Portugal is negotiating with the European Commission on the possibility of promoting a crisis distillation, financed by Community funds, to dispose of the surplus wine market. More than 40 million liters may be at stake in regions such as Lisbon, Alentejo and Douro, which is worrying the industry. Negotiations with Brussels are “very well underway” and only cover red and rosé wines with Designation of Origin (DO) and Geographical Indication (GI).
The excess of wine on the market is not a national exclusivity. The request to negotiate a crisis distillation operation came from Portugal and France and was supported by Spain and Italy. Those in the know say that the situation was not easy to negotiate, as the French were willing to support the absorption of surpluses with national resources.
As early as February, several news reports reported the willingness of the French government to support a crisis distillation, with funds of 160 million euros. In the Bordeaux region, growers are expected to uproot 10,000 hectares of vines in the coming years to balance production. A measure with an estimated cost of 100 million euros.
Around here, the numbers are secretly from the gods. There are those who guarantee that the Lisbon region alone proposes to distill 30 million liters. The Douro has some 7 to 8 million liters of surplus stocks, it remains to be seen what the other regions have. What is known is that the issue has been under negotiation for about a month and a half and there will be final news next week.
It is recalled that in order to help the wine sector to minimize the impact of the pandemic, exceptional crisis distillation measures have been approved in 2020 and 2021, with an allocation of EUR 10 million. Exclusively for certified wines, with designation of origin or geographical indication, these aids were set at 60 cents and 45 cents per liter respectively. The wine delivered for distillation is intended for the production of alcohol for industrial purposes.
Liqueur wines are not covered by these measures, which provide slightly better support to mountain wine-growing regions such as the Douro, whose production costs are significantly higher than those in the rest of the country. At the last crisis distillation, the DO from mountain viticulture received 75 cents and the IG 65 cents per litre.
On the other hand, Portugal produced a total of 6.8 million hectoliters of wine in the last harvest, slightly less than the previous harvest, but still above the production of the previous five years. Exports fell by 0.4% in volume in 2022 to a total of 3.275 million hectoliters. In terms of value, they were 941.5 million euros, an increase of 1.5%, well below the inflation rate, and the average growth of recent years: 4.5% in 2020 and 8.1% in 2021.
And everything indicates – at least if there are no major changes until harvest – that this year’s production could turn out to be “generous”. This forces immediate measures to prevent an excess of wine entering the market, which would lead to a fall in grape prices at the next harvest, seriously penalizing small winegrowers. Especially in a context of general increases in production costs, exacerbated by the rise in interest rates, which changed the availability of investments by companies, forcing much more careful treasury management. Cooperative wineries have been the hardest hit as, although they represent only 35% of the national wine production, they bring together most of the small producers, who are the most vulnerable to the current situation.
Rui Paredes, president of Casa do Douro – Douro Renovation Federation and member of the board of directors of Adega de Favaios, believes he is concerned about the situation, which he says is the result of importing wine at very low prices . “Portugal should oppose this, because the country has no surpluses if there are no wines coming in from abroad. We can’t have our doors open if enough is produced in the country,” he says, arguing that small winegrowers ” are left to their own devices” and depend on the cooperatives who are obliged to take all the grapes from their members. “We are on the verge of a harvest and the storage capacity of some cooperatives has been exhausted and all this is very worrying,” he emphasizes.
The president of the Association of Port Wine Companies is compelling: “We already know there will be a crisis distillation, we are just waiting to see what the terms of this process will be”. The concern of the sector is that the available resources could be equal to those of 2021, so a total of 10 million euros. “If the total amount available is small, either many people will be excluded or the distribution will be very high,” emphasizes António Filipe.
DN/Dinheiro Vivo has unsuccessfully sought comments from the Wine Commission of the Lisbon Region and the CVR Alentejana.
Source: DN
