Sunday, October 8, 2017

News You Can Use: "How to Arbitrage Bordeaux’s Superb 2016 Vintage"

With the news of the disastrous 2017 French harvests—not just quantity but quality as well— in the headlines, the pressure on 2016 vintage prices are increasing almost daily. 

Do note: what's discussed here is not really an arbitrage—very few things are, rather more of a substitution list.
Not mentioned as an alternative is skipping the 2016's and going straight to the 2005's, generally acclaimed by common-sewers connoisseurs to be the best of this century with the '09's and 00's giving them a run for the (increasingly large) money.

From Barron's Penta:
The renowned French region’s 2016 wines are among the best. Be choosy about what you pay.
Wine experts are praising the quality of Bordeaux that was produced throughout the wine region in 2016, whether you prefer the weightier reds of the Cabernet-dominant left bank of Bordeaux’s Gironde River or the more fruit-forward wines of the Merlot-dominated right bank. To Hortence Bernard, general manager of Millesima USA, a branch of the Bordeaux-based merchant founded by her family, the 2016 vintage is a return to classic Bordeaux, where the juice is “charming” and elegant. “What I love with 2016 is, I really feel back home,” says the wistful Bernard.

Which raises an important point for wine lovers: Given the abundance of great wine, collectors need to think carefully about price.

The 2016 Château Lafite Rothschild is top-rated and unquestionably of the highest quality. But some wonder whether you want to buy it at the current market price of GBP5700/case (about $7,330), when you can also buy the excellent Château Grand Puy Lacoste for GBP643 ($830). (Prices are according to en primeur market prices collected by Liv-ex, a London firm that tracks the global fine-wine market.)

Both wines are from Paulliac, a district in Bordeaux’s left bank that some argue produced universally excellent wines last year, from legendary “first growths” like Lafite to “fifth growths” like Grand Puy Lacoste. Wines of the left bank are ranked first through fifth according to an 1855 classification system. But is the price spread between the two growths still justifiable in a vintage universally lauded as superb?

Bernard is among those who give special praise to the wines of Pauillac —  which she describes as “really strong” and “full bodied” — as well as those of neighboring St. Julien, which produces both full-bodied wines as well as those with more acidity and subtler fruit. “You can almost buy any of those wines, it will be a real treat,” Bernard says. The vintage also allowed for a “perfect expression” of the right bank wines, in the bolder flavors of modern-style wines like those produced by Château la Dominique and in more classic styles, like Château la Gaffelière’s.

Bordeaux continues to use futures, or en primeur, for setting prices two years before wines are released in bottles. Collectors buy en primeur to secure the wines they love at the best price and to avoid chasing them later, says Ron van Vlaardingen, fine wine sales director at Grand Vin Wine Merchants in Olympia, Washington.

Others point out the risk in paying too much to buy wine for future delivery when bottles from earlier great vintages by the same producer may sell for less on the secondary market. Liv-ex, a London-based firm that tracks the global fine-wine market, found this was true with several producers this year, including right-bank Châteaux Troplong Mondot and Vieux Chateau Certan.“The pricing was as random as ever,” says Justin Gibbs, Liv-ex’s co-founder.

Overall, Bordeaux prices rose 10% to 30% in euro terms, roughly hitting the same level as  the pricey 2010 vintage. But, this year, hikes in top growths were modest compared with the so-called Super Seconds —  the best of the second-growth wines —  as well as other wines with lower classifications on both the left and right banks....MUCH MORE
May 6
"French Bordeaux vineyards could lose half of harvest due to frost"