This year, more than normal, August and the start of September felt like a holding period while the Northern Hemisphere harvests commenced and their likely respective sizes are assessed. The slowness of the bulk market in many countries – persisting for 2-3 months, brought about by the inflationary picture in key markets, perhaps too a lag in the shipping of already-contracted volumes – suggested only crops significantly down from their averages would stimulate activity. We have seen something of that in California, where an already light crop was hit by a week of extreme temperatures at the start of September. 

Europe, however, has remained largely unmoved, as the crops in France, Spain and Italy appear to be coming in below their averages but not significantly so. Red wine carryover is large in Europe and across the world. Whites are in healthier supplydemand balance, and the Languedoc’s bulk campaign for the white varietals kicked off early and quickly as many buyers possess little or no 2021 carryover. There is no clear trend on 2022 bulk prices in Europe, with pricing on southern French whites having fallen back somewhere between their 2020 and 2021 levels, while Spanish pricing is steady, with a small uptick in grape pricing offset by lower demand from Italy where, in turn, 2022 white wine production looks good and pricing has softened. 

As this month’s Italy page states: “The next big task will be to understand how much wine consumption is going to be affected by inflation and the economic instability during the next six months.” Inflation has doubtless already led to consumer belt– tightening, while high energy prices come the European winter could dampen consumption further. Wine sales in the premium categories of the US market appear to be slowing markedly, falling into line with the entry-level categories which fell back quickly after COVID’s pantry-stocking boom ended; the on-trade appears to be slowing down after its post-COVID bounce-back. 

There seems to be a loose consensus that inflation will peak in many markets at the end of this year, may even have already peaked in some, while others are actively working to repress it through direct intervention: the UK government is to spend at least GBP100 billion capping energy bills through to 2024, for example. As the bulk market has been proceeding conservatively for some months now, things could change rapidly if the economic/consumer outlook improves and gaps in supply suddenly need filling. 

Recent falls in the oil price have helped keep inflation in better check, especially in the US, but another upward pressure on inflation is high food and dry-good prices which – and the wine industry has been all too aware of this – is partly attributable to very high shipping costs. In a world interconnected by loops of shipping lanes, high container prices and added surcharges – together with container shortages still not fully resolved some months after the pandemic – can only serve to help keep inflation at an elevated level. Shipping’s importance in this was illustrated by the French government’s request to France-based CMA CGM to lower its prices as part of efforts to curb inflation. Such high shipping prices put immense pressure on both the buyer and seller to make a transaction work, in bulk wine as in any industry. It may be time for shipping companies to play a part in easing the business cost burden, for the good of the global economy. 

As we move towards the final quarter of 2022, market uncertainty – in the main – persists. Get in touch with Ciatti, who can draw on decades of experience to help buyers and sellers alike to anticipate the future marketplace. In the meantime, read on for detailed updates from each market.

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