market report

Liv-ex is an electronic exchange for fine wine used by professional merchants and collectors. Market Report is part of a package of services offered to subscribers of Liv-ex, with subscriptions starting at Ł49.95 per year. Below is just a brief extract from the latest Market Report. For the full report and to access Liv-Ex's services, sign-up with them at www.liv-ex.com

Liv-Ex Market Report
by Liv-ex.com, July 2009

Trading
July saw share indices around the world post some heady gains, with confidence finally returning to the financial sector. Price movements in the fine wine market were less spectacular, although morale continues to slowly build. Top Bordeaux is leading the way, with the bid offer spreads tightening and prices edging up as a result. All sectors of the market contributed to trading, with Asia seemingly the main driver. The steady rise of the Liv-ex 100 Fine Wine Index continued, gaining 0.6% to 215.6 by month end. The strength in top Bordeaux, however, is arguably better demonstrated by the Liv-ex Claret Chip Index (top-scoring First Growths only) which saw a 1.5% rise in July. (See www.liv-ex.com for details or find the Liv-ex 100 on Bloomberg: see index code LIVX100.)

July saw Bordeaux dominate the exchange, with its share of turnover nudging above the 92% mark for the second time this year. The top vintage was 1996, at 22% of Bordeaux trade, which was boosted by strong availability of a number of First Growths. The 2008 vintage also continued to trade well, taking 12% of trade, closely followed by 2003, at 10%. The 2005 vintage, which has been a top performer in recent months, fell back slightly to 7%. There was little action occurring elsewhere, with Champagne, in particular, continuing to perform poorly; it seems the appetite for top sparklers is yet to catch up with the stock market rally.

(more analysis in the full report)

Major Movers
The trend among the wines showing some upside is clear – Lafite from almost all vintages is back on the move. The question: will it bring other top Bordeaux wines with it? So far that remains uncertain, although wellpriced Bordeaux from a decent vintage usually finds ready demand. The bottom half of the table once again points to some softness in prices for the top wines of the Rhone. The prices of 2006 Bordeaux continue to edge lower – with even Lafite showing softness.

(analysed in detail in full report)

Critical Corner
2004 Brunello di Montalcino
Both Antonio Galloni, of the Wine Advocate, and Stephen Tanzer, of the International Wine Cellar, looked at Brunello in July. Montalcino hasn’t been having an easy time of late. As well as the “Brunellopoli” scandal – which saw almost seven million litres of Brunello declassified for allegedly including ‘foreign’ grape varieties – the last two vintages released, 2002 and 2003, were badly effected by, respectively, rain and drought. In contrast there have been high hopes for the newly released 2004 vintage. So has it delivered?

"Like all things that involve Brunello di Montalcino, the answer is not a simple one,” states Galloni. “My first impression of the wines from bottle was not particularly positive as I encountered a number of disappointing wines from well-known producers. Then an interesting thing happened. I tasted Brunello after Brunello from lesser-known properties that were in many cases outstanding."

(more analysis in full report)

Final Thought
Regular readers of the Liv-ex Market Report will have no doubt noticed that there is one wine that has dominated proceedings in 2009: Lafite Rothschild. The strong demand from Asia for all things Lafite (which includes the second wine, Carruades de Lafite and the Lafite-owned Fourth Growth Duhart Milon) has been a much-discussed trend for a number of years now. In previous years, however, Lafite has simply been the most visible of a whole host of wines that saw large price gains. In 2009 this trend has been different: Lafite and its stable mates are arguably the only wines to have shown consistent and significant price growth. The demand for Lafite is ably demonstrated by a quick look at the trades going through on the Liv-ex trading platform. In the year to date Lafite has accounted for 22% of all transactions by value – if you include Carruades that rises to 26%. Furthermore, demand is yet to shows signs of flagging. Indeed, July saw the 1982, 1999, 2000 and 2001 vintages trade at all time highs. And although some vintages, such as 1995, 2003 and 2005 are still some way of their peak values, they are all showing signs of life.

To quantify this price growth we created a Liv-ex Lafite Index of recent vintages (2000 to 2006) of both Lafite Rothschild and Carruades de Lafite. The index components are priced using the Liv-ex Mid Price, with each new vintage added to the index in June of the year it became physical. The index is price weighted and was based at 100 in January 2004. As you can see in the graph below, the index has performed significantly better than any of the main Liv-ex indices, finishing July almost 140 points (or 60%) higher than the Liv-ex 100 Fine Wine Index. What is arguably most impressive, however, is the extent of the brand’s recovery from last autumn’s price slump. Indeed, the Liv-ex Lafite Index is now just 4.4% off its all time high. No other wine has recovered from the price slump of last autumn so quickly and completely. Taking Carruades alone, the story is even more extraordinary: on average, recent vintages of Carruades are now 22% more expensive than they were at the peak of the market in June last year.

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