Looks like high(er) prices for 2010 Bordeaux…

So, already as of 21 April, some Bordeaux 2010 prices have been issued. For those who do not know, Bordeaux sells its wines as futures. While the wines are in barrel – and after the trade and journalists and hacks like yours truly have had a chance to taste – prices come out for future bottles. So you would “lock in” your allocation of a certain number of bottles, and then you would obtain the wine only 18 to 24 months afterwards.

In the past, great deals were made because of the way the Bordeaux system works. That is, the estates, the châteaux, would sell their stock of wine (as futures) to Bordeaux middle men, known as ‘la negoce’ and these companies would then sell that wine to distributors and importers who would then sell it to you and me. In the past, the châteaux often underestimated demand, so that by the time you got the wines, the value shot up importantly. This happened for example with the 2000 vintage. It happened even more markedly with the 1982 vintage. But since the 2005 vintage – with the exception of 2008 – this has not happened. In fact, for many wines, you could find in bottle prices today that are at the same level as their respective futures prices. Which begs the question: why bother to tie your money up for two years when the price will not be much different once the wine is on the shelf? Yes, there are glaring exceptions. Take Lafite Rothschild for example, in the 2008 vintage. It was initially offered as a future for about $200, and has now shot up in value at least five fold! But the 2008 vintage was exceptional for two reasons: it was underrated by many critics and it was released at the height of the financial crisis, a downturn. Prices were not that high. But the same cannot be said about 2005, 2006, 2007, 2009 and now 2010… Futures prices were rather high for all these vintages, and in bottle prices – with some notable exceptions of course – have not changed all that much. In some cases – 2006, 2007 – they have dropped!

So it is déjà vu all over again when I find out that Château Magdelaine in St Emilion is being offered at about €60 per bottle in futures, or at least $85US. I loved this wine when I tasted it, but with such a high end consumer price, you could get a 2005 OR 2009 vintage which are both lovely, too – I am sure you wine lovers recall –  for about the same price, if not lower. And in bottle, for the 2005. Yes, yes yes, one can hoo and haw that 2010 is particularly fine, but have we not heard this before? En primeur price fatigue, déjà?

Do the math. Sherry Lehmann in New York for example offers Magdelaine 2009 futures for $70 and several sources in the US propose the 2005 in bottle at that price. If you factor in the exchange rate for 2010, it is close to $90. Who is going to pay the $20 premium in 2010?

The 2000 vintage of this fine St Emilion is selling at most places to end consumers for at least $100, so I am not saying that the 2010 will not appreciate, in the long run. So Bordeaux will find its futures buyers, certainly. But I am wondering about some people who may think: Well, if I can get two other great vintages for less money, why stick my cash into a futures price for two years?

Here we have an interview with two US merchants in Bordeaux at the beginning of en primeur week… Interesting perspectives and price expectations, and their fears seem to be coming true.

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