Paso Robles News|Tuesday, May 30, 2023
You are here: Home » Uncategorized » The dollar currency and the US wine industry
  • Follow Us!

The dollar currency and the US wine industry 

How US wineries are affected by the dollar

Like any commodity that enjoys a global presence, wine is susceptible to the machinations of the financial market. With a history stretching back 8000 years, if the consumption of wine has proven anything, it’s a track record that’s sure to stay with us beyond the foreseeable future of all-round electric vehicle usage and even driver-less vehicles.

Wine’s almost ubiquitous acceptance around the world has made it a US$326.6 billion dollar industry; all of this despite its frowned upon status in some countries right down to its all-out banned status in others. However, regardless of wine’s market value, the industry remains fraught with challenges facing every chain-link of the process. More and more often winemakers are beset with ongoing challenges, fostering an adapt-or-die climate. Tastes, clientèle, emerging markets, all are playing a role in the ongoing story of wine and key amongst such variables is the dollar and its impact on the US wine industry.

Dollar strength: pros and cons in Central America & the Euro

The strength of the US Dollar plays a significant role in the US wine industry and for a number of reasons.  It’s most impactful results can be seen in the export and import of products, and this includes but is not limited to things like the purchasing of bulk wine, usually procured from countries like Argentina, Chile and Canada – an intricate knowledge on how USD CAD works is of paramount importance to winemakers when making such purchases.

The aforementioned countries tend to be US’ main source of bulk wine procurement although countries like France and Spain, part of the Eurozone, have been able to offer competitive prices, but only when foreign exchange rates have made it conducive.  As already mentioned, most if not all facets of the wine-making process are financially impacted upon. Outside of the procurement of bulk stock, the wine-making process is also incredibly reliant on French oak barrels, viewed as an imperative cog of the wine-making machine.

These barrels are traded in euros and thus the price is constantly dependent on the euro-USD exchange rate with regular fluctuations often placing wineries in a compromised position. The on-going currency fluctuation has led many wineries to establish foreign currency bank accounts to mitigate and offset potential losses.  A strong dollar, while capable of making external purchases easier, can also negatively impact wineries when it comes to exporting the final product, the end result often being that wineries provide discounts in order to keep product moving.

Dollar exchange rates, the UK, Australia & external influences

Australia provides an effective case study of how a mass-producing country’s currency can make it an incredibly appealing seller. Back in 1986 a very agreeable exchange rate turned Australian wine into a steal; that was up until 2001 when the $AU began to rise steadily and so much so, that within the span of a decade and in association with other global financial impediments, Australian wine exports to the US collapsed and has only recently seen recovery.

With regards to the UK,  Brexit’s completion could see the fruition of new tariffs sure to impact the imports of US wines while tougher immigration laws could see California’s wine industry facing higher labour costs. Outside of financial implications, external factors that have nothing to do with currency have also impacted US wineries, key examples are climate change, weather issues, evolving consumer patterns and growth in new markets like China.

 

Share To Social Media
About the author: Access Publishing

Scott Brennan is the publisher of this newspaper and founder of Access Publishing. Connect with him on Paso Robles Daily News on Google, Twitter, LinkedIn, or follow his blog.