Editorial: War's over
OPINION: In recent years farmers have been crying foul of unworkable and expensive regulations.
With the 2013 wines shortly to hit the retail stores, it is perhaps worthwhile to have a look at the impact vintage 2012 had on the industry over the past year. If you need reminding the 2012 harvest generated just 269,000 tonnes of grapes, down 18% on 2011. It was anticipated the smaller harvest would have a significant impact on the supply demand balance in the industry, the value and volume of sales, market orientation of sales and grape prices amongst other matters. This has certainly proven to be the case.
Total Sales
Total sales of New Zealand wine for the June year end (JYE) 2012 were 243.5 million litres. With the vintage down 18%, but with some stock to draw down on, our view was that total sales of New Zealand wine JYE 2013 would fall by up to 15% as a result. To the end of February this year, total sales of New Zealand wine are estimated to be down just under 10%, so by JYE 2013 it would seem sales are going to be significantly down on the previous year.
Export Volumes
Our expectation was that JYE 2013 export volumes would fall by up to 10% or around 18 million litres on the previous year. For the 10 months to the end of April export volumes are down 6%. Whether this reduction will be maintained over coming months will be interesting to see, as with stocks low it may be that a number of wineries bring forward the release of their 2013 wines.
Packaged Exports Still Growing
Despite the fact we expected there would be a reduction in the overall volume of wine exports, our expectation was that packaged exports would continue to grow for JYE 2013. This has proved to be the case as for the 10 months to April, packaged exports are up 5.5% on the previous year. This is in line with our view for 5% packaged wine export growth for the year to June 2013.
Bulk Exports Fall
On the other hand we expected there would be a marked reduction in export of bulk wine and we further expected most of that reduction to occur with exports of unpackaged wine into the UK. Again this expectation has largely eventuated. For the 10 months to April 2013, total exports of unpackaged wine are down 24% (or around 14 million litres) while unpackaged exports to the UK for the same period are down 42%.
What About Pricing?
Our expectations for pricing were two-fold: First, bulk export prices would rise by over $1 per litre to around $4 per litre; on the other hand we expected packaged export prices to respond much more slowly to the new wine shortage.
Again experience to date has largely followed these expectations with FOB prices for bulk wine now averaging $3.60 per litre over 80 cents up on last year. By contrast, there has as yet been little movement in packaged export prices, although there are signs of this in the UK market. The increase in the exchange rate over the past 12 months has, of course, impacted the FOB returns, but the clear signs are that the packaged export prices have yet to respond significantly to the changed supply demand balance in the industry.
Grape Prices?
And finally grape prices, yes our expectation was that grape prices on the back of the changed supply demand balance in the industry would increase in 2013. Anecdotally it would appear that this is certainly the case, but we will only know the extent of the increase when the grape price data from this vintage becomes available a little later in the year.
There are lots of numbers in the above, but behind them lies a single message – the supply demand balance in the industry has a significant impact on the operating dynamics of the sector.
Change the supply demand balance and sales, volumes, types, values, and destination markets will all change. The supply demand balance is not the only factor affecting these, but it is certainly an important one. ν
