SPAIN: WINE HIT BY CRISIS, SALES AND EXPORT COLLAPSE

(ANSAmed) - MADRID - Spain's wine sector has not been spared by the crisis, with sales in freefall due to the decrease in both internal consumption and exports. The dramatic fall in prices has led some of the main producers and cooperatives to ask the government for a so-called ''crisis distillation'', which will allow wines to be taken off the market and turned in to alcohol for industrial and fuel purposes. The value of wine export was down 13.5% in 2009, a deficit of 1.718 million euros, while its volume fell by 9.7%, the equivalent of 1.509 million litres, compared to the previous year. This trend comes in spite of a general decrease in prices. Worst hit were fizzy wines, with a 30% slump in sales and a 19.8% fall in cost, according to figures published by Spain's wine market watchdog. Average prices were reduced by 4.2% over the same period, or 1.14 euros per litre. As far as exports were concerned, Italy was the country that most reduced their purchase of Spanish wines, by a figure of 56.7% in 2009 compared to the previous year. The decline in both exports and internal consumption has damaged not only wine cooperatives, who have been forced to undersell their products to continue trading, but also the largest production companies, who market the wines directly, and who have been forced to drop their prices considerably.

Agriculture organisations such as UPA, COAG and food and wine cooperatives have reacted to the crisis by asking the Agriculture Minister Elena Espinosa to distil 2.5 million hectolitres at 1.91 euros per hectograde (the equivalent of 100 hectolitres of pure alcohol) to turn the wine into alcohol for industrial use. According to today's El Pais, the country's main agricultural organization, Asaja, has distanced itself from the request, due to its estimated cost of 50 million euros. The fall in consumption and export figures is also exacerbated by the presence of surplus stocks. During the last wine-producing season, excess wine, though slightly above average, was not significantly high, yet it added to the existing surplus, in turn contributing to the imbalance between availability and consumption. Wine consumption in Spain was down 10% in 2009, especially in restaurants and bars, but there was little change in domestic consumption of D.O wines, largely on account of falling prices. The situation is difficult to bear for many producers, especially those in the ''designation of origin'' region of La Rioja, who often find themselves covering production costs that exceed income. Local companies are said to have bought grapes from producers at a price of 0.3 euros per kilo, while harvest and production costs reach at least 0.4 euros per kilo.

Adding to the bleak picture, according to agricultural companies and cooperatives, is the change in machinery in line with European market regulation, which has led to the disappearance of the stocking and warehousing policy.(ANSAmed).