Jacquelyn Ryan/MEDILL

Tough economic times don’t stop Americans from drinking their wine – but tight budgets may have consumers looking Latin for the best (or most) wine for their dollar.

The U.S. consumed a record 753 million gallons of wine in the heart of the recession in 2008, according to the Wine Institute. [...]]]>

Jacquelyn Ryan/MEDILL

Tough economic times don’t stop Americans from drinking their wine – but tight budgets may have consumers looking Latin for the best (or most) wine for their dollar.

The U.S. consumed a record 753 million gallons of wine in the heart of the recession in 2008, according to the Wine Institute. It is still on track to become the largest consumer of wine in the world by 2012, according to the latest U.S. Wine Market Forecast. “The economic recession had little impact on the US wine industry as consumers saved funds to enjoy wines at home,” the report says.

But cheaper imports from countries such as Chile, Argentina and Australia are killing U.S. winery margins, Bloomberg has reported.

Though tough for the U.S. wine market, it’s not a bad thing for consumers.

“Really low-priced wines give the consumer a huge opportunity to try a lot of different wines,” says Erica Witte. Witte is co-founder of a Chicago-based wine shop Poison Cup, which aims to educate Chicagoans about all the varieties of wine available.

Between 1991 and 2008 the dollar value of U.S. retail wine sales rose every year, almost tripling in that time. Yet last year, salesof U.S. wines dropped by 3.3 percent, to $29 billion, as prices were driven down by wine from Chile, Argentina, Australia, and elsewhere, Bloomberg reported, citing an analysis by wine industry consultant Gomberg, Fredrikson & Associates.

As a result, a total of 30 wineries are for sale in California, Oregon and Washington, according to Bloomberg – more than ever before.

A similar fate has not befallen Illinois vintners, however, according to Bill McCartney, executive director of the Illinois Grape Growers and Vintners Association.

“Honestly, Illinois wineries are doing OK,” says McCartney. McCartney, who doesn’t drink foreign wines but instead gets his fix from the 86 wineries scattered throughout Illinois. He believes sometimes consumers sacrifice quality for price.

“If you want quality you buy Illinois, if you want something cheap you buy Latin America,” says McCartney.

Another challenge presents itself to Illinois wine: getting people to know it exists. You’ll notice that no major chains or even local stores in Chicago carry much if any Illinois wine and Chicago is the state’s biggest wine market.

“People don’t look at Illinois as a wine-growing state,” says McCartney. He said Illinois is one of the largest wine-consuming states in the nation, but lags far behind in production numbers. According to the U.S. Tax & Trade Bureaus, the state has 103 wineries compared with 2,593 for California, which produces roughly 90 percent of the wine in the U.S.

Even with the prolific production of wine within the U.S., it is still one of the largest importers of the elixir in the world, importing 845,000 tons of wine in 2007, according to the U.S. Food and Agriculture Organization.  Contributing to our fix, Argentina and Chile exported a respective 365,000 and 1.16 million gallons of wine that year, a 20 percent and 145 percent year-over-year increase, respectively.

Meanwhile, the U.S. had not been keeping pace with increased foreign production for much of the decade, as it experienced a 10.28 jump in wine production from 2000 to 2006, for 2.36 billion liters produced.

Comparatively, Argentina soared 14.5 percent to 1.54 billion liters; and Australia just exploded by 93.2 percent to 1.43 billion liters, as did Chile up 67 percent to 850 million liters, according to the Wine Institute.

Last year alone, Chile’s wine shipments were up 17.6 percent, according to the industry trade group Wines of Chile, though the dollar value of sales were flat at $1.4 billion. This compares with California, whose shipments declined by 4 million cases in 2009, the first drop in 16 years, according to the Los Angeles Times, also citing Gomberg, Fredrikson & Associates.

Even though the earthquake in Chile caused substantial damage, it’s not supposed to slow business and may even help boost sales as the world pays attention to the country’s plight. Still, Chile estimated a loss of 125 million liters of wine with a value of approximately $250 million, according to winery-funded group Wines of Chile, which represent 95 percent of the Chilean wine industry.

Though she believes some great wine is coming from those regions, Witte, whose wine store will be giving classes on Malbecs next week, is wary of wine that becomes too cheap.

“You definitely have to be careful with wines in $6 to $10 range,” Witte says. “There’s got to be a good reason where wines are getting down to that level.”

She recommends getting to know your local wine shop owner whose taste you trust before delving into the world of cheap Latin American wines.

Witte says that the appetite for foreign wines has increased, in large part thanks to the Malbec, and consumers are even looking to move up the scale to more expensive varietals.

“Now that people have finally discovered foreign wines and can find Argentina and Chile on a map, they’re looking at higher end,” says Witte.

Two recommendations from Witte:

• The nice earthy Terra Rosa Malbec, which you can pick up for $14.

• Valdivieso for $20, which wine expert Robert Parker scored that as a 96 or a 94, which is outstanding to extraordinary.

The Producer Price Index, or wholesale prices, rose at a seasonally adjusted rate of 1.4 percent in January, mainly due to a rise in energy costs, pharmaceutical costs and light trucks, the U.S. Bureau of Labor Statistics reported today.

This increase followed a 0.4 percent rise in December and [...]]]>  

The Producer Price Index, or wholesale prices, rose at a seasonally adjusted rate of 1.4 percent in January, mainly due to a rise in energy costs, pharmaceutical costs and light trucks, the U.S. Bureau of Labor Statistics reported today.

This increase followed a 0.4 percent rise in December and a 1.5 percent rise in November.

Analysts forecast a 0.8 percent increase in January wholesale prices, according to the median of 75 predictions in a Bloomberg LP survey.

So what does this mean for us?

The PPI measures the prices of goods before they reach store shelves and it is considered the first measure of inflation each month, followed by the Consumer Price Index released Friday. Luckily, we do not need to worry about inflation at this point.

“There is so much slack in our economy with the high unemployment and subdued labor costs,” said Richard DeKaser, president of Woodley Park Research. “That tells me that we shouldn’t see any big increase in inflation anytime soon.”

A main cause for the increase in the PPI was the rise of energy prices and food prices, partially because of the abnormally cold January, DeKaser said. Meat prices increased by 3 percent in January. Energy, meanwhile, rose 5.1 percent in January, its fourth consecutive monthly increase, according to the report. A majority of the energy increase can be attributed to an 11.5 percent jump in gasoline prices.

“The increase in energy prices affects consumer confidence,” DeKaser explained. “This will drain discretionary income. Whatever is spent at the pump will not be spent elsewhere.”

The core index, which excludes energy and food, rose 0.3 percent in January, led by higher prices for light trucks and airplanes, according to the report. Pharmaceutical prices jumped 1.3 percent as well.

DeKaser speculated that the rise in drug costs could be because congressional health reform has been derailed.

“In 2009 drugs prices showed a slowing, possibly because of the ongoing health-care reform debate,” DeKaser said. “Pharmaceutical companies could have raised prices due to the idea that regulation may not be put into place any time soon.”

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Image via Jeremy Brooks/Flickr.com

BY KATIE ROGERS — MEDILL REPORTS

Shares of Downers Grove-based food company Sara Lee Corp. (SLE: 9.72 -1.08 (-10.00%) plunged despite a narrower loss in its fiscal 2009 fourth quarter, as it released lackluster guidance for the 2010 fiscal year.

Sara Lee posted a quarterly loss of $14 [...]]]>

Image via Jeremy Brooks/Flickr.com

BY KATIE ROGERS — MEDILL REPORTS

Shares of Downers Grove-based food company Sara Lee Corp. (SLE: 9.72 -1.08 (-10.00%) plunged despite a narrower loss in its fiscal 2009 fourth quarter, as it released lackluster guidance for the 2010 fiscal year.

Sara Lee posted a quarterly loss of $14 million, or 2 cents per share, a paltry sum compared with a loss of $672 million, or 95 cents per share, for the same quarter a year ago.

The narrower loss didn’t impress investors, as the company released a revenue outlook for the current fiscal year that disappointed analysts.

Sara Lee said it expects earnings between $1.03 to $1.09 per diluted share on net sales of between $12.9 billion and $13.2 billion for the 2010 fiscal year. Sara Lee reported net sales of $12.9 billion for fiscal year 2009, a 2.5 percent drop from $13.2 billion for the year before.

Shares of the company dropped $1.08, or 10 percent, to close at $9.72 Wednesday.

Joseph Freeman/MEDILL

BY SHAHZAD CHAUDHARY — MEDILL NEWS SERVICE

The CME Group released its second quarter earnings today, smashing analyst expectations by 10 cents with a diluted EPS of $3.33.

The exchange’s CEO, Craig Donohue, credited strong cost-cutting measures and the success of new innovative products for the strong quarter, specifically mentioning [...]]]>

Joseph Freeman/MEDILL

BY SHAHZAD CHAUDHARY — MEDILL NEWS SERVICE

The CME Group released its second quarter earnings today, smashing analyst expectations by 10 cents with a diluted EPS of $3.33.

The exchange’s CEO, Craig Donohue, credited strong cost-cutting measures and the success of new innovative products for the strong quarter, specifically mentioning the strong performance of newly developed interest rate products.

The net income for the second quarter was $221.8 million, a 10 percent increase from the prior-year period, while the diluted EPS was down from last year’s $3.67.  Total revenue increased by 15 percent from the prior-year period to $648 million.

Importantly, the number of contracts traded in the second quarter of 2009 was down compared with last year. For example, interest rate products, which made up approximately 40 percent of the total contracts traded, averaged about 4.4 million per day, down from 6.5 million from the year-earlier period.

So what accounts for the increase in revenue? It could be the result of an increase in rate per contract. So for the interest rates products, the average rate increased from 52.2 cents to 52.5 cents and the increase rate of all products increased to 81.6 cents from 77.5 cents in the second quarter of last year.

During Thursday’s conference call, Executive Chairman Terry Duffy discussed the regulatory initiatives being taken in Washington D.C. He said the CME Group supported the Obama administration’s efforts to ensure high standards of integrity for the financial markets, but warned that speculators have been getting a bad reputation for no reason.

“In healthy markets, speculators are a critical part of the market and provide essential liquidity to hedgers or commercial participants,” he said.

Duffy also added that the blame placed on the speculators in the recent run-up in oil prices was undeserved. “The [energy] prices have been determined independent of market participants,” he said.

CME Group stock was up $3.15, or 1.1 percent, at $275.85 during Thursday afternoon trading.

BRIDGET MACDONALD – MEDILL NEWS SERVICE

Although the ethanol market has been flooded with surplus over the past several months, forcing many producers to idle production or drop out of the business entirely, the industry is showing signs of life in the Corn Belt.

Six of the 11 ethanol plants in Illinois [...]]]>

BRIDGET MACDONALD – MEDILL NEWS SERVICE

Although the ethanol market has been flooded with surplus over the past several months, forcing many producers to idle production or drop out of the business entirely, the industry is showing signs of life in the Corn Belt.

Six of the 11 ethanol plants in Illinois operate within a 50-mile radius of Peoria (as the crow flies), where agricultural industries are helping to offset the decline of traditional manufacturing.

According to specs from the Illinois Environmental Protection Agency, the six plants, including a new facility that opened in Galva on May 14, have the combined capacity to produce 797 million gallons of ethanol each year – 42 percent of the state’s projected output of 1.9 billion gallons for 2009.

Illinois, which boasts the second highest corn yield in the nation – about 2.2 billion bushels annually – produces about 60 percent of the grain used for ethanol in the United States according to statistics from the Illinois Corn Growers Association.

View Ethanol still pumping from the Heartland in a larger map

www.amazon.com

BY JOSEPH FREEMAN-MEDILL NEWS SERVICE

Monday night University of San Diego professor Frank Partnoy appeared on “The Daily Show” to discuss his new book about Ivar Kreuger, the most effectively damaging ponzi scheme artist to have emerged over the past century, known to most by his honorific, the “match king.”  But before [...]]]>

www.amazon.com

BY JOSEPH FREEMAN-MEDILL NEWS SERVICE

Monday night University of San Diego professor Frank Partnoy appeared on “The Daily Show” to discuss his new book about Ivar Kreuger, the most effectively damaging ponzi scheme artist to have emerged over the past century, known to most by his honorific, the “match king.”  But before you pick it up on Amazon, I suggest starting with Partnoy’s memoir “F.I.A.S.C.O.”

Here’s a brief passage on page 218 of this entertainingly informative tell-all (the title is an acronym for a corporate skeet-shooting excursion), a book about his years in the mid-90′s as a salesman in the Derivatives Products Group at Morgan Stanley.

“Because mortgage payments are so unpredictable, even the most sophisticated investment banks that actively trade mortgages have suffered significant losses; in 1987, Merrill Lynch lost $377 million when a trader made several large losing mortgage trades.”

Did you catch the year?  1987.  F.I.A.S.C.O. is about the rise of derivatives, and like the advances in geometry since Euclid’s time, these derivatives morphed from somewhat easy to grasp financial instruments into complex deals linked to the performance of seemingly incongruent and various volatilities, like the Mexican peso, a Philippines power company, and industry benchmarks like the London Interbank Offered Rate (known as LIBOR to anyone who is not a financial philistine).

While Partnoy does a commendable and humorous job of breaking down the theories behind many of these impenetrable bonds of ill repute and why anyone like a municipal treasurer would invest in them (see Orange County, whose treasurer in 1994 lost over a billion dollars in the bustling derivatives agora), he presents an undeveloped picture.

Derivatives have come under a lot of warranted fire lately, but Partnoy does nothing to dispel the notion that derivatives, in many forms, such as those exchange-traded commodities at The Chicago Board of Trade, have been a boon to the U.S. economy and have helped business owners protect themselves against fraud and volatile price swings.

The problem with the word derivative is that it can mean almost anything.  Saying “derivatives trader” today comes weirdly close to calling someone a “fascist.”  It roughly translates, in the public mind, to a male, chauvinistic and rapacious trickster who most likely works on Wall or LaSalle St. and takes pleasure only in divesting a small business owner or farmer of his life savings.  Though truth be told, Partnoy and his colleagues at Morgan Stanley were guilty of similar scurrilous acts.

But as an early warning, and an instructional primer on the rise of these suicide bond derivatives and tax scams like equity swaps, as well as a piece of farce, the book is invaluable.  My favorite passage is about Partnoy’s foray into so-called “emerging markets” in Latin America.

“It wasn’t clear what ‘emerging’ meant, or how these markets might ‘emerge.’  Still, it sounded awfully good, and it helped cloud the fact that the emerging bond an investor bought actually was a Peruvian loan that hadn’t paid any interest since the 1800s.”

The only problem with the book, and the discourse about derivatives ever since, is that they are always called “sophisticated” and “exotic.”  Nay.  The definition of love in Plato’s “Symposium” is sophisticated, and canoe trips down the Amazon are exotic.  Brady Bonds, RAVS, MEXUS notes, and Pre4 Trust structured vehicles are lurid gimmicks that, for the most part, can only end in a fiasco.