Suggestions were made in the world's press last week that wine consumers had a new worry, above the prospect of minimum pricing, making decisions on the best closure and too-high or too-low abv options. Chris Losh looks at how the panic exploded, then considers just how ludicrous the suggestion truly is.

The ‘global wine shortage’ story which swamped the world’s media last week was a classic example of not letting the facts get in the way of a good story. Pages were full of headlines about soaring prices and barrels running dry.

Given that, since the Millennium, we’ve been battling a sizable over-production issue – the International Organisation of Vine and Wine has consistently put the gap between production and consumption at 50m hectolitres of surplus wine a year for the last four decades - it seems somewhat suspicious that we should have gone from glut to drought without even a brief period of equilibrium in between.

The authors of the Morgan Stanley report that sparked this ill-informed hysteria seem to have been thorough in their research. However, they have also been journalistically selective about the facts on which they’ve chosen to focus.

There’s talk, for instance, of a 25% fall in wine volumes from a ‘high in 2004’ to 2012, implying that global wine production is in free-fall. 

Put simply, this is arrant nonsense.

2004 was, at close to 300m hl, a freakishly large year – some 10% higher than the average. Last year, meanwhile, at 252m hl, was freakishly small – getting on for 10% lower than usual.

To compare two atypical years and extrapolate from this that production is tumbling is sophistic.

The overall trend for wine production is, indeed, downwards, but it’s a gentle, managed decline, rather than an uncontrolled tumble. And it’s one, moreover, that has been going on for 40 years. 

Global vineyard area was 10m hectares in the 1970s, and is around 7.5m ha now. Most of the pulling up over that period has taken place (and continues to take place) in Europe, with Italy, France and Spain seeing their vineyards shrink by 15%, 12% and 17% respectively since the Millennium. 

Since the vineyards that have gone were making wines that, frankly, nobody wanted, it’s hard to argue that their disappearance is a bad thing. Equally, it’s indisputably good news that European wine production is now far more closely aligned to demand. 

The downside is that, in years like 2012 - which saw the three biggest wine-producing countries in the world all recording harvests that were significantly below average - there can be pressure on supply. Many wines will be put on allocation, and there will be significant massaging of supply. Prices may well rise – particularly in France, which produced 11m hl less wine than in the previous year.

But, 2012 needs to be seen for what it is: A blip, rather than the norm. 

In any case, the early indications for 2013 are of an above-average year for many countries, and most are expecting recently-emptied pipe-lines to be quickly refilled.

In fact, with plantings in the New World (and China) going some way towards countering the (slowing) vineyard pull-ups in Europe, the biggest trend is less a fall in the World’s vineyard area, rather a shift in the balance from Europe to the New World.

What, then, of demand? If there really is a wine shortage, surely it must be soaring?

Well, no. The OIV statistics show that consumption has, indeed, grown from a low-point of 220m hl in 2000 to a high of 251m hl in 2007. But, the global economic slowdown has since seen it fall back (and stabilise) around the 240m hl level.

This - you might notice - is still below even the atypically-low production figure of 2012.

It’s perhaps a little close for comfort, admittedly, and a big rise in consumption could conceivably put pressure on supply.  But, to be honest, I can’t see consumption levels doing much other than staying roughly where they are.

Many of the northern European markets that drove the growth in the noughties are now flat or in decline; Russia’s explosive burst seems to have fizzled out, and China’s double-digit growth is now firmly in single-figures, too. Moreover, the latter’s economic slowdown, coupled with an even more pronounced stalling in Brazil, could yet rob wine of two of its brightest hopes for the medium term.

And, all the while, consumption in the big traditional European producer countries keeps on falling. Italy and Spain have seen their domestic markets shrink by around a third since the Millennium, and this looks set to continue.

While there are signs of recovery in the US, these are probably not enough to counter the downward forces elsewhere.

So, let’s assume that global consumption will remain between 240m and 250m hl over the next ten years. In an average year, this would give wine an excess production of around 25m hl – more than the entire US wine crush.

It’s hard to see how that could be defined as a ‘shortage’.

Admittedly, the gap between supply and demand is narrower now than it has been for some time – and it may get narrower still. But, for the moment, you only have to look at the still-soft prices on the bulk market to realise that there isn’t a significant shortage of wine.

Also, ask yourself this. Three months before the ‘wine shortage’ story ran riot, Treasury Wine Estates admitted it was writing-down US$145m of unsold stock in the US.

Do you think they’d be doing that if the taps were running dry?

There may be a shortage of some styles, and yes, we’ll all feel the impact of the 2012 vintage, in a way that we might not have done when the wine world was routinely overproducing by the equivalent of the entire Italian wine crush.

But, far from being a cause for concern, I’d say this proves that the macro-economics of the wine world are better now than they have been for decades.