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, October 2008

Trading
The momentous events that gripped the financial markets in September need no introduction, save to say that the fine wine market inevitably saw some trickle-down effects. Trade was extremely heavy throughout the month and all sectors of the market were active, with some traders looking to reduce their positions and others spotting excellent buying opportunities. As a result, exchange turnover hit a new high, with September trade 128% up on last year and 21% above the previous record level set in July 2008. All this activity had an obvious effect on prices, with the Liv-ex 100 Fine Wine Index down almost 10 points to 253.0, a 3.7% drop. Even so, year-todate the index is up 5.5% and 4.6% year-on-year. (See www.liv-ex.com for details or find the Liv-ex 100 on Bloomberg: see index code LIVX100). Trade was concentrated on the top Bordeaux wines from the leading vintages, with large parcels from 1996 (24% of total Bordeaux trade), 2000 (17%), 2003 (16%) and 2005 (12%) changing hands. As we explain later it this report, the 2005 vintage saw the largest falls with strong back vintages, such as 2000 and 1996, seeing less price pressure. Trade in Champagne was strong, whereas Burgundy continued to fall back from its mid-summer high. Elsewhere, only Italy saw significant levels of trade.

(more analysis in the full report)

Major Movers
Again in September we saw highly priced wines from recent vintages come under pressure, with the 2005 vintage in particular seeing price reductions. List prices for Cheval Blanc, Margaux and Haut Brion all fell back this month, following on from the falls shown for Latour, Lafite and Troplong Mondot in August. The reasons behind the drop in price for Mouton 1986 are harder to explain, although it is a wine of which large volumes are still available despite its 100-point rating from Robert Parker. Among the movers upwards, Angelus continues to perform well, with its third appearance in the major movers list in the last four months. In contrast to the wines on the downward slope, the major movers upwards are mid-ranked wines from back vintages either approaching, or well into, their drinking windows.

(analysed in detail in full report)

Critical Corner: Wine Spectator on Burgundy 2007
With the Burgundy en primeur tastings held in London each January fast approaching, the report on the 2007 vintage in the latest edition of the Wine Spectator (Vol. 33, No.10) is of great interest. The magazine’s Burgundy correspondent, Bruce Sanderson, visited 16 domaines and houses over the summer, predominantly in the Cote d’Or, sampling more than 200 wines from tank, barrel and bottle. As many of the wines tasted had not finished their malolactic fermentation he did not rate individual wines, “but sought an overall impression of the vintage”. “Twenty years ago, a vintage like 2007 in Burgundy would have been a disaster,” he states, but with September “warm and dry” and “advances in vineyard management and meticulous sorting of the grapes” he finds “much to admire in both the red and white wines.” Both are said to be “typical” Burgundies. They are “pure expressions of Chardonnay and Pinot Noir, with lightness and elegance, the type of wines you expect from a northerly climate. Overall, I give the edge to the whites for their freshness and vibrant structures.”

Final thought — auction price analysis
With more than three million lines of price data, Liv-ex has probably the largest, and certainly the best organised, fine wine price database in the world. Our price data currently consists of list prices from our merchant members (who we estimate to account for 70% of the world’s fine wine sales) and actual Liv-ex Fine Wine Exchange transactions. Liv-ex is now collecting data from the third sector of the secondary market – auctions. Although auctions prices often grab the headlines, they are in fact a relatively small part of the market. Indeed, the value of fine wine transactions made through Liv-ex in the past year is more than those of all the UK auction houses combined. Nevertheless, auctions still play an important role in setting prices, particularly in the US (where the broking sector is less active) and for older vintages that rarely come to market elsewhere. It is also another step in providing price transparency to our members and subscribers. You will start to see auction prices appearing in our analysis and on the website as we move into 2009. Next year we hope to include auction price data on the website on a more formal basis – take a look at the Liv-ex blog (www.liv-ex.typepad.com) for updates. As a taster of what’s to come, we have looked at the Bordeaux First Growths – Haut Brion, Lafite Rothschild, Latour, Margaux and Mouton Rothschild – from the 1996 vintage, for which a great deal of price data is available. We started by comparing prices from three sources – merchant list prices, Liv-ex transaction prices and auctions. This allows us to compare pricing in the wholesale market with that in the auction market. Liv-ex has collected prices from ten major auction houses across the UK and US. The price used below is the monthly mean hammer price, including the buyer’s premium. US prices are converted to GBP using the spot rate on the day of the auction. If the wine in question was not sold at auction that month the previous month’s price was used. The transaction price here is the mean of all the transactions that took place on the Liv-ex Fine Wine Exchange that month. The merchant list price used is the Liv-ex Best List Price – the cheapest list price for any wine received from a member merchant or the wider market in the past 30-days. We then created a monthly basket price for the five First Growths for each data source, from January 2007 to September 2008.

(analysed in detail in full report)

To trade on Liv-ex or subscribe for price information, visit www.liv-ex.com
Liv-ex Limited, Tel:+44 (0)207 228 2233