Global Wine Production Slumps For Second Year As Industry Crushed By Virus

Global Wine Production Slumps For Second Year As Industry Crushed By Virus    Tyler Durden Sun, 11/01/2020 - 08:45

The International Organization of Vine and Wine (OIV) released its global wine production report, warning that after the high production year of 2018, for the second consecutive year, wine production volume will be below average, due to low volumes from South America and European output caps following the virus-induced downturn that crippled sales. 

In a zoom call, OIV Director General Paul Roca said the virus-induced global downturn has resulted in declining wine prices, output slumps, and dented demand. 

Roca said the pandemic worsened geopolitical tensions, and in some regions, led to tariffs, and a decline in international trade. He said lockdowns and other social distancing measures limited the flow of goods through cities and towns, along with hindering flows on an international basis, adding that the disruption led to disorder in distribution channels, limited production at wine-making facilities, and also resulted in inventory builds. 

"The situation differs from country to country depending on the length of lockdown measures, the consumption habits of the population and the elasticity of the substitution between wine and other beverages, and also the relevance of the regular channel or the development level of the eCommerce channel," he said. 

OIV estimates the 2020 global wine output will be around 253.9 million and 262.2 million hectolitres, with a mid‑range estimate at 258 million hectolitres. As OIV points out in the slide below: 

"After the exceptionally high production in 2018, for the second consecutive year global wine production is expected to be below-average."

In terms of supply, Roca said the current situation is not entirely "bad news" given the abundance of worldwide inventory: 

"This is not necessarily bad news for the sector given the current context, where wine stocks are still relatively high, and geopolitical tensions, climate change and COVID-19 pandemic are generating a high degree of volatility and uncertainty in the global wine markets," he said.

OIV said Europe had desirable growing conditions but output remained lower than average as producers and governments limited production during the virus pandemic. France collected 20% fewer grapes this year because of the collapse in sales. Expectations for the world's three largest wine producers - Italy, France, and Spain - will have output around 159 million hectolitres, up 5% over 2019 levels but still below average. 

As for wine country in the Southern hemisphere, output totals could decline by as much as 8% from 2019 to 49 million hectolitres. The largest declines were seen in Argentina (-17% YoY), Chile (-13%) and Australia (-11%). 

In the US, output estimates for the 2020 year are around 24.7 million hectolitres, up 1% YoY, but OIV notes the forecast could be heavily revised because of the wildfires in Napa Valley, California. 

Top 15 Exports By Volume And Value 

Here's the full OIV press conference 

To sum up, the global wine industry was already under pressure before 2020, the virus pandemic just made everything worse. 

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Global Wine Production Slumps For Second Year As Industry Crushed By Virus