In Australia's case, the export of wine is now being seriously compromised (Australian wine exports to China fall by 98 per cent). As a result, wine producers are being encouraged to return to traditional markets including the United Kingdom, the USA, Canada, and Germany. There is also likely to be a drop in grape and wine prices (Red wine prices tipped to plummet as exports to China trickle to a halt). It is therefore instructive to look at the sort of price that the Australians currently get for their exported wines. In this post, I will look at bulk wine exports.
One obvious place to look is what was traditionally Australia's biggest wine export market: the United Kingdom. The British have imported bulk wine from lots of places, because they did not have much of a wine-producing industry of their own, until global warming started to have a detectable effect.
The following graph illustrates the top six importers in 2020 (from Top bulk wine suppliers to the UK, 2019 v 2020). It shows the total amount of bulk wine (horizontally) and the price paid for that wine (vertically), with each point representing a named import country. The pink point represents the total for the remaining countries.
Note that Australia is by far the biggest importer by volume, but the price received is very poor. Indeed, the New Zealand wine garners 2.6 times as much money per liter; and the USA is actually the biggest importer by total value (£123.9 million, versus £122.5 million for Australia).
The Australians will need to do better than this from their remaining trading partners, if they are thinking of continuing to rile some of them. A summary of exports during 2020 is included in: Australian wine exports slow due to China tariffs.
For comparison, we could look at bulk exports from Italy. The next graph illustrates the top 20 importers of Italian bulk wine in 2020 (from Italian bulk wine exports, 2019 vs 2020). It is arranged the same as the first graph, except that only seven of the countries are labeled, and volume uses a logarithmic scale.
Here, Germany imports an order of magnitude more Italian bulk wine than does anyone else, and pays an average that is less than most of the other countries. So, the Italians are not doing so well here, either. Indeed, only three countries pay well above the odds for their bulk Italian wine, including the USA and China. Note that Norway pays more than do the other Scandinavian countries, which pay about average (Sweden is labeled, and Denmark is the point just below the pink dot).
Mind you, it is not at all clear about the fate of the German imports. Back in 2017, this report appeared from Angelo Cotrone (Bulk wine comes into its own):
More than 40% of all wine produced in the world is exported, of which 40% is shipped in bulk, a tendency that’s rising. In some countries, more than 60% to 70% is shipped in bulk. Much of this wine is sent first to Germany for bottling, before being re-exported to its destination market. Germany is a global hub. Over 3 million hL are exported from Germany, but only a third are German wines.
Germany’s automated bottling lines are so efficient that it costs less for Chile to bottle in Germany and then send the wine back to South America, than for Chile to bottle locally. US wines are bottled in Germany and re-exported to the US. We can bottle wines in Germany for about €0.30 per bottle, and the costs go down with volume. In the US, bottling costs around $1.00 per bottle, with Australia somewhere in the mid-range. Transport is about €0.10 per Litre.The effect of this eccentric behavior on the global carbon footprint is another thing altogether, of course. You can check out the total wine exports from Germany here: Major export markets for wine from Germany in 2019).
Anyway, a direct comparison with Italy suggests that the Australian bulk wine exports into the UK are actually not too bad, as they beat the price of the bottom nine export countries from Italy; and their UK price considerably beats the Italian export price to Germany, even though the volume involved is roughly the same. The issue, then, is that the Italians are not trying to antagonize any of their wine recipients, and thus disrupting their market.
* The ultimate problem was deteriorating trade relations (What does China really want from anti-dumping probe into Australian wine?). This was exacerbated when a politician decided to shoot his country in the head (rather than the more traditional foot, usually favored by politicians) by demanding that China be investigated over the origin of the SARS-CoV-2 virus (see this report from way back in April: Chinese ambassador threatens boycott of Australian wine, and this one from May: China considers targeting Australian wine). No-one demanded this for the H1N1 influenza epidemic (2009), which came out of Kansas, nor the Spanish Flu (1918), which also came out of Kansas. Apparently, some trading partners shall be investigated but not others. Interestingly, much of the Australian wine media seem to be blaming the Chinese for the current trade dispute. Perhaps the most same commentary has come from Jeremy Oliver: Do we want to save the China wine market?
I'm pretty sure neither H1N1 nor the "Spanish" flu originated in Kansas. Are you using Kansas euphemistically?
ReplyDeleteBoth epidemics are well documented, as arising in the pig farms of Kansas. Pigs are a well-known source of diseases for humans (as are birds). The trail of the Spanish Flu from the pig farms to the troop camps, and onto the troop ships bound for war-torn Europe, has been described even at book length.
DeleteThanks for your reply! I appreciate the insight.
DeleteYou are failing to take into account transfer pricing, which means the major international wineries operating out of Australia, are declaring export prices way below trade prices, and are doing their bottling in EU, for EU distribution [inc UK ] if you think the export price on these shipments is the market price,you will be very misinformed.
ReplyDeleteYes, all export data are overly simplistic. Economics is never as simple as it is presented.
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