27 September 2005

HISTORIC GRAPE HARVEST IN CHILE

(Sept. 27, 2005) Wine producers breathed a sigh of relief as Aníbal Ariztía, President of the Chilean Wine Association, announced a historic grape harvest this year - up 25 percent over 2004.

Wine producers have had a hard time over the last few years because of the high cost of primary materials needed to make their wine. In 2004 grape harvests decreased six percent from the year before at the same time as Chilean wine exports grew 20 percent. The high demand for grapes to create wine to export and the short supply of them in Chile drove up the overall cost of producing a bottle of wine.

On top of the rising cost of primary material, wine exporters suffered along with the rest of the world as the value of the dollar decreased on world markets. Chilean wine exporters have earned less in US markets because of the devaluation of the US dollar, further adding to their financial difficulties.

Vineyards have steadily increased the number of hectares planted with grape stock over the last several years in an effort to stabilize the supply of grapes. By increasing the amount of grapes available in Chile, primary material prices have gone down thereby allowing wine producers to recover share prices of investments in their companies.

“The increase in harvests should have a calming effect on the prices of primary material.” said Ariztía, “It should create equilibrium between supply and demand that will bring about a cycle of rising prices for red wines that will eventually level out and stay high.”

This does not mean that the price of a bottle of wine you buy at the store will decrease though. Because of high cost of grapes over the last couple of years, the market is just beginning to level out to where it was before 2004. The price of a bottle of Chilean wine should not go down until business can recover stock prices that have slowly decreased over the last several years.

SOURCES: LA SEGUNDA, EL MERCURIO