News Summary

World Wine Shortage and France

Article: http://www.bbc.com/news/world-24746539

Related articles: http://money.cnn.com/2013/10/29/news/economy/wine-shortage/

http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/leisure/10414086/Global-wine-shortage-on-the-horizon-economists-warn.html

1. Briefly summarize the issue. 

According to the research done by America's Monrgan Stanley Financial Services and the articles, the demand for wine has greatly exceeded the supply provided and has plummeted the wine supplies into "the deepest shortfall in over 40 years of record." 

Not only has the demand for wine been increasing greatly since 2012, but because of poor weather conditions in Europe, and mainly France (the world's largest wine producer) the overall production of wine has been steadily declining, and as of October 2013, had dropped to its lowest levels in more than 40 years.

2. Relate the issue to one or more of the economic concepts we have discussed in class.

Supply and Demand

In France, the world’s single biggest wine producer, output fell by 18pc between 2011 and 2012 due to poor weather conditions affecting the grape crops and vineyards. However, wine consumption has increasing grately, with booming demand in the US and China driving the rise. In other words, production in Europe dropped about 10% in 2012, while at the same time, the worldwide consumption rose by 1%

An example supply/demand graph of this:

Relationship to other countries (substitutes)

Currently, France is not only the number one producer of wine, but it is also the biggest consumer of the drink, closely followed by the United States and China.  Because the production in Europe (mainly France) has decreased so much, even with the rise in demand, the market for wine has opened it doors to smaller wine producers such as the U.S. Argentina, Chile, Australia, New Zealand, and South Africa, whose productions of wine has already peaked since the articles came out in October. Unfortunately, even with these supplementary suppliers of wine, there is still little reason to believe that the global wine production will be able to pick up anytime soon and meet the increasing demand. 

An interesting fact that I found, is that China has quickly been catching up to France; competing for the number one producer of wine position. The demand for wine in china has more than doubled in the last five years, which has given incentive for  China to produce its own wine. If this trend continues, China will replace France as the world's largest consumer and producer of wine by 2016.

3.  What led to this situation? Can you suggest a resolution to this problem?

As stated earlier, the reason that the production of wine in France has decreased is because of the poor weather conditions since 2010. Unfortunately, aside from cropping strategies and manipulation of the crops, there is not much that can be done about the weather and its effects on the grapes.