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Chile and South Africa bulk wine markets face 'stormy weather'

Published:  27 November, 2014

Chile and South Africa's bulk wine suppliers are facing "stormy weather", according to experts, given there is still a lot of wine from last year's harvest.

Daniel Murphy, of Daniel Murphy Wine Company, told there's a "lot of stock" still around from 2014, and both countries new crops look "pretty darned good".

bulk wineBulk wine markets in Chile and South Africa are facing ‘stormy weather’With plenty of stock still in tanks, prices are starting to slide and it’s becoming harder to sell last year’s wine.

Murphy said the difficulty is how to clear out volumes ahead of the next harvest - "either you store off site or drop your prices to get the market to move". But, he warned, "they're leaving it pretty late." He said even if sales did go through now, the physical logistics mean it's already too late.

"Slowly the reality is starting to hit," he said. Chilean prices will continue to slide, he predicted as there's a "very delicate balance over whether to buy in bulk or grapes next year".

He added that it was "finally dawning on the South Africans" that they're in the same position.

Stephen Rannekleiv, executive director of Rabobank International's Food and Agribusiness research and advisory division, told "No-one's really panicking just yet, but there certainly is a build-up of inventory. Spain coming back into the market has affected South Africa - it's taken back some of that market share South Africa gained last year."

While Spanish volumes have also impacted Chile, there is a "bigger issue" at play there. The large US harvest means "tank space is at a premium". He said the US market at $9  and below is "very soft", especially in Southern California.

Chilean prices are also starting to soften, as those pressures begin to be felt there. "These things can change quite quickly," Rannekleiv pointed out, moving from being long to short very rapidly.

The Ciatti Company's latest report said Chilean prices continue to be stable, with demand fluctuating both domestically and internationally, except for Chardonnay, "which has seen demand since the low inventories".

"2015 grape purchases continue to be stable to active, especially for high quality grapes, driven by the increase in exports for quality and value wines," the November report stated.