March 25, 2023

Luis Planas, Minister of Agriculture, is possibly the member of the Council of Ministers who measures his words the most. For this reason, it is not usual to make direct reference to a specific sector without a good reason. The head of Agriculture observed yesterday against “the mismatch between supply and demand” in the wine market, as well as against prices that, he estimated, “are between five and seven percent lower.” In any case, he asked winegrowers and winemakers “not to panic” and mentioned the upcoming start-up of aid for the green harvest for an amount of 15 million euros. Was the minister right to verbalize his concern? The rebalancing plan announced this week by the Rioja Designation of Origin (DOCa Rioja), as well as production cost overruns, the behavior of some key markets such as the United Kingdom and the escalation of food, support these concerns.

It is true that Planas himself added that “fortunately there is no great crisis at this time, but there is a horizon of concern”. Last year, according to the Spanish Wine Market Observatory (OEMV), closed with a record turnover of 2,980 million euros (89.6 million more than in 2021) although in terms of volume a 9% drop was broken up to 2,089.5 million liters (almost 213 million less than in the year 2021). A figure not alien to the phenomenon of inflation. “The data for the second half of 2022 pointed to a significant slowdown in total wine sales in Spain, so the modest advance in the commercialization of Rioja national sales represents a strengthening of our position in the market,” declared the president of the regulatory council of the Rioja Qualified Denomination of Origin Fernando Ezquerro last February during the balance press conference for the year 2022.

a perfect storm

However, as the saying goes, when the river sounds it is that water carries. The same body adopted this past Tuesday a plan to rebalance supply and demand, by which it gave the green light to an adjustment of production yields for the 2023 and 2024 vintages of 90% in the case of red grapes. In the case of white grapes, intended for the production of white wine, it will remain at 100%. In addition, the main body of the Denomination will comply with limiting the entry of table grapes to 4% and the transformation yield to 69% (70% for white grapes).

The general director of Grupo Rioja, Iñigo Torres, has stated in La Información that in order to recover the balance between supply and demand, it was necessary to “adjust the yields in the vineyard and the winery to maximize the quality of our wines”. In addition, it has accepted its concern about the situation of key export markets such as the United Kingdom, which consumed 11.45% less, although Rioja saw this partially offset by strong growth in markets such as Belgium (+27.13%) and, above all, Mexico, which increased its imports by 26.13%.

A situation that Torres has blamed on the “current economic crisis” characterized by “soaring inflation and rising interest rates, which reduce citizens’ disposable income.” This has been considered to especially affect wine “which is not a staple product” although it has considered that, in the case of Spain, consumption is recovering thanks to the return of the hospitality industry “but more slowly than usual planned”.

Another important factor is production costs, which, as in the rest of the Spanish countryside, have been skyrocketing for months and have a direct impact on the entire agri-food chain. Torres has recognized that this situation is negatively affecting everyone, both winegrowers and wineries. “This reduces the competitiveness of our wines in a sector as demanding as wine,” he lamented.

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