the wine sector," Roca said. "Not all of the impacts will be permanent, but some will last. The sector needs to anticipate this. Governments must recognize the importance of the wine sector to help avoid a global recession."

In other words: Help the world economy. Drink up!

Source:  Blake Gray. Wine-Searcher. 28.10.20