Stop the world I want to get off…
By Richard Siddle
There’s always a scene in any road movie when the main characters are up to their necks in complete chaos. From Planes, Trains or Automobiles to the Hangover you are left thinking can it really get any worse for these characters? And of course it does.
Well, it seems like we are all currently starting out on the same road movie and although that point of seemingly no return seems a fair bit away at the moment, we know it’s coming. Regardless of what we do.
Rarely has there been so much upheaval, uncertainty and simply not knowing what is around the corner in the global wine industry. What makes the situation even more taxing is that it is not the same for everyone. It really depends on where you are in the world as to how uncertain your future looks.
But with global currencies fluctuating by the day it is hard to keep track on what to do next week, never mind a month or six months to a year from now. Which is not ideal when you are planning and placing orders for wine that may still be sitting in a fermentation tank the other side of the world.
At the moment the spotlight is very much on the UK and the plunging value of sterling against all the major world currencies. Down nearly 20% against the dollar since June 23, and the day the UK voted to leave the European Union.
It has meant it has become a lot more expensive for the key UK market, particularly for bulk wine, to buy wine from anywhere in the world. The rates might be beneficial on paper for wine producers, but not if no-one wants to buy your wine.
The impact the so called Brexit vote has had on sterling has also had a knock-on effect on other major currencies and how they rate and score against each other.
No matter where you are your own individual currency's rating will be very different to what it was three months ago. But, and here's the rub, it is also not possible to predict with any great certainty where it might be in three months time. Which is why it is wise for producers in currently more advantageous countries to keep their counsel. Firstly nobody wants to hear about how much more you can now get for your wines in key markets. Secondly, you don't know what unknowns lie around your corner.
Take the European Union. There is a growing feeling amongst some financial analysts that the euro could be in for its own form of currency battering going in to 2017. France, Italy and, possibly even Germany, could end up with new leaders following their own forthcoming elections.
Each of which will have their own individual impact on the strength of the euro. Strikingly those elections will collectively go on for months putting the whole future, purpose and effectiveness of the EU, and the Euro itself, under the volatile microscope of the currency markets.
Whatever happens in the drawn out Brexit negotiations the EU is going to have to change to some extent just to be able to continue without one of its key strategic and trading partners.
Which could, in the long run, eventually be good news for the beleaguered pound.
Then there is America and the fact they are going to have a tarnished and unpopular president in charge of the country regardless of who finally comes out standing between Trump and Clinton.
The dollar might rule the waves now, but what will happen to it if Trump strides in to the White House come November 9.
Then there are the equally volatile Asian markets to keep an eye on. Tensions there are increasingly having ripple effects around the world. The Japanese banks have had their own version of a wobble in recent weeks and China's economy continues to impress and alarm in equal measure.
All of which makes for interesting and worrying times for wine producers, distributors, buyers and retailers alike.
There has never been a greater need to plan and be prepared. To be on top of grape prices, the latest trading and currency data, and to have business plans in place with customers that are as flexible, and fair, as possible for both sides.
Quite how this will play out in negotiations between wine buyers and sellers globally, in what's looking like being a market with reduced supply will be interesting to see.
We can expect to see more short term buying opportunities and the emergence of new countries and areas of supply that suddenly become highly competitive.
Long established trading routes will not be as secure as they once were as buyers seek out their next quick fix.
Let's just hope, as with all good road movies, it works out just fine in the end, no matter how rocky the road is to get there.