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The contracts will be introduced in first quarter of 2001 on premium Bordeaux red wines. Fine wines from Bordeaux represent around 1.5% of the world's total vineyards in area, but 10% of the market in value. Three-quarters of total output of fine Bordeaux vins primeurs are aimed at export markets.
The new contracts will give professionals a means of hedging price risk in a worldwide market where price volatility is around 25% and producers, merchants and buyers — backed by financial groups — require high profitability.
The launch will be preceded by a period of training and a communications drive to familiarize players in the wine industry with the techniques used by futures markets.
The contract will be based on premium red wines (grands vins) produced in the Bordeaux region on properties of over 15 hectares for which price trends covering at least five years are available. Candidates must be placed on the market as vins primeurs, and be available for delivery at maturity. 70% of all fine Bordeaux wines, valued at FRF 3 billion, meet these conditions.
Maturities are in keeping with the physical market. Thus, the contract will be based on a case of 12 identical bottles delivered 29 months after the contract opens. New contracts will open in July of the year following the harvest, and will close in November two years later, i.e., at the time the wines are delivered as vins primeurs.
Vins primeurs are delivered in November two years after harvest, at a price that is usually announced in the second quarter of the year following harvest.
Wine professionals, including vineyard owners, merchants and traders joined with financial experts to conduct feasibility studies prior to creation of the new future. These groups will be its main users, alongside large-scale buyers including major distributors in France and other countries, airline companies, etc.
Futures contracts on fine Bordeaux red wines will be launched in the derivatives compartment of Euronext. Euronext plans to extend this range to include wines from other French regions, California, southern Europe, Australia and South America.
As with all Euronext products, the contract will be traded electronically through a network of certified members. It will benefit from Euronext's expertise in bringing orders together in a single central orderbook and disseminating prices to data vendors. Financial security and performance guarantee will be guaranteed by Clearnet SA, the clearing house of Euronext, acting as a central counterparty.
