HARVEST WATCH: 2.5 million metric tons; quality excellent Autumn is turning to winter in Argentina’s growing areas and there have been some low temperatures and snowstorms in the mountains. These normal conditions are allowing the vines to rest after a growing season that saw them yield 2.5 million metric tons of wine grapes (the accumulated total as of 2 June), down only slightly from the 2.55 MMT in 2018. May was a relatively quiet month on Argentina’s bulk wine market as growers and wineries worked to finalise the 2019 wines. The perception is that – quality-wise – the new vintage is one of the country’s best in recent years, with maturity, ripeness and colour all excellent. As part of a package of assistance for the wine industry during Argentina’s economic struggles, the Mendoza provincial government is offering wineries tax incentives to export. There is an understanding that Argentina’s combined 2018 and 2019 inventory is significant and, with domestic demand flagging, international markets are the best bet. The latest official carryover data shows there is 7.6 months’ worth of stock of red wines (546 million litres) and 7.1 months’ worth of stock of whites (189 million litres), so over 700 million litres in total. This ample supply has meant low and stable prices: Argentina’s generic reds and whites are priced at approximately USD0.28/litre and USD0.25/litre respectively. All prices are negotiable. Argentina’s bulk wine market has thus been receiving encouraging levels of international buyer interest. Some of this can be accounted for by upward pressure on prices in Chile and Australia – Argentina has received Chinese interest, for example. Argentina’s low prices are also proving attractive to buyers situated in traditional producer countries such as South Africa, where domestic supply is difficult to find and/or high in price. Domestic bulk wine demand continues to be subdued: Argentina’s ongoing recession is suppressing consumer demand. Inflation is running at an annual rate of close to 55%, hitting savings, while interest rates are currently around 70%. Argentina is also one of a group of countries repeatedly cited as especially vulnerable to market volatility caused by the US-China trade war. The peso-US dollar exchange rate, however, has remained stable since last month at ARS44-46/dollar despite the dollar strengthening against most other currencies: the peso is being artificially held in this band by the Argentinian government, seeking re-election in October.
HARVEST WATCH: Approx. 1.00-1.10 billion litres Chile’s harvest drew to a close in May. Picking weather was excellent, with no rain to rush wineries, so that crushing proceeded smoothly. The lack of rainfall has been a cause for concern regarding vine rest and water reserve replenishment: Maipo (Santiago) has seen only 21.8 millimetres of rain so far in 2019, 81% down from the normal 111.9 mm, while the Valle Central (Curico) has seen 74.6 mm, down 68% from 231.4 mm. More rain is forecast. Plenty of late rain is needed to replenish water reserves and boost snowpack levels: Chile’s ski season is due to start more than a month later than it did last year. Demand for Chile’s bulk wine continues to be very strong from all over world, assisted by the country’s many free trade agreements, good price on varietal wines, and the excellent quality of its 2019 vintage – the reds in particular are considered “outstanding”, among the country’s best in the past ten years, with intense colour. Push factors to Chile include high pricing and/ or short supply in South Africa and Australia. The price-quality sweet spot seems to have been reached in Chile, drawing in many buyers who had been holding off. As a result, its 2018 wines are now almost sold out, so too 2019 Chardonnay and Pinot Grigio. Other varietal bulk wines – Merlot, Pinot Noir, Cabernet and Sauvignon – are also seeing big demand. An 11% increase in Chile’s bulk exports in the January to April period – compared to the same period of 2018 – offset a 2.7% fall in bottled exports. This kept Chile’s total wine exports in positive territory (+2.5% to 286 million litres). The Chilean peso moved past the CLP700/dollar mark on 29th May, then returned to the CLP690s on 5th June where it has remained since. This weakness against the dollar was attributed to the ongoing US-China ‘trade war’.