Reform may dry up EU wine lakes

In an effort to boost the competitiveness of EU wine industry against the New World wine producers, a special 5-year plan is initiated by EU Agriculture Commissioner Mariann Fischer Boel. The root-and-branch reform scheme of the Common Market Organisation for wine includes an offer of cash reward to winemakers in EU countries for producing less wine by abandoning their poorer quality vineyards. Beginning from August 2008, a compensation of 420 million EUR is offered in the first year of the program to farmers willing to tear up a combined 200,000 hectares of grape vines. This makes ca. 6% of the total of 3.4 million hectares of grape vines in EU.

The program also intends to end funding of distilling surplus wine into alcohol or bio fuel, and to stop the EU practice of paying producers for surplus cheap table wine. Instead, this large portion of the EU wine budget under the Common Agricultural Policy will be used to improve the production and marketing of quality vintage wines.

Another proposal in the program is to ban the use of sugar in fermentation process. This can have a considerable effect on winemaking in cooler countries such as Austria, Germany and Britain. It is also expected a fierce opposition from France, as sugar beet is traditionally used in champagne production process.

The program may be realized in two steps, in order to bring supply and demand back into balance before focusing on improving competitiveness.

The plan has so far met huge opposition from European wine producers. European farmers criticise the reform as too violent and extreme. Farmers argue that the program risks demolishing the foundations of Europe's ancient industry.

At the end of 2006 France, Italy, Spain, Germany and Portugal had 45% of vines and 60% of global wine production. EU stands also for almost 60% of global wine consumption. Since 2002 average production of wine in the EU 25 amounted to 178 million hectolitres, worth ca. €16.1 billion. The accession of Romania and Bulgaria will contribute with another 7 million hectolitres.

1) France is the largest producer by volume, 55 million hl annually, worth 7.7 billion EUR.
2) Italy: 51 million hl, with a value of €4.2 billion.
3) Spain: 43 million hl, worth €1.2 billion.
4) Germany: 10 million hl, worth €1.1 billion.
5) Portugal: 7.2 million hl of wine for a value of €1 billion.
6) Hungary: 4.5 million hl for €181 million.
7) Greece: 3.6 million hl for €46 million.
8) Austria: 2.5 million hl for €437 million.
9) Slovenia: 1 million hl.
10) Czech Republic: 520,000 hl.
11) Slovakia: 440,000 hl.
12) Cyprus: 425,000 hl.
13) Luxembourg: 140,000 hl.
14) Malta: 67,000 hl.

But the wine industry in EU is troubled by falling sales and increasing imports, and the production by far exceeds demand, creating large surpluses known as the "EU wine lakes".

The exports of all New World producers have greatly increased during the last 15 years. The four main New World producers have seen a spectacular rise during 10 years until 2003: South Africa +770%, Australia +500%, Chile +270% and the United States +160%.

Figures are based on EU sources, including The Directorate General Communication (EU DG COMM).