World wine output down on bad weather, EU curbs

Global wine production fell sharply last year due to bad weather in Europe and a recent policy to drain its "wine lakes", while Chile and United States saw a jump in harvests, according to a report on Thursday.

The International Organisation of Vine and Wine (OIV) said world production was down around 6 percent in 2012 at 251 million hectolitres (Mhl), a level it described as very low. European Union output fell 10 percent to 141 Mhl, with France suffering a drop of nearly 17 percent after a good harvest in 2011.

"We had a difficult year 2012, mainly because of a sharp drop in production, but trade flows mostly held stable," OIV director-general Federico Castellucci told reporters, referring to total wine exports which were stable at 101 Mhl after a long-term upward trend.

Also read: Regulatory approvals in place for Diageo-USL deal: Mallya

The EU policy of digging up vines to end years of surpluses had lead to a reduction of 269,000 hectare between 2008 and 2011, well above the targeted 175,000 hectare, contributing to a recent rise in prices, Castellucci said. Rising consumption also helped push prices up.

"This meant tightness on the market and we need to be careful because once a market is lost it is hard to conquer it back," he said, pointing to higher prices for bulk wines, used to make liquors such as brandy and vermouth or vinegar.

Prices for French bulk red wines gained 7 percent between August and February, while bulk white wines rose 30 percent, data by French farm office FranceAgriMer showed.

NEW CONFIGURATION

French exports rose 6 percent to 15 Mhl, but Italy and Spain, the world's two largest wine exporters by volume, which also had a poor crop although not as bad, saw their exports fall 7 and 13 percent respectively to 21.5 and 19.1 Mhl.

Chile, the largest South American producer which had a record output in 2012, saw a 13-percent rise in exports to 7.5 Mhl. South African exports were up 17 percent to 4.2 Mhl, with sales to Britain jumping 50 percent.

This meant that the share of the top five European producers - Italy, Spain, France, Germany and Portugal - in world exports fell to 62 percent, from 65 percent last year, to the benefit of South America as well as the United States whose crop jumped 7 percent last year, the OIV said.

Wine consumption increased 0.6 percent last year to 245 Mhl, mainly helped by China and the United States, the OIV said.

Chinese consumption rose 9 percent to reach 17.8 Mhl, leading to a total rise in consumption since 2008 of 27 percent, with local output supplying the bulk of the additional demand. Imports only accounted to 0.3 Mhl of the 1.5 Mhl rise recorded in 2012.

"There is a slightly new configuration here. The Chinese start either to make the wine themselves or to import wine from countries where they have companies - it's still a small number but not minimal anymore," Castellucci added.

An increasing number of Chinese wine lovers have purchased French chateaux in the past years, keen to ship the wine home and turn their new properties into tourist resorts.