Wine Business International

Vintage Reports

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October 13^th 2006

Argentina: Plenty and good

by Daniel López Roca

The Argentinean producers are absoltely elated with the results of the 2006 harvest which ended on the 30th of April. 2.855 million kilos of grapes produced 1.360 million litres of wine and 611 million litres of must according to the National Institute of Viniculture..

This represents a slight increase over 2005 which brought in 2.800 million kilos, producing 1.350 million litres of wine.
Mendoza again headed the field with 1.910 million kilos producing 987 million litres of wine and 338 of must; San Juan followed with 778 million kilos of grapes producing 281 litres of wine and 251 of must. The average alcoholic maturity from the two most important producing provinces in the country is estimated at 13.3% in Mendoza and and 13.2% in San Juan.

In terms of quality most oenologists think that 2006 will be one of the finest vintages of the last decade. The only worry for buyers is volumes. Exports are booming, which is putting pressure on prices, but most agree that the market could easily support slight increases should they come. In the first half of this year almost 40% more volume was shipped than in the same period in 2005, putting the country on track to set new export records. It is estimated that Argentina will export 40 million litres this year to the United States alone. This represents almost a quarter of total exports of approximately 170 million litres, but still only a small part of the average annual production. The USA continues to be by far the main destination for Argentinean wine, followed by the United Kingdom with some 10% and both Brazil and Canada with about 7% each. To date 115 million litres of wine have been sold for $168 million ($131m). This represents a 38.6% increase in volume but only 30.5% increase in value compared to 2005, pointing to a slight fall in average price.

For that reason a Viniculture Association has been established, uniting the various bodies involved in wine production. Their board acts as a platform to deal with both economic and political issues of viniculture and is presently trying to buttress pricing. To this end they have requested that the state provide an export incentive of $0.03 per litre of wine and hope to move 50 million litres of bulk at a price under $0.20 per litre. If this initial volume moves, another 50 million litres could follow, indicating that there is still sufficient wine in the market - and that such excess stocks are responsible for the 19% fall in the price of bulk wine. While prices for bag-inbox are essentially stable, bottled wines are showing a slight increase. So far this year 275 Argentinean cellars have exported some 1.207 different wines. The list by turnover is headed by Trapiche, while Uvita (RPB) heads the bulk exportation. A slight increase in domestic consumption, which in spite of inflation is slowly recuperating at the rate of 2%, should ease pressure as well. The large investments made in vineyards and cellars in the 1990s are beginning to bear fruits for the industry. The worry of producers is that internal costs, which continue to rise with inflation, will diminish their margins.

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