Europe’s vineyards reform under threat from New World wines | The Australian

Europe's vineyards reform under threat from New World wines | The Australian

An interesting article on the nature of the wine in industry in Europe. The EU has mandated which vignerons may grow which grape variety and where, an extraordinary intrusion of bureaucracy into the free market, as a condition of higher subsidies. It was intended to ration supply and prevent price collapse. The result has worked as well as any extraordinary intrusion of bureaucracy into the free market does; not very well. Wine prices in Europe remain extraordinarily low and more nimble producers from the New World are still capturing market share.

The easiest way to prevent the overproduction that causes gluts is to abolish subsidies and let the market determine demand, not some Soviet central planning approach. If the EU can unwind its massive subsidies to the wine industry and let the market work its way out, the survivors will be much stronger companies capable of seeing off competition from imports and driving exports harder. Higher wine prices would also create more opportunities for Georgia to compete in export markets.

FACED by increasingly ferocious competition from New World wines, Europe’s top producer nations kicked off talks to decide whether or not to liberalise the planting of vineyards.

In discussions scheduled to last until the end of the year, a high-level group will decide whether or not to go ahead with plans to abolish by 2018 wine planting rights, determining which grapes are planted where.


Originally agreed by EU nations in 2008 as part of a package of sweeping reforms, top producers such as France and Spain are now calling for a U-turn on the grounds that European wines could lose their identity should growers be allowed to freely choose where and what grape variety to plant.


The 2008 European Union scheme also called for the removal of poor vines, an end to the distillation of surpluses, and higher subsidies to modernise the wine industry as it faced growing pressure from New World bottles.


While the EU remains world leader, with 65 per cent of production and 70 per cent of exports, “it is also the top importer”, EU Farms Commissioner Dacian Ciolos said.


And it remains under sharp pressure.


In Britain, sales of European wines are neck-to-neck with New World rivals and China is slowly but surely also taking to wine drinking.


Chile meanwhile is planning to plant 100,000 extra hectares by 2020 to increase its exports by 10 per cent per year as vineyards in France shrink 11 per cent in a decade and 14 per cent in Spain and in Italy.


In this context, the European Federation of Origin Wines (EFOW) fears that the abolition of the planting rights system could undermine the quality and reputation of Europe’s fine tipples.


So EFOW quality wine-makers from France, Italy and Spain have convinced their governments as well as those in a dozen other EU nations to rethink the 2008 reform.


An end to the current restrictions on where and what to plant could trigger over-production and a fall in prices as well as lead to a greater industrialisation of the sector which would undermine the small prestigious estates that drive sales.


“The question is not whether or not we maintain the existing system, but, if we do keep the context, how can we be more efficient than in the past?” said Mr Ciolos.


“We are ready to discuss this in a pragmatic way,” he said. “If we have enough member states who want to re-open the question, the Commission is ready to discuss.”


But “on planting rights we need the analysis and expert advice first.”


Opening the first of four meetings to re-think the wine reform package, Mr Ciolos said he would oppose a return to the highly interventionist policies of the late 1970s, when there was a ban on planting and the obligation to distill any surplus.


The sector achieved a better balance between supply and demand around 2000 after receiving help to restructure vineyards in order to produce higher quality wines. But even then, considerable funds had to be spent to dispose of surpluses.


Mr Ciolos said he believed European vintners needed more flexibility to satisfy wine-lovers who “are more curious, more volatile” nowadays as trends become “more fleeting, faster, specially on new emerging markets,” such as China.

via Europe’s vineyards reform under threat from New World wines | The Australian.


Food Security for Georgia 2011

The FAO recently collated figures, based on Geostat data, on the food security situation in Georgia in 2011. I have picked a few figures of interest.

GDP Growth: 7%

Population Growth: 0.7%

Consumer Price Index (2010 = 100): 108

Food Price Index (2010=100): 115

Share of Plant Production/Animal Production in Agricultural GDP (%/%): 40/57

Increase in domestic fertiliser price: 9%

Increase in imported fertiliser price: 12%

Increase in beef price: 38%

Cereal grain imports: 565 000 tonnes

Decrease in cereal grain imports: 23%

Decrease in cereal grain import value: 9%

Some comments:

Population increase is gratifying to see, as many former Soviet countries have population decline.

A CPI of 8% and food price increase of 15% is disconcerting, as the value of the Lari to the US Dollar has changed very little over 2010-11. World food prices are relatively high, driven by multiple factors; as a rule, financial sector insecurity results in investors overweighting commodities, including food commodities. Fertiliser prices tend to track hydrocarbon prices quite closely, as natural gas is the usual material used for production of ammonia and urea.

It is interesting to see over half the agricultural GDP accounted for by livestock production. I believe that as poultry, pork, dairy and beef breeding expand and become more professionalised, that livestock production will account for more than 2/3 of agricultural GDP.

The increase in beef price last year caused a great deal of public outcry, with various accusations regarding government policy driving cattle slaughtering out of the backyard and into commercial abattoirs. That said, it should be remembered that beef price in Georgia is only half that of Azerbaijan and lower than Turkey, so there is still scope for prices to rise as Azeri importers absorb more of the young bull production and domestic supply tightens.

Georgia now is more or less self-sufficient for corn, although it will need to increase production to satisfy demand by the growing poultry and pig industries, at a rate of roughly 5 tonnes corn to each tonne of bone-in pork or chicken. Georgia’s reliance on wheat imports for bread is a hot political issue; poorer city dwellers want flour to be subsidised or price-controlled, wheat farmers want prices to remain high, and the government does not want to be caught short of wheat should a conflict with Russia break out again and Georgia’s ports be blockaded.

Georgia has no competitive strengths in wheat production; land plots are small and so production is much less efficient than large operations on tens of thousands of hectares on the plains of Ukraine, Kazakhstan, southern Russia and Siberia. A rough farmer’s rule of thumb is that one must have 3000 Ha under crop to justify the investment in modern farm machinery that will drive efficiency to international norms. High land taxes and operating costs mean Georgia will never be internationally cost-competitive in this crop. Conversion of cereal cropping land to irrigated vegetable production is an inevitable trend. Hence, a state-run strategic wheat reserve, such as is run by the Chinese government, will be a necessary aspect of national defense.