In-Market Insights - Julian Grubb, Chile + Argentina
By Julian Grubb, VINEX Regional Manager - South America
How is the vintage going for Chile and Argentina?
Chile:
- Overall harvest is projected to be approximately 1,150M litres, equal to the long term average. White wines should be 25% higher than 2017 with 50m additional litres.
- Still 50% of harvest to come and views on quality and quantity of this fascinating vintage change almost weekly. The harvest is at least two weeks later than last year and 10 days behind an “average year”.
- Ripening has been extremely slow, resulting in lower ABVs and larger cellars are harvesting at low brix levels for logistic reasons.
Argentina:
- Harvest is wrapping up, with both quality and quantity looking excellent.
- Production is likely to be at upper end of forecast at around 2.3 million tonnes, sufficient to restock wineries and stabilise supply after two terrible vintages. ABV levels will be low.
- White volumes look to be particularly high.
What impact is it likely to have on grape prices?
- Grape prices in 2018 are at historically high levels, pushed up in December and January by a general panic over the world supply situation and low levels of stock in Chile.
- For example, Central Valley Cabernet Sauvignon has been trading at $300 - $350 base per kg, plus alcohol bonus (base 12%) ie US$0.50-0.60.
- Chilean bulk wine prices 20% up on 2017 during January and February but stabilised in March as harvest prospects look good and buyers realised the potential impact of COGs increases on sales, and scaled back requirements.
- I believe Chilean prices will stabilise and soften slightly, but not drop drastically. The markets cannot accept prices over $1.10 for Central Valley Cabernet.
- Argentina is seeing significant softening in prices, as the good harvest reports started to come in, compounded with reduced domestic demand and steadily weakening currency. Argentina has the potential to become an important bulk destination during 2018. Malbec dropped below $1.50 / litre in January, and is now trading at $1.20-1.40, although FOB costs and CCT into the EU still make it unattractive compared to Chile.