Global Wine Shortage

The world is undergoing a wine shortage as the consumer demand outmatches the supply. In 2012, the demand for wine surpassed supply by over 300 million cases. Production dropped to its lowest levels, and global production has been declining since 2004 when supply surpassed demand by approximately 600 million cases. According to Morgan Stanley’s analysts, global wine consumption had risen since 1996, with the exclusion of the 2008-2009 year. Global consumption is at about 3 billion cases per year. Currently, more than a million wine producers exist, and together they make about 2.8 billion cases per year. The analysts predict that inventories will be reduced soon as previous vintages, or older wine products, supply current consumption. The analysts tie this occurrence with the decrease in production in Europe due to inclement weather and other factors. The total production in Europe decreased by ten percent in the previous year and fell by twenty-five percent since its zenith in 2004. While production has been declining in Europe, it has been increasing at a steady pace in the Western Hemisphere. It seems that the New World will benefit the most from the increasing demand on global markets.

                The wine industry is undergoing an imbalance of the supply and demand curves as production decreases in the European countries. The supply used to exceed the demand in the previous years, but as wine suppliers reduced their production, the opposite has happened. Consumers are demanding more wine than what is being produced. The demand curve has been shifted to the right, which increases the price of the good produced, in this case wine. The supply curve has also shifted, but to the left, which in turn increases the price for wine while it provides a smaller quantity. Wine producers see this as an opportunity to charge more for wine. Europe is also trying to sell older wine produced and leftover from the previous year and it went under poor harvest recently, so it makes sense that less wine is produced. What European countries probably did not count on was that the producers from the New World would be able to take advantage of this situation. Wine producing countries such as Chile, Argentina, United States, South Africa, and New Zealand, are increasing their wine production, thus enabling them to provide the amount of wine that Europe is not able to offer to the global consumers and earn more profit. This can be beneficial to the developing countries such as Argentina, South Africa, and Chile, for increased trade means more revenue for the countries. This is especially good for Chile since wine production and grape agriculture plays a key role in its economy.

Based on http://www.bbc.co.uk/news/world-24746539