World vineyard acreage is declining.

World vineyard acreage declined by 10.8% from an average of 22.7 million acres in the period of 1986-90 to 20.3 million acres in 1994. The vineyard reductions were most significant in European Union countries. For example, vineyard acreage in Spain decreased by 563,000 acres or 15% from 1986-90

From 1986-90 to 1994 world grape production declined from 70.5 million tons to 61.6 million tons, a decrease of 8.9 million tons, or 12.6%. In addition to wine, grapes are used for fresh consumption, raisins, grape juice, grape juice concentrate, canning, brandy and grape alcohol. Information is not available on a world wide basis to correlate the relationship between grape production and wine production.

Grubbing up and limited new grape plantings in the European Union were major factors for 1994 grape production. Unusual weather conditions for several years in Spain have accounted for a decline of 6.3 million tons in 1992 to 3.5 million tons in 1994, or a 49% decrease. In contrast, the grape production in the following countries increased in 1994 compared with the 1986-90 average: Iran 46%, China 99%, Germany 14%, Chile 44%, South Africa 9%, Australia 11%, India 158%, Egypt 19% and Lebanon 67%.

World wine production in 1994 was 255 billion hectoliters (6.7 billion gallons) which was 116 million gallons less than production in 1993. The reduction in 1994 is attributed largely to reduced crop conditions in the European Union where the so-called "wine lake" has been significantly reduced as a result of government grubbing up policies and unfavorable growing conditions in recent years. Table A shows the rapid decline in wine production in the world's three largest wine producing countries during the period 1992-1994.

The three largest wine producing countries saw declines of an average of 20.9% from 1992 to 1994. The declines in those countries were partially offset by significantly increased wine production in Argentina, Australia, Romania, Chile and Moldova.

1994 wine production declined by 12.7% from the average wine production during the period 1986-90. Fortunately, consumption has declined at a slower rate of 6.3% during the same period. The result is that the world "wine surplus" has declined from the annual rate of 1.476million gallons during the period 1986-90 to 896 million gallons in 1994, a decrease of 39.3%. Putting the 896 million gallon surplus in perspective, the supply/demand relationship in 1994 would have been balanced if the world's fourth and fifth largest wine producing countries, Argentina (479 million gallons) and the U.S. (427 million gallons) did not produce any wine during that year.

World wine consumption, which was 237 million hectoliters (6.23 billion gallons) during the period 1986-90, declined by 6.4% to 222 million hectoliters (5.86 billion gallons) in 1994. During the same period, world wine production declined by 12.7%. As a result, a much closer demand/supply relationship prevailed in 1994.

The additional good news is that the rate of decline in consumption slowed significantly from 1992 to 1994. The rate of decline in consumption from 1992 to 1993 was only .7% and from 1993 to 1994 the rate of decline was 1.3%.

From 1980-90 to 1994 the major wine consuming countries showing reductions were France 12%, U.S. 16%, Spain 15%, Argentina 19%, Romania 24%, Chile 31%, Canada 19%, Netherlands 20% and Bulgaria 46%. The countries showing improved consumption were Germany 16%, United Kingdom 10%, Hungary 31%, Brazil 8% and Japan 27%.

TABLE A

              1994       1992          VARIANCE 1994 VS 1992
Country     (hl 000)   (hl 000)   (hl 000)   (gal 000)   % Change

Italy        59,278    68,686      9,408      248,371     -13.7
France       54,640    65,401     10,761      284,090     -16.5
Spain        18,954    33,832     14,878      392,799     -44.0

TOTAL       132,872   167,919     35,047      925,240     -20.9

CONVERSIONS: To convert hectoliters (000) to gallons (000) multiply
by 26.4.

[TABULAR DATA FOR TABLE B OMITTED]

TABLE C

                                                     WORLD     % OF
CATEGORY                                  AMOUNT    RANKING
WORLD

Vineyard (Acres 000)                         766       6        3.8
Grape Production (US Tons 000)             5,926       3        9.6
Wine Production (gal 000)                427,020       5        6.3
Wine Consumption (gal 000)               462,000       4        7.9
Share of World Market (gal 000)          428,076       4        7.3
Share of World Export Market (gal 000)    35,201       8        2.9

Wine exports increased from 44 million hectoliters (1.17 billion gallons) in 1986-90 to 52 million hectoliters (1.38 billion gallons) in 1994, a 17% increase. There were major new entries into the wine export scene from 1986-90 to 1994. The rates of export growth for many countries during this period were astounding: Spain 67%, Australia 522%, Chile 406%, Cyprus 83%, South Africa 332%, Austria 138%, China 400% and New Zealand 243%. The major wine exporters which declined during the period were France 14%, Bulgaria 27%, Hungary 40%, Greece 40%, Argentina 24% and Algeria 81%.

The world's ten largest wine producing countries represent 56.9% of the world's vineyard acreage and 58.7% of the world's grape production. These same countries are much larger factors in wine production. They produce 81.6% of the world wine production and represent 73.4% of the world's consumption. These ten countries also represent 83.8% of the world's wine market and 98.1% of the world's wine export market. See the graph entitled "1994 World-Wide Vineyard, Grape & Wine Report" on page 18.

UNITED STATES POSITION IN THE WORLD:

The U.S. represents only 3.8% of the world's vineyard acreage but 9.6% of the world's grape production in 1994. This relationship results from the fact that 59.5% of U.S. grapes are raisin and table grape varieties which have higher yields than wine grapes and U.S. productivity levels are generally higher than in other parts of the world. The U.S. world ranking and percentages in 1994 are summarized in Table C.

In 1994 the U.S. was the fifth largest wine producer in the world at 16.2 million hectoliters (428 million gallons). U.S. production in 1994 accounted for 6.3% of total world production. U.S. wine production has declined from an average of 17.1 million hectoliters (452 million gallons) in the period 1986-90 to 16.2 million hectoliters (430 million gallons) in 1994. During the period 1986-90 the U.S. represented 5.3% of world wine production and that percentage has increased gradually to 6.3% in 1994.

U.S wine consumption in 1994 was 17.5 million hectoliters (462 million gallons) compared with an average of 20.8 million hectoliters (549 million gallons) during the period 1986-90, a decline of 3.3 million hectoliters (87 million gallons). Table D suggests in 1994 the U.S. market was faced with a 10.9 million gallon surplus.

TABLE D

                                hl (000)     gal (000)

US Domestic Production            16,175       427,020
Plus Imports                       2,618        69,155
Minus US Exports                  -1,301       -34,346

Plus (or Minus)
Inventory Change(1)                  422        11,140

Available for
Consumption US                    17,914       472,929

US Consumption                    17,500       462,000

Surplus                              414        10,929

1 Based on OIV report of "Stocks" for 1994. OIV Bulletin 1995,
page 1028. 15,448 hectoliters beginning of 1994 versus 15,026
hectoliters year-end indicating the use of 422 hectoliters of
inventory during 1993-1994.

CONVERSION: To convert hectoliters (000) to gallons (000) multiply
by 26.4.
TABLE E

Type of Grape         U.S. Tons (000)     % of Tons

Wine Varieties             2,398             40.5
Raisin Varieties           2,484             41.9
Table Varieties            1,044             17.6

Total                      5,926            100.0
TABLE F

                            hl(000)     gal (billions)

World Market for Wine       222,431         5.870
US Wine Share                16,200          .428
US% of World Market             7.3         7.300

CONVERSION: To convert hectoliters (000) to gallons (000) multiply
by 26.4.

U.S. grape vineyards equaled 766,000 acres in 1994, a decrease of 2.8% compared with the 1986-90 average. The U.S. was the third largest grape producer in 1994 and the fifth largest wine producer. The difference is accounted for by the fact that considerable volume of U.S. grapes are marketed as raisins and table grapes. In 1994 U.S. grape production consisted of the types of grapes listed in Table E.

The world market for wine in 1994 was 222.4 million hectoliters (5.87 billion gallons). The U.S. consumption for 1994 was 17.5 million hectoliters (462 million gallons) of which 2.62 million hectoliters [TABULAR DATA FOR TABLE G OMITTED] (69.1 million gallons) was imported. The U.S. share of the total U.S. market was 14.9 million hectoliters (392.9 million gallons) or 85%. The U.S. share of the U.S. market and U.S. exports total 16.2 million hectoliters (428 million gallons) or 7.3% of the world wine market as shown in Table F.

In 1994 the U.S. exported wines to 112 countries. U.S. wine exports in 1994 were 1,333,390 hectoliters (35.2 million gallons or the equivalent of 14.8 million 9-liter cases). U.S. wine exports in 1994 accounted for only 2.9% of the world's exports which totaled 45.4 million hectoliters (1.197 billion gallons). The U.S. did not register any exports to 24 countries where OIV reported exports from other countries.

The U.S. balance of trade for wine has improved by 34.7% from 1986-90 to 1994. The major improvement is the result of a 25.6% reduction of imports in addition to a 9.1% increase in exports. Annual imports declined by 23.8 million gallons from the 1986-90 average to the 1994 level of 69.1 million gallons.

Concurrently U.S. exports increased from the 1986-90 level of 31.4 million gallons to 34.3 million gallons in 1994. The net effect of the decline in imports and the increase in exports was an improvement of 27.7 million gallons in the U.S. balance of trade for wine, as shown in Table G.