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Time and Tide

Published:  23 July, 2008

As a stunt it backfired horribly. Sitting on the beach one depressing day in the early eleventh century, King Cnut was attempting to show that man couldn't turn back the tide, whereas history unkindly remembers him as having tried to do precisely the opposite.

The new surge in the global surplus from 2004 will have the same effects, for better or for worse, as the rising surplus of several years ago. As competition continues to increase, downward pressure on grape and wine prices will strengthen. The price of table wines (both red and white) rose sharply in France and Italy during 2002 and 2003, but remained subdued in Spain, where the harvests were larger. And from 2004, prices seem sure to tumble in France and Italy too. Already by August last year, bulk wine from Bordeaux was selling for as little as €1 a bottle. At prices as low as these, many producers in both the Old and New Worlds will no longer be able to survive, and many more will go under.

The greater competition will also serve as a spur to trade, the growing volume of which is both a cause and a consequence of the rising surplus. According to the OIV's latest report (2004), the global wine trade, measured as the export sum total, fell back in 2000, but rose over the next three years - by 4 million hl in 2001, 2.4 million hl in 2002 and 5.0 million hl in 2003. At between 72.4 and 74.3 million hl in 2003, the world market in 2003 was 9% up on that in 2002. In relative value, this trade represents nearly 32% of world consumption, against only 18% at the beginning of the 1980s, and 29.5% in 2002.

Overall, the Old World is meeting the challenge of domestic surpluses much less successfully than the New. In the largest EU producers, not only is consumption falling, but the share of exports is too. Taken together, the five largest exporters in the EU (France, Italy, Spain, Germany and Portugal) saw their share of world trade fall from more than three-quarters to less than two-thirds, from a five-year average of 75.6% in 1981-85, to 70.7% in 1996-2000, to 63.9% in 2003. The corresponding rises for leading exporters in the New World (US, Australia, New Zealand, Argentina, Chile and South Africa) were from 1.6% in 1981-85, to 14.7% in 1996-2000, to 23.4% in 2003.

All producers with a surplus, wherever they are in the world, need to be more like the Cnut of historical legend, trying to turn back the tide. They can't change the weather any more than he could, but unless they're to be equally at its mercy in surplus terms they need to change what they can - above all, production potential as determined by the area under vine and yields. On the other side of the equation, actual consumption, especially per capita rates in markets such as the USA, needs to be higher. And happily we can all play a part in that.