Vines in Spain: ripening slow and getting ripped up

In the news in Spain today was a report in the economic journal Expansion on vineyards. The 2008 harvest is looking to be one of the longest ever, with some areas still being harvested. The overall harvest is expected to ease 2% from last year's to 39.7 million hectoliters (1.05 billion gallons).

In Catalunya, the harvest is expected to be down by 10%. For many growers this could be their final harvest. Under the EU vine reduction program, Catalan growers have requested support to uproot 1.970 hectares of vineyards or 7.6 square miles of vines. In total, Spain is leading all other EU nations in requesting aid to tear up 100,000 hectares of vines (386 square miles). This is 22% more than the combined requests of Italy (58,435 ha.) and France (22,700 ha.). Requests from the big three wine grape producing nations have already exceeded the target budgeted by the EU. It remains to be seen if all requests will be accepted by the EU.

EU wine reform: the "last chance" for european wineries says Jose Ramon Fernandez, Secretary General of the CEEV

The CEEV – Comité Européen des Entreprises Vins, which represents 22 European national winery associations is supporting the proposed EU wine reforms. Secretary General Jose Ramon Fernandez was quoted in Expansión newspaper on Friday April 25 as saying that "this is the last chance that we will have for public support".

Even though Europe is the world's leading wine producing area, consumption in the EU has fallen by 20% in the last 15 years. Hence, the proposed reforms aim to restructure European wine production by eliminating non-competitive vineyards and promoting winery consolidations.

The reforms will carried out in two phases. The first phase, to be made over the next three years, will see the destruction of some 175,000 hectares of vines. This would allow, according to Mr. Fernandez, a "dignified exit" for winery owners that are not or will not be competitive. The second phase, estimated to begin in in 2012 and to run for the following three years, will see an end to limitations on vine planting rights in the EU , except in some countries, among them Spain, for whom this system will continue until 2018. This extention is a dubious favor to wineries in Spain says Mr. Fernandez as it will slow the implementation of the restructing necesary to gain international competitiveness.

EU wine reform not very patalable in Spain

The Spanish Ministry of Agriculture has said the newly announced European Commission policy plans for the European wine industry are not "satisfactory". This despite the plan's call to allocate the greastest amount of funds, 470 million euros, to Spain. Spain would receive 50 million more than France or Italy.

With some important "howevers", the Spanish Wine Federation (FEV) in its July 4 press release signalled support. These "howevers" include: the ban on new plantings to 2014, the continued practice of giving the individual countries control on promotional spending, the bureaucratic difficulties surround promotional funding and concern about the new product labeling proposals.

Missing was any direct comment on the big items of the plan: the destruction of 200,000 hectares of vines across Europe and the ending of the 500 million euros per year support for distilling wine to alcohol, which encourages Spain to burn roughly 7 million hectoliters of wine.

These two measures, if not further diluted, could go a long way to removing waste from the sector.

Opposition to EU wine sector reform

On August 24th, the largest growers' association in Catalunya, the Unió de Pagesos, published their criticisms and suggestions regarding the proposed EU wine sector reforms.

The Unio agrees with the EU Agricultural Commission in that reforms are needed to guarantee the viability of the European wine sector, but does not fully support the EU Commission's proposals as these are seen to be too radical and in favor of the most powerful agro-business and detrimental to the interests of the small farmer. The Unio supports removal of excess vines, but only in so far as this is done on an equal basis for all regions and four years later than the proposed date of 2013. This reduction of vines should be voluntary and economic incentives should be given to areas where grape-growing is challenging.

Regarding the current pratice of distilling excess wine production, the Unio agrees with the EU that this has not been a practical solution and proposes, as a substitute for distillation, the creation of preventative measures to control excess production, such as compensation of growers for not completing harvests. Furthermore, the Unio is opposed to the rural devolpment funds proposed in the reforms as there is no guarantee that this money will reach the small farmers working there.

EU wine reform - the Spanish perspective

There has been a fair amount of coverage on the new EU commission proposals to reduce, or at least, modify the present sector supports given to the European wine industry. One of the most significant proposals has been for the uprooting of grape vines to help reduce the glut of wine produced in Europe, which national governments in Europe then buy up and distill into fuel. For a concise summary, there is this article from the BBC: Q&A: EU wine reform .

At the end of June, the Spanish Wine Federation (FEV in its Spanish initials) chimed in with their comments on the reforms, which it is, in general, in favor of. Specifically, the Federation supports all moves to enhance the international competiveness of European wines, to establish a comprehensive European Union wine policy, allowing more clarity in labeling, but at the same time allowing producers that so desire to continue to adhere to traditional indicators of quality. The FEV, in principle, supports an end to subsidies that "disturb or delay the adaptation of products to the demands of the market" and that such support be used only to allow products to enter the market. However, the FEV is opposed to preventing the renovation of vinestocks until 2013 and the removal of the estimate 400,000 hectares of vines, as has been reportedly proposed by the EU Commission. The stance of the FEV on this point is that the governmental bodies should be basing their support efforts to helping wine producers react to market demands and not be working to diminsh the potential of the European wine sector.

Intestingly in the El Pais newspaper on Sunday was a report on the dramatic rise in the prices of agricultural lands in Spain, up by 7.6% in 2005 alone, which has been effected by the real estate construction boom of recent years and the expectation that agricultural lands, particularly those along the coast or in the Canary and Balearic islands, will be rezoned for urbanization. The article made note of the dramatic rise of the past decade in the average price of vineyards, which has nearly doubled from 6,660 euros to 13,000 euros per hectare (US$6925 per acre). Any policy of removal of vines will have to come up with a means to compensate the land owners for removing vines, which will likely be more expensive given this rise in vineyard land prices.