My Thoughts on Technology and Jamaica: Australian analyst Morgan Stanley Stats say World Faces Global Wine Shortage - The Glass is either Half Empty of Half full as Chinese and Americans become more like the French

Friday, December 13, 2013

Australian analyst Morgan Stanley Stats say World Faces Global Wine Shortage - The Glass is either Half Empty of Half full as Chinese and Americans become more like the French

Australian Analyst Morgan Stanley has declared something that I thought was improbable given the nature of the item and the Statement. They’ve stated that the World is running out of Wine as stated in “World faces Global Wine shortage - report”, published 30 October 2013 Last updated at 18:07 GMT, BBC News and “Global Wine shortage on the horizon, economists warn”, published 30 Oct 2013 10:35AM GMT By Denise Roland, The UK Telegraph

You might want to do like the lady is doing in the photograph as Wines produced the way we do now may go extinct by 2020! As hoarding Wine, that’s pointless; you’ll eventually find some reason to imbibe, be it celebration or in times of melancholy!

It also tells me what I need to get this Christmas: A bottle of Wine, be it Red or White for each day of Christmas as described in “Wines for the 12 Days of Christmas”, published Thursday, December 24, 2009 by Christopher Record, The Jamaica Observer and “Raise your glass - Wine flavours”, Published Thursday December 12, 2013, The Jamaica Gleaner.

But this news makes you wonder. Is this a case of the Boy Crying Wolf just to increase the payout on a financial Bet on a company, in this case Australian Vinery Treasury Wine Estates?

Apparently it’s the fault of the Americans and the Chinese; they’re drinking it all! America is on pace to become as big a Wine drinking nation as France and the Chinese have doubled their Wine consumption in the past five years according to the Morgan Stanley report.

1.      12% France
2.      12% USA
3.      9% Italy
4.      9% China 
5.      8% Germany
6.      5% UK
7.      5% Russia  
8.      4% Spain
9.      4% Argentina

By their numbers, Global Wine Production stands at 2.8 billion cases of Wine per annum from some 1 million Winemakers in both the Old World and New Worlds while Global Demand is outstripping that at 3 billion cases of Wine per annum. This works out to be roughly 300 million Cases, approximately the amount of Merlot (Brit’s favourite Vintage!) that the UK Drink in two (2) years as per the video above!

That means our American and Chinese Connoisseurs are drinking off all the Good stuff from the Old World producers, which are mostly located in Europe e.g. France, Italy, Spain, Portugal and Germany, forcing the New World Producers i.e. US, Australia, Argentina, Chile, South Africa and New Zealand to ramp up Production of two (2) year old Vintages to meet demand.
Old World Growing less Grapes – Collision course to outstrip Wine Production in 2020

But it’s not just more Wine being consumed by suddenly cultured Americans and Chinese. It’s also being made worse by the decline of land areas under Grape cultivation, the traditional food crop fermented to make Wine. According to Morgan Stanley the years 2004 and 2006 in Europe saw a massive oversupply of Wine as that was BEFORE the Global Recession.

We may STILL be heading for a Second Recession soon as I’d predicted in my blog article entitled “EU, USA and the Second Recession - Economist Dennis Chung's Andromeda and The Long Night”. As we all know, the Recession in the US of A happened around 2008. 

Around that time in 2008, Production began to plummet, as the Global Economic Downturn in terms of demand for Wine as well as loss of financing from the imposed Austerity packages in 2011 from indebted Banks in Italy, Greece and France as described in my blog article entitled “EU Debt Deal Reached on Wednesday October 27 2011 - Austerity measures for sustained Recovery” forced many Old World Wine producers out of business between 2008 and 2012.

Thus there are less Acreages growing Grapes in the Old World. That’s when the problem started.

This was a boon to the New World Wine producers in the US, Australia, Argentina, Chile, South Africa and New Zealand who began capitalizing on the opportunity to ramp up Production. Thus by 2012, with reduced acreages under Wine Production from the Old World, New World Wine producers suddenly found their Wines in demand and their Vintages flying of the shelves as supply from the Old World Wine Producers began to outstrip demand. 

The shortage isn’t visible now as most Wine in 2013 was produced and bottled from Grapes that was grown and fermented two (2) years prior in 2011. But as 2014 comes around, Morgan Stanley is predicting that Global Shortage will become visible to consumers, as 2012 Production of Grapes from Vineyards that have been closed down in Europe would affect Old World Wines Production but not New World Wines such as those in Australia.

This is not even considering rare Vintages that take longer than two (2) years to ferment in those big underground casks or the more modern Stainless Steel Vats used by Mass producers of Wine.

A good example of this outside of Australia is the American Carlos Daley CEO of Asymmetrical Investments and Financial Planning Company Limited, who sponsoring an International Reggae Wine Festival in Jamaica and promoting his own line of Reggae Themed Wines as explained in “Reggae Wine from Indiana to be launched in Jamaica”, Published Sunday December 8, 2013 by Richard Browne, Business Reporter, The Jamaica Gleaner. They’re riding this wave using the popularity of Reggae and Brand Jamaica to promote their Bob Marley Fruity Wine Selection.

Is this for Real or a Hoax – Arguments for and Against the Coming Wine Shortage

It’s this demand for New World Wines which explains the blind optimism of the New World Wine Producer’s as this coming shortage benefits them. However, could Morgan Stanley have made a mistake? According to Bin32 Owner and Businessman Christopher Reckord in the article “What Wine Shortage?!”, published Thursday, December 05, 2013 by Christopher Reckord, The Jamaica Observer it’s just hype being generated to boost stocks in Treasury Wine Estates, a Vinery in Australia that’s Australian based Morgan Stanley’s pick for Top Australian Wine Producer.

This is the theory posited by Reuters blogger Felix Salmon in his analysis of the Morgan Stanley Stats using the original source stats from the OIV (Organisation Internationale de la Vigne et du Vin) in his article “There’s no Global Wine shortage”, published November 1, 2013 By Felix Salmon, Reuters Blog as the original report was written by Morgan Stanley Australia.

Apparently investors that follow Morgan Stanley’s advice have a lot of money invested in this Vinery and thus decided to use their good name to deceive the World into believing that Wine would be in short supply and thus drive stock prices up.

His main evidence is the original graphs from OIV as shown below which suggest the period of 2008-2012 of Wine Shortage may be coming to an end by 2014. Good to note here these are estimate graphs as well, no different from those used by Morgan Stanley! 

The Global Wine Shortage – The Glass is Half Full and Half Empty

The Main Difference is that the OIV is estimating an increase in Production in 2013, whereas Morgan Stanley is projecting a Decline, based on the coming demand from USA and China.

Therein lies the Rub; neither Australian analyst Morgan Stanley or Reuters blogger Felix Salmon are any more credible as they’re BOTH Estimates as pointed out in the unbiased article “A Global Wine shortage could soon be upon us”, published October 29, 2013 By Roberto A. Ferdman, Quartz.

The reality aside from Wine Production in either the Old World or the New World Vineries is still true though:

1.      Americans and Chinese are projected to consume over 400 million cases of Wine by 2016
2.      2008 Recession hit vineyards in the Old World supply nearly 60% of Global Demand for Wine have seen a 25% decline since 2004.
3.      New World Vineyards are a mere 30% of Global Wine Production and even lower for Global Wine Exports
4.      No new Vineyards aside from the New World Vineries in US, Australia, Argentina, Chile, South Africa and New Zealand have come online

So while it presents an opportunity for News World producers to ramp up to meet demand and thus stave off a Shortage (Reuters blogger Felix Salmon argument), they may not be able to ramp up fast enough to satiate the growing Global demand muchless the projected demand from North America and China (Australian Morgan Stanley argument) alone.

Note I said Global Demand; America and China are not the only ones developing a taste for Wine. South America, The Caribbean and Africa are slowly catching on to the trend from the First World Countries. Wine, once a rich man’s drink, is now common even in shows such as the Big Bang Theory, where the actors, especially Kaley Cuouco aka Penny drink an awful lot of the stuff!

In addition, there is also an increase in the demand for land for the Production of other Agricultural produce to meet a coming Global crunch in Food Supply in the next 20 years projected by the UNFAO (United Nations Food and Agriculture Organization)  as explained in my blog article entitled “United Nations Food and Agriculture Organization says Insects is the Meat for the next 20 years - Soylent Green may be avoided via Indiana Jones and the Temple of Doom”.

So the Glass is Half Full – or half Empty, depending on who you choose to be, that being an Optimist (Reuters blogger Felix Salmon argument) or a pessimist (Australian Morgan Stanley argument). Cheers to you and yours this Christmas 2013 and a Happy New Year in 2014…as depending on how this all pans out, this may be the last toast you Make!

No comments: