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Oct 30, 2013 05:15 PM EDT

Wine Shortage: Vino Industry In Serious Jeopardy As Demand Rises


The world is facing a shortage of wine, according to Morgan Stanley.

A report released by the Australian Consumer and Beverage branch of Morgan Stanley earlier this month said the world has gone from wine surplus of more than 600 million unit cases in 2004 to near parity, now, of supply and demand, ABC News reported.

According to the report, the industry is experiencing an undersupply of nearly 300 million cases, a year. The reduction is the result of "an ongoing structural reduction in capacity."

 "After adjusting for non-wine uses, demand for wine exceeded supply by 300 [million] cases in 2012, the deepest shortfall in over 40 years of records," the report said.

Wine author Alice Feiring told ABC News the surplus amounts to a virtual lake of wine. Depressed prices have prompted European governments to offer growers incentives to reduce production.

Global production has dipped to its lowest level in over 40 years, largely after poor weather ravaged European vineyards, according to a report by Morgan Stanley.

Vineyards in France, Spain and Italy were plowed under, she said and housing sprouted where grapes had once grown. But since then, world demand for wine has increased. That, plus bad weather, has led to the present situation.

Amid the wine shortage, prices will probably rise in the coming years when the 2012 vintage matures for consumption, the Los Angeles Times reported.

The shortage is expected to be exacerbated by robust demand from the two fastest growing markets, the U.S. and China.

Wine has become particularly popular in China, as the economy booms and the standard of living rises. China is also producing more wine of its own, the report said.

America consumes 12 percent of the world's wine but produces just 8 percent. And the U.S. is only getting thirstier; consumption rose 2 percent last year, CNN reported.

Australia-based analysts Tom Kierath and Crystal Wang told CNN the shortage comes despite the fact that there are one million wine producers globally, making 2.8 billion cases each year. About half of that comes from Europe; but it's not enough to keep up with worldwide demand.

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