World Wine Situation and Outlook
|Overall, the production estimates for 1999/2000 are down 3 percent at 36.4 million hectoliters for the selected Southern Hemisphere countries (Argentina, Australia, Chile, and South Africa). In contrast, export estimates are up 12 percent to nearly 8.7 million hectoliters. As part of their efforts to expand exports beyond 2000, these countries are increasing plantings and making investments that will improve wine production. Argentina and Australia are expected to account for most of the increase in exports. The U.S. wine industry, which is on track for 16 consecutive record-breaking years of exports, will face increasing competition both at home and in third-country markets.|
Argentine wine production in 1999/2000 is expected to drop to 13.8 million hectoliters (hl), 13 percent below 1998/1999, according to National Wine Institute forecasts, due to poor weather. Hail and rain damaged this years harvest and bruised the vines for next years harvest as well.
In contrast, Argentine wine exports in calendar year (CY) 2000 are expected to increase nearly 25 percent over 1999 levels to 1.1 million hl, due to high stocks, greater demand, and an increase in exporting wineries in Argentina. Fine wines account for half of the volume of Argentinas wine exports. Total Argentine wine exports in 1999 were about 881 million hl, down 18 percent from 1998. However, they were valued at $117.2 million, the highest level since Argentina began exporting fine wines. Paraguay was Argentinas top export destination in 1999, followed by the United Kingdom and the United States.
Production of premium winegrapes is expected to reach record levels in 1999/2000. Despite difficult conditions in South Australia, total wine production is projected at a record 8.1 million hl in 1999/2000, up 5 percent over the previous year, due mainly to increased bearing acreage. Increased plantings, mostly of premium varieties (with the majority being red), will result in rapid production increases and lower grape prices over the next several years.
The increased winegrape production also led to an increase in wine exports. In CY1999, exports rose 29 percent to 2.6 million hl and are expected to rise again in CY2000. Major export markets by volume include the United Kingdom, the United States, New Zealand, Canada, and Germany. Exports now represent approximately 33 percent of wine production.
In 1996, the Australian wine industry launched a strategy which envisioned annual sales of $2.6 billion in 2025. To achieve this, the industry must increase productivity and plant an extra 40,000 hectares (ha) of new vineyards by 2022, or 1,500 ha annually. Plantings have already exceeded this annual target, as an estimated 8,000 ha per year were planted from 1996-1998.
There is no accurate measure of storage and processing capacity in the wine industry and, in recent years, there has been concern that the current expansionary phase in winegrape production may lead to a shortage of processing and storage infrastructure. The larger wineries are reported to have been increasing processing and storage capacity at an annual average of 20 percent for the past five years. If infrastructure investment lags production, then the downward pressure on winegrape prices may be more severe than currently expected, as more grapes would be processed into bulk wine rather than branded wine.
Favorable weather and new vineyards coming into production are expected to lead to a 16-percent increase in total wine production to 5.6 million hl in 1999/2000. An estimated 8,000 ha of new vines were planted again in 1999/2000, mostly red varieties. By 2003, acreage is expected to reach 95,000 ha and production is projected at 7.5 million hl.
Over the last three years, bottled wine exports have been increasing over 10 percent annually, while bulk wine exports have fallen. Total Chilean wine exports in CY1999 were down slightly from the previous year to 2.4 million hl, due to the slowdown of the world economy. As economies improve and the amount of wine available for export expands, total wine exports are expected to increase slightly to 2.8 million hl in 2000 and 3.5 million hl by 2003. The United Kingdom, the United States, Canada, Germany, and Denmark are Chiles top export markets.
New Zealands 1999/2000 harvest is expected to yield 85,000 tons, up slightly from the 1998/1999's record level, reflecting additional area of vines in production. Increased plantings of vineyards are expected to increase to 13,000 ha by 2003.
New Zealand's wine exports grew exponentially over the 1990's, and the New Zealand industry projects that exports will reach $140 million by 2003 (almost triple the 1998 total) and account for almost half of wine sales by 2003. In 1998/1999, exports increased to 166,180 hl, 11 percent more than the previous year, according to Statistics New Zealand. Higher land and production costs in New Zealand mean that New Zealand wines are more expensive than Australian wines in overseas markets like the United Kingdom, thus export success is dependent on overseas buyers being prepared to pay a premium for New Zealand wines.
The New Zealand wine industrys cohesive international presence could be weakened by recent budget cuts. The Wine Institute of New Zealand has reported grower disappointment over the New Zealand Trade Development Boards decision to cut its direct funding to the institute from $70,500 to $35,250 in the coming financial year. Additionally, industry sources report that New Zealands wine industry could be dominated by overseas players by the end of the year, with three of the countrys four largest winemakers owned by overseas companies, including the Australian companies BRL Hardy and Lion Nathan.
Total wine production in 1999/2000 is projected to drop 2 percent to 9 million hl, due to poor weather and wild fires in the red wine producing areas. Acreage is expected to grow slightly to 116,775 ha in 1999/2000.
Total wine exports reached 1.3 million hl in CY1999, and, despite the setbacks this year, exports are expected to grow 10 percent in 2000, as a result of new market opportunities and high demand in the EU. However, red wine exports may decline since the fires occurred mainly in the red wine producing areas. The largest export markets are the United Kingdom and the Netherlands. Ireland is South Africas fastest growing market.
The South Africa-EU wine and spirits agreement, in which a formal agreement would provide a 32-million liter, tariff-free wine quota for South African exporters, is still being negotiated. The implementation of the wine and spirits agreement was delayed because of the rule of origin for port, sherry, ouzo, and grappa. The target date of implementation, September 1, 2000, may be postponed.
Current issues raised by South Africa relate to the effective starting date for phasing out the terms "port" and "sherry," the tariff quota for South Africa, the EUs financial assistance program for restructuring South Africas wine and spirits sector, and the compromise on trademarks.
The National Agricultural Statistics Service (NASS) is estimating the 2000 U.S. grape production at 7.4 million short tons (6.7 million metric tons), up 18 percent from a year earlier and slightly higher than the 1997 record. As higher yields and recent new plantings of premium varieties come into production, NASS expects the California winegrape harvest to reach a record 3.2 million short tons, up 20 percent from a year earlier and 10 percent more than the 1997 record. U.S. wine production is also estimated at a record 25 million hl for CY2000, up 20 percent from the previous year and 16 percent more than the 1997 record.
The increasing wine supply, robust foreign demand, market promotion efforts, recovering international economies, increased varieties of higher quality wines, and reports of favorable health effects associated with moderate wine consumption continue to drive U.S. wine exports. In CY2000, U.S. exports of wine and wine products (including cider, fermented beverages, and must) are estimated to reach $575 million, up 4 percent (3 million hl, up 5 percent) from 1999. U.S. wine exports are on track for a 16th consecutive record-breaking year by value. U.S. wine exports totaled $270.4 million for the period January through June 2000, up 6 percent from the same period last year. The United Kingdom, Canada, and Japan are expected to remain the top export markets. Impressive gains are also anticipated for Denmark and Belgium. U.S. wine sales to Asian markets are also expected to rebound as these economies improve. The Market Access Program (MAP) will continue to help U.S. vintners successfully leverage their resources to find new distributors and importers, establish new business contacts, and increase wine sales overseas.
U.S. wine imports also grew steadily over the last several years, and rose in value every year since 1993. In 1999, imports reached a record value of $2.2 billion, and are expected to be even higher in 2000. France, Italy, and Australia were the largest suppliers last year. Imports from January through June 2000 totaled $1 billion, up 8 percent compared to the same period last year. Canada, Argentina, New Zealand, and Australia registered the highest gains for the first six months of this year.
For additional information, including trade statistics, please see FASs wine web page at: /htp/horticulture/wine/wine.html.
(For information on production and trade, contact Shari Kosco at 202-720-9792. For information on marketing, contact Yvette Wedderburn Bomersheim at 202-720-0911.)