Northern Hemisphere set to harvest an average crop

Just over two months ahead of this year’s World Bulk Wine Exhibition in Amsterdam, a clearer picture is emerging of crop volumes across the Northern Hemisphere, and the impact those volumes could have on the 2022-2023 marketing campaign.

This year’s roller coaster weather patterns, with regular heat spikes, storms and severe drought episodes, have made putting precise figures on likely crop volumes in the Northern Hemisphere a tall order. After the fairly robust volumes expected to start with, forecasts then dwindled – soaring temperatures and lack of rainfall, after expediting the ripening process, put it on hold in many regions. After the rain returned and there was some respite from the heat, some countries subsequently revised their figures upwards, so the actual outcome has been challenging to chart.

Has Italy’s wine industry become impervious to adverse weather?

Italy is a case in point. Agricultural organisations intimated in August that there could be a shortfall of around 10% this year compared with 2021. However, official estimates collected and collated by Assoenologi, Ismea and UIV – presented on September 14 at the Ministry of Agriculture in Rome –revealed that Italy is on track to produce as much wine as in 2021. If the current estimate of 50.27 million hectolitres is confirmed, output would be 3% higher than the 5-year average, and secure the country’s long-standing position as the world’s largest producer country. Severe drought across the northern part of Italy earlier on in the season brought fears of a significant decline in production but estimates now show that only Piedmont and Lombardy really suffered (-9%/-20% respectively) with Veneto’s production potentially falling by 3%. The declines are likely to be offset by increases of around 10% in many regions, including Tuscany and Trentino-Alto-Adige, and smaller percentage rises off larger bases elsewhere, as with Emilia-Romagna and Puglia (+3%/+4%).

Dramatic drop in harvest forecasts for Spain

Italy’s wine industry is giving itself a pat on the back and ascribing this year’s good outcome to the strides it has made with vines that are resistant to drought and adverse weather. There is no denying that its current production estimates stand in stark contrast to those issued by Spain. At the end of June, there was talk of a harvest in the range of 44-45 million hectolitres. By mid-September, Spanish agricultural organisations were pointing to an average drop of 11% on last year, which would equate to around 35 mhl. Some regions, like Catalonia are expecting a fall in excess of 20%, whilst Castilla-La Mancha and Valencia are predicting declines of around 15%. The news has halted the softening of red and white bulk wine prices, especially with production costs increasing dramatically. Dry goods, rising input, shipping and diesel costs have reportedly led to a 30% jump in overheads, a message Spanish grape producers seem to be struggling to pass onto the country’s major buyers. At the end of the last campaign, ministry estimates pointed to total availabilities of nearly 70 million hectolitres, with wine inventories standing at around 35 mhl. But if the short harvest is confirmed, international brokers Ciatti predict that prices for red wines over the new buying campaign could be higher than in recent months. Despite the recent uptick, Ciatti stresses that “Spanish red wine prices remain ultra-competitive and good quality wines still remain, representing an opportunity, given the 2022 reds are still 3-4 months away from being ready”.

Chequered supply picture in France

Across the border in France, the Ministry of Agriculture published its latest harvest forecast at the beginning of September. This year’s crop is now expected to come in at around 44 million hectolitres, with increases across-the-board compared with last year – the only exception being base wines for brandy. If the current estimates prove accurate, France would harvest around 6 mhl more than last year, which could potentially compound the storage problems faced by producers in some regions. The situation across the country is varied. Some regions, like Burgundy and Champagne, have asked for temporary permission to lift the cap on yields, whilst others are starting to chew over the idea of removing surplus wines through distillation measures. Rosé wines in particular have been hit by the shortage of white glass and shipping issues have slowed down loadings, which is critical for a time-sensitive product. Ciatti also points to a large volume of good-quality red wine still in stock, “at an attractive price-quality ratio which, on some standard qualities in some areas, is competitive with Spanish pricing”. Elsewhere in Europe, Portugal is expecting a near 10% drop in production this year (6.7 mhl), whilst Germany’s optimism in the spring after flowering may well be dashed by scorching summer temperatures. Further afield, California is looking to harvest an average crop, larger than last year’s but below the 4-million-tonne mark.

Red wines in a global lull

As Ciatti’s Robert Selby stressed in the broker’s August newsletter, “Anticipating and projecting what will occur on the bulk wine and grape markets in the final quarter of this year, once the Northern Hemisphere is back from its summer holidays, is highly challenging, let alone what 2023 may hold”. In terms of worldwide trends, there is no denying that red wines still appear to be in long supply, partly due to long-term changes in consumer patterns, and partly due to a stall in demand in major red wine markets like China along with protracted shipping delays. This is already affecting projections for next year’s Southern Hemisphere harvest. In his latest bulk wine briefing for Australia, Austwine’s Jim Moularadellis predicted that “uncontracted red grapes are unlikely to be picked in 2023. Some contracted red grapes are likely to have yield limitations or some other mechanism to reduce intake”. The unknown impact of spiralling, inflation-driven prices on consumer demand, forthcoming dock and shipping issues in the United States and energy uncertainties over the winter in Europe are just a few of the factors stoking a very volatile market situation going into the next few months. Once again, the World Bulk Wine Exhibition in Amsterdam is likely to provide the perfect opportunity to unravel some of these complexities.

Sharon Nagel