Faced with a scenario of a general decline in industrial activity in 2002, the latest INDEC report highlights the good moment for Argentine wine, although there is a side B that does not say so and that explains why it is not profitable to produce wine.
Industrial activity fell 7.1% in August compared to the same month last year, and fell 0.9% compared to July 2020, the National Institute of Statistics and Censuses (Indec) reported today. The fall is greater in regard to the accumulated between January and August: -12.5% and has been this way since last April, the first full month of the quarantine with social and mandatory isolation . According to the Manufacturing Industrial Index (IPI Manufacturing) , which the INDEC released this afternoon, the following data correspond to what happened between January and August of the last four years:
And with respect to last April, the Manufacturing Industrial Index from that month to August has been like this:
The Indec report specified that in August two categories marked improvements in the year-on-year comparison: Oil refining, with a rise of 3.3%; and Furniture and other manufacturing industries, with a rise of 10.2% year-on-year.
Meanwhile, the production of Food and beverages fell 4.8% year-on-year and rose 0.2% compared to July.
The same Indec report highlights the situation in the wine market:
“ Winemaking presented a year-on-year increase of 8.4% in August 2020. According to data from the marketing advance of the National Institute of Viticulture (INV) , available at the end of this report, the marketing of wine to the domestic market, Measured in hectoliters, it registered a year-on-year increase of 1.1%. Exports of fractionated and bulk wine recorded a year-on-year increase of 10.1%. The volume destined for the foreign market represented 28.1% of the total wine sold. In the month under analysis, the largest export of wine is mainly explained by the export of varietal, bulk and colored wine “..
However, there is a B side to this: although Argentine wine has been the one that grew the most in the world during the first half of 2020, according to the Spanish Observatory of the Wine Market, because Argentina exported 54% more wine in the first semester, mainly due to inflation and tax pressure, the production of this drink, Mendoza's emblem, is not profitable for the producers or the industry.
The Spanish Wine Market Observatory leaves a relevant and difficult to understand data: on the one hand, 54% more exports and at the same time, 6.7% less in turnover because the average price fell by 40% (from 3.08 at $ 1.87 per liter).
Why is it not profitable?
The Observatory of the Association of Wine Cooperatives of Argentina provides strong data:
- Total production costs increased 35% in the last year.
- Wine producers are still far from reaching equilibrium. The producer of generic red wine requires a price of $ 21.80 per liter or a yield per hectare of 264 quintals to reach equilibrium. And the producer of generic white wine the equilibrium price is estimated at $ 17.16 per liter or a yield of 284 quintals per hectare.
- Profitability for Generic Red and White Wine Producers continues to be negative.
- To achieve equilibrium (profitability), the price of generic red wine should increase at a rate of 13% per month and that of generic white at 8% per month.
See the full explanation in this note.