Because Italy, France, and Spain will have the smallest grape harvest in 56 years, we will be enjoying three billion fewer bottles of wine.
You can see below that the heart of the world’s wine country was hit:
Our story though is about more than wine. It also takes us to weather, supply, and demand.
The Wine and the Weather
Talking about wine, we have to start with the weather.
Grapevines appear to be happy with early season heat and moisture followed by a drier spell. The goal is first to have the vegetative growth and then the fruit production. In Europe this year, it did not work out optimally.
Frosty conditions at precisely the wrong days in April hit Italian, French and Spanish vineyards. (It was not as bad in Spain.) Then Italy had a severe heat wave called Lucifer and Spain, an historic drought.
The big worry though is that a changing climate will have a lasting impact. So yes, 2017 was a problem. However, what lies ahead could be worse or better, depending on whether the vines enjoy cooler or warmer temperatures.
Depending on the grape, temperatures vary a lot:
And determine where it is grown:
As economists, all of this takes us directly to supply and demand.
Our Bottom Line: Supply and Demand
One economist tells us that an increase of 1 degree centigrade during the growing season can boost the price of the highest quality Bordeaux by 61.6%. But there is much more to consider.
Because weather affects taste and alcohol content, it directly impacts supply side quality and demand side utility. Then the supply side gets ever more complicated when we consider harvest size and wine storage. And to all that we can add the development of new varieties and locational shifts in response to temperature changes. Similarly, a host of variables on the demand side range from taste to a more affluent world.
So where does this leave us? It reminds us that we cannot be sure of the impact on price of 3 billion fewer bottles of wine. We also will have many wine price surprises when temperatures change in the future.
My sources and more: Thanks to yesterday’s Wonkblog for the wine harvest alert that started me along an interesting path, It turns out that the NY Times was writing about the harvest in August and Harvard and NASA did a 400 year grape growing season study. Meanwhile these scholars here and here considered the impact of climate changes on wine supply and demand.