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Low 2006 beneficio could push up young Port prices

Published:  23 July, 2008

By Richard Woodard
Port shippers fear that there may be a shortage of younger Ports, after the region's production limit for the 2006 harvest was set below annual sales for the fifth year in a row.

The Instituto dos Vinhos do Douro e Porto (IVDP) has set the beneficio or production limit at 123,500 pipes this year, equating to about 9.5 million nine-litre cases of finished Port - but annual sales are likely to hit about 10.4 million cases.

Now shippers fear a shortage of young Port may force price rises after five consecutive years of production lagging behind sales. The total shortfall over that period is more than 4.6 million cases, while the UK Port market numbers 1.1 million cases.

'This shortage will inevitably result in some cost increases for grapes and therefore for Port on the shelves in the main export markets,' said Paul Symington, joint managing director of Symington Family Estates. 'But this may not be such a bad thing after some years of effective price reductions and excessive price promotions.'

Adrian Bridge, MD of The Fladgate Partnership, said a shortage of commodity Port was 'becoming a more serious concern' and would drive up prices there.

He added that there was 'very little' Port for sale in the Douro at the moment, but said: 'It's still perfectly possible that there will be wine left unpurchased at the end of the harvest. You would imagine that you would end up with a very short market and prices will push up - farmers would like to see it. In reality, that can't be pushed through to the consumer.'

IVDP director Jorge Monteiro pointed out that the beneficio figure was still 6.25% above the annual demand for younger wines, adding that the price paid to production had fallen further than the FOB bottled price in recent years.

'In any case, the sustainability of both the trade and the Douro producers may be at risk if the negative tendency of prices is not inverted with care,' he added.

George Sandeman, board member at Sogrape, said: 'It's not a question of let's create the shortage and get the prices up. The reality is that it's not sustainable to keep producing at this level - a lot of farmers will be going out of business.'

He added that all the major companies took part in the discussion that led to the setting of the beneficio. 'The problem with democracy is that there is always someone who wished for a different outcome.'