The OIV's preliminary estimate for global wine production in 2023 assumes an mid-range volume of 244m hectoliters, which would be 7% less than the already below-average volume of 2022.
Northern Hemisphere performance
We suspect the OIV’s mid-range figure estimate is a little on the high side, as they used for their Italy figure an early-September estimate issued before the lightness of tonnages in central and southern parts of the country became clear. Our assessments of the other Northern Hemisphere harvests are as follows: the French crush appears to have come in above-average in size; Spain’s crush was well below the average but availability levels remain near normal after a slow year of sales; we roughly estimate California’s crop at 3.5-3.6m tons, short of the average but at least partly due to some unsold grapes going unpicked.
Fundamentals unchanged
The OIV states that “the expected low production could bring equilibrium to the world market”. We believe it will take more than that. In the short to medium term, until such time as North American and European consumer confidence returns, supply will remain out of balance with demand and buyers will hold the upper hand. In the longer term, demand will continue to trend downward unless wine can grow its share of alcohol consumption among younger demographics.
Reasons for optimism
But there are some reasons to be a little more hopeful about the supply-demand balance in 2024. Italy’s short crop has stimulated some bulk-wine buying activity there and in Spain, with some ripples also felt further afield. There is a feeling in some markets that distributors are finally nearing the end of the inventories they built up during the pandemic and will soon require fresh volumes, even if they purchase them incrementally given the current slowness of consumer demand. In the longer term, uprooting is underway in some countries as the industry rationalises in response to reduced cashflow, lowering crop potentials in coming years.
China orders tariff review
In another positive development, China has launched a review of the import tariffs it has levied on Australian wines since 2021, which have reduced the value of Australia’s wine exports to the country from AU §1.2bn at the peak of sales to AU $8.0m today. A China active again on the Australian market would help drain red wine volumes and potentially help to stabilise bulk red pricing around the world in 2024.
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