The international trade in wine has faced a number of challenges in 2020. The pandemic has reoriented demand from food service to residential buyers. The U.S.-EU battle over trade in steel, aluminum and aerospace sectors has drawn the wine industry in via retaliatory tariffs. Wildfires may have caused "smoke taint" to supplies from California and Australia according to the Financial Times. Additionally, the Australia-China trade war will restrict flows, as discussed in Panjiva's Nov. 11 research.

Panjiva's data shows that global exports of wine fell 22.2% year over year in the second quarter, led by a 24.1% slide in shipments from the EU, including intra-EU trade, which accounted for $20.5 billion out of the $28.1 billion global wine trade. The U.S., Australia and New Zealand all accounted for $1.3 billion of exports over the same period while Chile represented $1.44 billion of shipments.

The reduced exports of Australian exports to China will likely lead that wine to be diverted to other markets. China represented 38.9% of Australia's wine exports in 2019 with other leading markets being the U.K. and U.S. That may present a challenge for U.S. and other new-world wine exporters.

The U.K. is the largest export market for U.S. wine exports, accounting for 39.1% of shipments in volume terms in the 12 months to Sept. 30 after a 42.0% surge in the third quarter, which compares to a 15.2% improvement in total U.S. wine exports. Exports to the EU more broadly improved 13.7% — most of the drag from retaliatory duties was felt in early 2018 — while shipments to Canada improved 17.1%.

There are signs of a reversal in shipments, however, with seaborne exports — including those for in October having declined 5.0% year over year including a 21.6% slide in shipments to the U.K. while exports to the EU inched 3.5% higher.

Christopher Rogers is a senior researcher at Panjiva, which is a business line of S&P Global Market Intelligence, a division of S&P Global Inc. This content does not constitute investment advice, and the views and opinions expressed in this piece are those of the author and do not necessarily represent the views of S&P Global Market Intelligence. Links are current at the time of publication. S&P Global Market Intelligence is not responsible if those links are unavailable later.