Most commercial domestic wines are too expensive compared with imports, and one reason is that imports often have a major financial advantage.
Wine is, ultimately, an agricultural product, so it is susceptible to all kinds of risks, including pests, climate change, and market fluctuations. But because wine has alcohol (horrors!), it’s often ignored by the U.S. government.
Many other U.S. commodity products, by contrast, such as milk, eggs, pork bellies, and corn, are analyzed well by the government, which steps in when upheaval strikes. This has almost never occurred with U.S. wine.
I’m not for or against government aid. But stories out of Europe indicate the uneven playing field in which U.S. wineries are expected to compete—and why many imports are cheaper by comparison.
By now, most people have heard of wine’s current difficulties. Wine sales worldwide are down, U.S. wineries are going bankrupt, many growers can’t break even this year, and experts suggest that between 50,000 and 100,000 acres of grapevines must be torn out to stabilize the market.
One expert suggested that 150,000 acres needs to be removed—about 25 percent of all U.S. winegrape acreage.
This country isn’t alone in the economic hardships that wine is facing. Every major winemaking nation in Europe is in the same boat. But instead of ignoring the problem, European governments are stepping in.
France allocated 120 million euros to aid growers in removing up to 75,000 acres of vines in Bordeaux due to unfavorable market conditions. EuroNews said that’s an 1,800 euros per acre reimbursement.
One report said the Bordeaux program is part of a government plan to eliminate 220,000 acres of vines (15 percent of the total.)
Wine economist Mike Veseth writes in his The Wine Economist newsletter, “American growers will rue the fact that they generally don’t receive subsidies from anyone” if they are encouraged to replace vines with other crops. France “isn’t the only country that has to pull out surplus vines and this isn’t the first time, either.”
He writes that in the past he was “skeptical about the EU (vine-pull) program when a similar situation occurred in 2008. New Zealand’s earlier vine-pull scheme turned out well, but ripping out vines is only a temporary fix unless there are associated policy and structural changes to alter the market balance. I expect the same holds true today.”
U.S. wineries and growers do not expect any assistance in the current crisis. Part of the reason lies in the mentality existing in this country since its founding.
Prohibitionist belief has pervaded since John Calvin’s day, and the current wave of neo-prohibitionism surely will make government aid a nonstarter. Far too many politicians believe in public abstention—although they probably do not abstain personally.
Meanwhile, trade accounts from U.S. ports indicate that import fees in the last few months have dropped about 3.5 percent nationally, which lowers importers’ costs.
