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Source: The Atlantic
By: Roberto A. Ferdman
10.29.2013

It isn’t only France that’s suffering from a dearth of wine—it’s the entire world, says a report released on Monday (Oct. 28) by Morgan Stanley Research.

And the shortage is only getting worse.

Last year, global supply for wine already barely exceeded demand. Adjusting the demand to include non-wine uses (such as making vermouth), there was actually an undersupply of about 300 million cases, marking the largest such shortfall in almost 50 years.

At the current pace, a global shortage of wine is fast approaching. “Data suggests there may be insufficient supply to meet demand in coming years, as current vintages are released,” the report says.

The problem is something of a two-headed monster.

On the One Hand…

Global wine consumption has been on the rise almost without interruption (save for a short stint between 2008 and 2009) since the late 1990s.

The US and China, in particular, have been drinking more. The US, which guzzles roughly 12% of the world’s wine, has seen its per capita consumption double since the start of the century. And China, which is now the world’s fifth largest import market, has doubled its consumption not once, but twice in the past five years.

On the Other…

World production hasn’t managed to keep pace. Outputs have steadily declined in a number of the world’s most prosperous regions. Overall, global production has been on a downward trend ever since the early 2000s, when there were still massive excesses. Peak wine, the report holds, isn’t merely upon us; it already happened—back in 2004.

Lagging production in the world’s three largest wine-producing countries—Spain, France and Italy—is largely to blame. “Area under vine” (the amount of land being used to grow grapes for wine-making) has fallen considerably in all three since 2001.

This year has been a surprisingly good year for winemakers, after poor weather wrought an exceptionally weak harvest in 2012. Global wine production for 2013 is seen rising to seven-year highs, according to the International Organization of Vine and Wine. “After five modest harvests in a row and an exceptionally weak 2012 harvest, wine production in 2013 can be qualified as relatively high,” the organization said in a press release.

Reversing the current trend will require more than a single, strong harvest. The US and China alone are projected to consume over 400 million cases of wine a piece by 2016. Who will supply them? They themselves are nowhere near that level of production. And Europe, which has easily been suffering the steepest decline in wine production (roughly 25% since 2004) will have to reverse its recent bout of poor harvests well into the century to continue supplying the world—Europe, after all, still makes roughly 60% of the world’s wine. Nowhere else is wine production growing fast enough to suffice. The “new world” market, which includes the US, Australia, Argentina, Chile, South Africa and New Zealand, still accounts for less than 30% of global wine exports, and even less of global wine production.

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