According to figures from the International Wine and Vine Organisation, a bumper crop in Australia, Argentina and Europe has put global wine production at an estimated 287 million hectolitres - 10 per cent up on last year and the highest since 1992. But, over half of this increase is attributable to France, Italy and Spain - the world's three largest wine producing countries.
The news has prompted fears that oversupply will significantly devalue the market value of wine.
According to French media reports, a request to be put forward by the CCVF (Confédération des Caves Viticoles Françaises) asks for €200 million 'crisis' allowance to distil 10 million hectolitres of wine, in addition to the 11 million hectolitres already provisioned for in the EU wine budget. An EU spokesperson said that although he was aware of the announcement, Brussels had not yet recieved a formal proposal from the CCVF.
Overproduction has long been one of the greatest challenges to the wine industry. But, it had seemed like a challenge that was being met. In 2001 and 2002 Italy, France and Spain had successfully started a trend of reducing wine production, with their combined total dropping down 22 million litres (14 per cent) from the year 2000.
But, in 2003 - even despite the notoriously hot summer that diminished French yields - the trend reversed. Production increased 3 per cent from 2002 - with an increase of 8 million hectolitres in Spain quietly compensating for the much talked-about drop of 4.5 million in France.
This year, French production went up by over 11 million hectolitres as did Italian by 8.5 million.
Two thirds of all wine comes from the EU but not all of the world's wine regions have had higher yields this year. The largest non-EU wine producer, California, has reported that its harvest is down 10 per cent on last year, making 18 million hectolitres of wine - good news following a surplus last year. The combination of this reduction in supply and a low dollar should make it a prosperous year for the American wine industry.
In South Africa, which produces 3 per cent of the world's wine, harvests are also reportedly down by 5 per cent on an average yield. But, in Australia, where a high Australian dollar is contributing to a slowdown in exports, there is predicted to be 19 million hectolitres of excess wine by June. Australia is the third biggest non-EU wine producing country, supplying 6 per cent of the world's wine. Argentina, the second biggest, also increased production, reportedly up 10 per cent to 14.6 million hectolitres.
The EU has, since 1981, been distilling surplus wine into both potable and industrial alcohol. It is a costly process and the final products are 'dumped' into the world market. There is an annual budget of €220 million which can be used to distil 11 million hectolitres of wine. In addition to this, an unspecified quantity can also be applied for as a 'crisis allowance'.
Until the 2002 vintage, there had been a crisis distillation each year since the mid-eighties. The last crisis distillation, from the 2001 harvest, removed an extra 7 million hectolitres of wine from the market.
But this year, a combination of higher production, a weak dollar and declining domestic consumption in both Spain and Italy, spells trouble for the EU wine industry - and consequently the possibility of reigniting crisis distillations.
"It is the first time in the history that the gravity of the crisis has led to AOC wines calling upon distillation." said Denis Verdier, president of the CCVF in a French media report. In addition to the distillation - a quarter of which would be of French wine of both high and low quality - Verdier asks for financial assistance in pulling up vines, including 10,000 hectares in the Bordeaux region.