AAWE, Economics Dept, New York University, 19 W 4th St, 6Fl., New York NY 10012aawe@wine-economics.org

AAWE Working Paper No. 184 – Business

Over-Production or Recession? Causes of the Low Prices of Table Wine in Argentina

Jorge A. Day

Introduction

Table wines do not shine like Malbec does in Argentina’s wine industry; nonetheless they represent two  thirds of the wine produced  in this country. A key economic indicator of this product is the price of the “vino de traslado” (bulk wine). A grape-grower has two options with his grape: he can sell it or he can elaborate wine (the “bulk wine”) and sell it later to a large winery. Thus, the price of the “bulk.wine” is a reference of the income of grape-growers and small wineries.
In the last five years, this price has been very low, and consequently governments of wine provinces are under social pressure to implement policies to raise it by restricting wine supply and/or by buying wine. Why is this price so low? From a sectorial perspective, there is overproduction, with the consequent increase in wine stocks. This hypothesis is strengthened by the declining domestic consumption of this wine in Argentina for several decades, as well as in other major wine producing countries.

However, there is another view, a crisis one. Over a period of more than three decades, this reference price reaches the minimum levels in each recession in Argentina. After a while, in every economic recovery, this price has increased very strongly. Macroeconomic impacts seem strong.

This study will show in numbers both impacts (of overproduction and recession) on the price of “bulk wine” in the Argentine case. Given the relevance of this price for the grape-grower, the study.will analyze the evolution of the producer share in the final price of wine (paid by consumers). In these years of low prices, producers have complained of lower share and there is a question whether this phenomenon is a trend observed over time.

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