What’s happening in the market?
This week, Burgundy has overtaken Bordeaux as the top-traded region by value, with Domaine Leflaive and Domaine de la Romanee-Conti tied in first place as the top producers.
Sassicaia 2022 is the top-traded wine so far, leading Tuscany to a 17.2% share of traded value.
Today’s deep dive: how much further does Burgundy have to fall?
In May, we reported on an increase in bid exposure for Burgundy, despite the US pullback leaving the market quieter as a whole. Since then, the Burgundy 150’s bid:offer ratio (by both value and volume) has continued to rise. By value, it now sits at 0.27, and by volume, at 0.61 — the highest of the Liv-ex 1000’s sub-indices aside from the Italy 100. We are now seeing trade levels begin to reflect these positive changes in demand. At just over halfway through the year, 86% of the total volume traded in 2024 has already changed hands.
There is still, however, a disconnect between buyers and sellers. The Burgundy 150’s average bid:offer spread of 34.8% is higher than that of any other index. Offer exposure has remained steady, but sellers appear reluctant to bring their prices down to meet buyers. Nevertheless, we are undoubtedly in a buyers’ market and Blue-Chip Burgundy is not immune to this condition. Deals have generally transacted well below Market Price.
Demand has grown healthier, but will this be enough to protect prices from falling further?
Technical analysis of the Burgundy 150
The Burgundy 150’s downward moving trajectory has eased up slightly since crossing below its SMA5 earlier this year, the index ticking down more slowly. It has now reached a key support zone – its 2018 high with its 2020 low not far below. With the Bollinger Bands narrowing slightly, providing additional dynamic support, there is some hope that prices will find their floor at these levels. This view is further supported by a Relative Strength Index reading well below 30 – a marker of ‘oversold’ conditions – which, as evidenced by increases in bid exposure, appears to have generated a buy signal.
Trade prices vs. Market Prices
While an uptick in demand and several trades taking place around 2020 lows is promising, recovery will be most likely when list prices begin to reflect reality, spurring higher demand amongst private collectors. With merchants holding their listed prices high for their top wines for as long as possible, Market Prices of the Burgundy 150 have been slow to fall in line with trade and auction prices. The Burgundy 150 index calculated using Mid Price (the midpoint between the highest firm bid and lowest firm offer) has fallen 4.6% year-to-date. When calculated instead with Market Prices, we record a 2.6% rise. Given that trade tends to lead Market Prices, it seems likely that list prices have further to fall.
The Market Prices of most of the Burgundy 150 components remain higher than one might expect. Prices of Joseph Drouhin’s Marquis de Laguiche, for example, appear not to have moved at all since the turn of the market.
Clos des Lambrays presents another interesting case. While list prices have come down c.25% since peak, they remain over 30% higher than 2020 lows. Recently, some vintages’ trade prices (see the 2016 below) have made a full return to these lows.
Auctions and Liv-ex trades of Domaine des Lambrays, Clos des Lambrays 2016
By contrast, list prices of Comte Georges de Vogue’s Musigny, which saw relatively slight price increases in 2022, are likely much closer to their floor. For the 2018 vintage, auction prices are consolidating around the £4,600 mark (where there currently exists a live bid), while its Market Price sits at £6,000.
Georges de Vogue, Musigny 2018
For buyers more conscious of possible future price movements, offers around 2018 highs and 2020 / 2021 lows may present the most interesting opportunities.
