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Liv-Ex Market Report
by Liv-ex.com, May 2011
The first 2010s came to market in May, though the campaign was slow to gather steam. With Bordeaux’s biggest names
still biding their time, merchants turned their attention to back vintages and turnover rose four per cent year on year.
Despite the increase in activity, prices moved up and down in equal measure and the Liv-ex indices failed to find direction.
The 2008 vintage was the favourite last month and accounted for 28 per cent of Bordeaux turnover. Once again,
Mouton ‘08 was the impetus behind the increase (having found a new price level following its recent Parker
downgrade). Elsewhere, 2006 and 2004 were strongly bid, with activity concentrated in the First Growths and Forts de
Latour. And though a handful of notable brands hit the market, the new vintage drove just two per cent of trade.
Bordeaux’s dominance went unchallenged in May and the region accounted for 97 per cent of turnover. Sauternes saw
a slight kick-up in demand, bolstered by trade in Yquem 2002 and a thirst for low-priced (and abundant) Rieussec
2010. And though demand for Burgundy softened slightly, the ’08s finally made an appearance on trading screens.
(more analysis in the full report)
What’s in a name? After a period of stasis, Petrus has been making great strides
in recent months, with the 2004 vintage leading the Bordeaux pack in May. With Cheval Blanc also starting to
see price increases, is the Right Bank back in favour? Leoville Poyferre, which looks increasingly cheap when
compared to some of its Second Growth peers, also makes this month’s Major Movers board.
(analysed in detail in full report)
Ian D'Agata of Stephen Tanzer's International Wine Cellar
raised eyebrows last month when he published his
contentious take on Bordeaux 2010. The critic was relatively
uninspired by this year’s primeurs and said "claims that
2010 is another vintage of the century are overstating the
case". The vintage as a whole does not match up to his
opinion of Bordeaux 2009 (which achieved four potentially
perfect scores). As such, even his most highly rated wines
received top scores of 96-99 points.
Though Margaux has been hailed as one of the stars of
the vintage by the Wine Spectator and James Suckling,
D’Agata awarded it a modest 91-94 points.
Final thought — Expansion
One of the key fundamentals behind the rapid increase in
wine prices is that demand is continuing to rise, while the
supply of new wine released to the market (ignoring the
vagaries of vintage size) is static.
On a basic level, this is enshrined in AOC rules. As hard
as the Haut-Medoc producers positioned just outside the
fence may plead, the boundaries that define AOC Pauillac
are not going to expand. Nevertheless, the intricacies of
Bordeaux’s rules – which state that any grapes grown in
an AOC may be included in any wine from the same AOC
– means that the top chateaux can expand their
production. And at quite a rate.
This trend is made clear by the declarations that every
Bordeaux chateau is duty bound to make to its local town
hall each year regarding the area of vines that has
provided grapes for that year’s production. Looking at just
20 of the major brands in the neighbouring Medoc
AOCs of Pauillac, St Estephe and St Julien (which are
also three of the smallest) we find that more than half of
them have increased their vineyard area by 10 per cent
or more over the last decade – with Montrose leading
the field with a 60 per cent rise. If we go back to 1982
we can find even larger increases, with Pichon Baron
effectively tripling its area under vine (from 28 to
91 hectares) by 2010.
The financial rewards for the lesser chateaux to sell
vineyards to their more high-profile peers are massive.
Just last year Montrose (a St Estephe Super Second)
bought 22 hectares from Phelan Segur (a cru Bourgeois)
at the price of €900,000 p/h. This is far more than
this land was worth to Phelan Segur and – with Montrose
selling at a price of €2M p/h four years previously
– a great deal less than it was worth to Montrose.
So, what impact has this had on the level of production?
Interestingly, it seems that the drive for ever-increasing
quality means that the amount of wine produced by the
top chateaux has not risen in line with the expansion in
vineyard area. If we look at the same chateaux included
in chart 1 (again using official declarations as our
source) we find that they produced five per cent less
wine in 2010 than in 2000, despite an average rise in
vineyard area of more than 15 per cent. Indeed, after
reaching a peak in 2004, average yield has been on a
steady downward trajectory.
Nevertheless, the financial inducement for the major
chateaux to expand their production rises hand-in-hand
with the price of their wines. And as you can see in chart
2, the expansion of their vineyards is accelerating.
Anecdotally, it also seems that the drive for ever lower
yields is being questioned. Over the coming years, it
seems increasingly likely that the amount of wine
produced by the top Medoc chateaux will start to rise.
Perhaps, rapidly. The key question, then, is will demand
(more charts in full report)
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