Talking Trade: 5th – 11th February

LXFW50

After seeing a strong start to 2016, the Liv-ex Fine Wine 50 held steady this week (+0.3%). Focus turned towards higher value wines: the total value traded on the Exchange increased, while volume dipped. Total exposure held at £29m after peaking last week.

Bordeaux’s share edged up but remains below January’s average. Burgundy saw a second strong week, boosted by activity for Ponsot, Clos Roche Vv 2012.

Regional

Lafite Rothschild was the most traded First Growth by value. The 100-point 2003 vintage traded most, while the 2012 – which recently saw high activity and then increasing prices – continues to find the bid.

Krug, Vintage Brut 2002 was the most searched for wine. It was recently released at £950 per 6×75, and traded this week for £1,266, a 33% increase.

Top_value

The week’s most traded wines by volume are from a number of regions. Amongst them is Fleur Morange Mathilde 2010 which was purchased for £199 per 12×75. Back in 2008, Jancis Robinson wrote that she mistook La Fleur Morange 2005 for Pavie when tasted blind – but these wines normally see little activity on the market.

Top_volume

Record high: exposure approaches £30million

Exposure_2016

Last week exposure on the Exchange – the total value of firm bids and offers – reached a new high of £29,214,515. This figure has been climbing steadily since 2007 when exposure was at £3.3m.

As the chart above shows, this push has been boosted by an increase in bids since June 2014, the market’s low. Last month, the total value of bids overtook the total value of offers for the first time since July 2010. The bid:offer ratio – the total value of bids divided by the total value of offers – is currently at 1.07. A bid:offer ratio of 0.5 or higher has historically indicated an uptrend in the market, or at least acts as a signal for price stability.

As highlighted this morning, recent purchasing has been stimulated by currency moves: the weaker Sterling is making prices more attractive to Euro and Dollar buyers, driving demand from Europe, the USA and Asia.

Yet the surge in bids certainly appears to be a longer term trend. Demand has already impacted prices – the Liv-ex Fine Wine 50 is up 2% year to date. Going forward, the question will be whether this is sustained.


2016: Strong start for fine wine

Liv-ex fine wine 50

Fine wine has been looking robust compared to several other financial assets and physical commodities so far this year.

In 2016, the Liv-ex Fine Wine 50 index, which tracks the daily price movements of the ten most recent vintages of the Bordeaux First Growths, has gained 2.01% while the FTSE 100 is down 9.1%, the S&P 500 is down 9.4% and oil has plummeted 25.9%. However, it is still early days: the fine wine market has seen several strong Januarys and gone on to decline later in the year.

Still, there are some positive indicators in the background. On Tuesday, the index reached a new high for 2016, closing at 270.87. This is its highest level since July 2015.

While recent buying has been helped by currency moves – a weaker Sterling against the Euro and the Dollar encouraging European, US and Asian merchants to buy – UK merchants have been able to lift prices and the increases have held.

The technical picture also looks supportive of the recent uptrend.

At the beginning of January, the 20 day SMA (simple moving average) crossed the 50 day SMA, and momentum has built since the crossover. As can be seen from the graph, the 20 day SMA has also acted as a support level since the move higher.

Over the longer term it is important to remember that the index is still trading in the tight range it established after hitting a previous low in August 2014. Over the past eighteen months, the Fine Wine 50 Index level has remained between 262 and 272.

Whether it can maintain this momentum and break above the 272 level remains to be seen.


Spotlight on… Ducru Beaucaillou

Ducru label

Ducru Beaucaillou:
Owner: Bruno Borie
 and family
Appellation: St Julien
Vineyard area: 100 hectares
Average annual production: 120,000 bottles p/a
Second wine: La Croix de Beaucaillou

History

Having once formed part of Beychevelle, the vineyards that were destined to become Ducru Beaucaillou were partitioned and sold off in the 17th century to cover the cumbersome debts of the chateau’s late owner. By 1720 the fledgling estate was run by the Bergeron family, who named it Beaucaillou – or “beautiful pebbles” – after its stony terroir.  Following their 70-year tenure, Beaucaillou was bought by Bertand Ducru. As well as appending his name to the property, Bertrand and his children invested heavily in the vineyards and contributed much to the quality of the wine. Their efforts culminated in the chateau’s classification as a Second Growth in 1855, placing it alongside the likes of the Leovilles and Cos d’Estournel. A decade later, however, Bertrand’s daughter Marie-Louise sold Ducru Beaucaillou to Lucie-Caroline Dassier, the wife of a wealthy wine merchant. Lucie-Caroline’s husband, Nathaniel Johnston, went on to become Mayor of St Julien, though his role in the discovery of Bordeaux mix – a copper sulphate solution that ameliorated mildew – is perhaps his most famous achievement.

After Lucie-Caroline’s death, Nathaniel Johnston married Princess Marie Caradja of Constantinople and the couple commissioned an award-winning architect to extend and redesign the chateau to suit Victorian fashions. But economic hardships in 1929 forced the Johnstons to leave their palatial home and in 1941 it was bought by Francis Borie. Today the Bories own a number of chateaux in the Medoc, including Grand Puy Lacoste and Haut Batailley. Ducru Beaucaillou has been run by Francis’ grandson, Bruno, since 2003.

Market Performance

Ducru_left_bank_200

Prices for Ducru Beaucaillou soared during the China-led bull market of 2009-11 and outpaced increases for its parent index, the Left Bank 200. Although both initially declined at a similar pace after the market rolled over in June 2011, Ducru held a steadier level from the beginning of 2012 and has since shown signs of recovery. Over five years, it is up 19.6%; the Left Bank 200 is down 1.2%.

Vintage Prices

Vintage performance

Of Ducru’s recent vintages, the 2008 has been the biggest riser over the past 12 months: its market price has moved from £780 to £850 per 12×75, an increase of 9.0%. As the chart below shows, it is one of the higher-scored vintages but is still available at a significant discount to the “great” vintages of 2005, 2009 and 2010. Robert Parker called it “one of the stars of the vintage”. The next best performer is the 2012, which is up 8.1%.

Other vintages that look to offer relative value, shown below, include 2006 and 2014.

price_points

You can view more historic price data for Ducru Beaucaillou vintages on Cellar Watch by clicking here. Cellar Watch subscribers can track the prices of Ducru Beaucaillou vintages by adding them to a cellar. Sign up here.


Talking Trade: 29th January – 4th February

Liv-ex 50

The Liv-ex Fine Wine 50 continued to rise this week and was up 0.2% at 270.37, its highest level since July 2015. There was a good volume of trade in Bordeaux across the whole of January helping to push the Bordeaux 500 index to its highest level since April 2014 at 241.46.

Regional trade

However, Bordeaux’s market share slipped this week with Burgundy and Champagne both filling the gap with 9.6% and 9.4% of trade share respectively.

Mouton Rothschild and Haut Brion saw good activity taking 24% and 21% of First Growth market share. Lafite’s share of First Growth trade was slightly lower this week at 37%. Haut Brion 2005 (RP 100) and Mouton Rothschild 2006 (RP 96) took the third and fourth spot of overall trade by value across the exchange.

Trade by value

It was a good week for Champagne, with Bollinger Rd 2002 (AG 91) taking the top spot in terms of trade by value. Trade in Champagne was stimulated this week by the release of Krug 2002 at £950 per 6×75. It last traded at £1,100.

Lafite 2012 (RP 91) remains well represented at second place in terms of trade by value with buyers looking to purchase the cheapest physical vintage of the brand available in the market.

Trade by volume

Trade by volume saw Bordeaux’s Cote Baleau 2009 (RP 87) and Carmes Haut Brion 2009 (RP 92) take first and third place respectively, while Italy’s San Guido Guidalberto 2012 (AG 89) – the second wine of Sassicaia – took the second spot, helping to boost Italy’s share of trade by value to 5.4% this week.

Cellar Watch February 2016 Market Report released

The Cellar Watch February Market Report has been released. Containing all the latest Liv-ex research and analysis, this month’s issue includes:Fine wine market report - January 2016

  • High January – a positive start to 2016
  • Bordeaux leads indices up
  • Chart of the month: DRC:First Growths price ratio
  • Antonio Galloni on Bordeaux 2012
  • Final Thought: The price of First Growths

Please log in to the Cellar Watch website and find the full report in Market Reports under the Cellar Tools tab. Those who have not yet subscribed to Cellar Watch can view the first page of the report here.

Liv-ex 1000 Index gains 1.1% in January

Livex_1000_indices

Following gains made by the Liv-ex 100 and Liv-ex Fine Wine 50, the Liv-ex 1000 index – the broadest measure of the market- moved up 1.1% in January to close on 247.8. The Bordeaux 500 Index also edged up, moving 1.4%. Both of these indices are now at their highest levels since April 2014.

After four and a half years of decline for the region, the Bordeaux indices* led the way in January, with the most positive news coming with the performance of the Bordeaux Legends 50 Index. Composed of a selection of 50 Bordeaux wines from exceptional older vintages (from 1982), it gained 1.5%. This makes it the top-performing sub-index last month.

The Italy 100 gained 1.2% while the Rhone 100, which has been sluggish over the past two years, closed the month up 0.9%. The Champagne 50 is now the weakest sub-index over twelve months: after dipping 0.1% in January it is down 2.6% over one year.

Levels_livex1000

*Bordeaux 500 Index, Liv-ex Fine Wine 50, Bordeaux Legends 50.

Liv-ex 100 Index gains 1.1% in January

Liv-ex_100_index

The Liv-ex 100 gained 1.1% in January to close on 240.87. The Liv-ex Fine Wine 50 index also moved up, increasing by 1.7% over the month to close on 269.17. The Liv-ex 100 has a history of moving up in the first quarter only to end the year down, as was the case in 2011, 2012 and 2013. 2014 saw a reversal of this pattern while 2015 looked altogether more confused. It is therefore too early to call whether this positive movement will be sustained.

The top movers within the index are all Left Bank Bordeaux names. Pape Clement 2010, amongst the cheapest 100-point Bordeaux wines, was the top riser. Two Haut Brion vintages also feature. Three of the five steepest fallers hail from Champagne. Last year, Champagne overtook Burgundy to become the third most traded region, and the Champagne 50 index reached a new high.

impacts

Talking Trade: 22nd – 28th January

Liv-ex 50_four weeks

The Liv-ex Fine Wine 50 index rose up 0.3% this week to close at 269.7. The index continues to hold steady at the level it was at the beginning of October before it dipped 3% and hit a five-year low at the end of November last year. It currently sits just shy of its year high of 269.85.

Regional trade

It was a good week for Bordeaux with the region taking 83.9% of overall market share by value, up from the previous week and well above the average for 2015. The increase in the ‘others’ category was helped by brisk trade in Taylor 2003 (NM 95) that saw good trade at £528 per case.

Share of trade_value

Overall, trade by value was up 7.5% this week. Interestingly Bordeaux’s increased market share was not dominated by the First Growths but instead by good trade across the lower classified growths. Leoville Poyferre 2003 (Robert Parker 96), Lafite Rothschild 2012 (91) and Pichon Baron 2009 (98) took the top three spots.

Lafite 2012 has seen a good level of trade throughout the month with buyers looking to purchase the cheapest physical vintage available in the market in front of the Chinese New Year. Amongst the First Growths, it represented 47% of trade by value this week with Margaux the nearest of its peers with just 17% of First Growth trade by value.

Share of trade_volume

Lafite Rothschild, 2012: moving on up – but will it hold?

Lafite Rothschild 2012

In December, Liv-ex highlighted the demand for Lafite Rothschild, 2012. Since becoming physical, the wine has seen high levels of trading activity on the market. In spite of this, at the time of our last report prices for the wine were running almost completely flat – barely moving from a trade price of £3,000 per 12×75. With the 2012 the cheapest physical Lafite Rothschild on the market, it seemed that buyers were looking for the lowest entry point to the label.

Demand ran high through January, with the approach of Chinese New Year pushing prices up. The wine last traded for £3,200, a 7% increase on December 2015.

Whether this is a temporary Chinese New Year effect or something bigger is too early to tell. With the price of the 2012 now reaching the same level as the 2011, and the 2013 – very recently physical – hitting the market at £2,950 per 12×75, will price-driven buyers begin to turn their heads towards this younger, cheaper vintage instead?

You can view historic market data for Lafite Rothschild vintages by clicking here.