Well, I’ve been buying futures ( :) sorry En Primeur) and think I get rewarded for it most times. I get wine I might find hard to get later and at a price that is cheaper than it will be later. Many times when I taste the wines I bought, I wish I had bought more from the original offer because I can’t get more or the price is much higher.
If Bordeaux chateaux set their new vintage release price 6 months after vintage, like they do now… say at £300 IB per 6… anyone actually buying now at EP should pay £250-£270 IB or less. Then when the wine arrives physically in 24 months time, the price should be £300 if you didn’t buy EP. Simple. If the market price at physical release drops below £250… then the wine is simply over priced to start with. It’s really not that complicated. Sadly the chateaux seem determined to persist with ridiculous pricing levels until big name Negoc and Chateaux start going bust. Then they will reconsider. 🤷🏼♂️🍷
Once upon a time, the buyer used to get compensated for the use of their capital with a notable appreciation in the value of the wine in the secondary market by the time it arrived. At fulfilment, now they are most likely looking at a depreciating asset which has fallen in value on paper. Buying EP has made bad financial sense for as long as I can remember. Nobody is forced to buy EP but if the model is useless and loss making for the individual, less and less people will continue the practice. The risks at present far outweigh any upside and only really favour the growers or the supply chain.
TBF Commodity futures (also exchange-traded) do deliver the underlying asset. Although most contracts are closed out prior to delivery, it’s not uncommon for oil, cocoa, coffee to go to delivery.
Indeed, that was was the point of futures in the first place. For, I don't know, a baker to get delivery of some wheat that they'd need in a years time and for the farmer to fix the price now for the wheat they'd have ready in a year. For futures you buy or sell up front, money changes hands and the underlying item is delivered at the contract end date to the holder of the long from the holder of the short.
The first part of the info-graphic describes an option, where there's an agreement for the underlying to be paid for at a set price at a set point later on.
Yes, exactly — with a futures contract, you commit to buy or sell at a set price in the future which includes delivery. With an option, you pay a premium for the right, but not the obligation, to do so.
I’m not sure that is what my infographic shows, though.
My point was not that futures contracts never result in delivery. My point was that we need to look at the underlying economics of the transaction and ask what kind of pricing is justified.
En primeur is essentially a two-year loan to the château, and it should be priced accordingly. Too often, it amounts to a free two-year loan from the buyer to the château.
I am sure the futures contracts you mention are not priced on those terms.
Well, I’ve been buying futures ( :) sorry En Primeur) and think I get rewarded for it most times. I get wine I might find hard to get later and at a price that is cheaper than it will be later. Many times when I taste the wines I bought, I wish I had bought more from the original offer because I can’t get more or the price is much higher.
😅
Oeno Group customers warned ‘you may not get your money back’
If Bordeaux chateaux set their new vintage release price 6 months after vintage, like they do now… say at £300 IB per 6… anyone actually buying now at EP should pay £250-£270 IB or less. Then when the wine arrives physically in 24 months time, the price should be £300 if you didn’t buy EP. Simple. If the market price at physical release drops below £250… then the wine is simply over priced to start with. It’s really not that complicated. Sadly the chateaux seem determined to persist with ridiculous pricing levels until big name Negoc and Chateaux start going bust. Then they will reconsider. 🤷🏼♂️🍷
Exactly. I don’t understand why chateaux don’t understand this …
Or you pay now and receive nothing in the future.
(Sadly I've been there, it was partially due to my own lack of judgement of course).
Wine or else, the hasn’t been delivered?
It was wine, my broker went spectacularly bust and I trusted him and did not the wines in my own named storage account.
Ouch!
Once upon a time, the buyer used to get compensated for the use of their capital with a notable appreciation in the value of the wine in the secondary market by the time it arrived. At fulfilment, now they are most likely looking at a depreciating asset which has fallen in value on paper. Buying EP has made bad financial sense for as long as I can remember. Nobody is forced to buy EP but if the model is useless and loss making for the individual, less and less people will continue the practice. The risks at present far outweigh any upside and only really favour the growers or the supply chain.
That’s exactly right.
I also think it constitute as mis-selling…
TBF Commodity futures (also exchange-traded) do deliver the underlying asset. Although most contracts are closed out prior to delivery, it’s not uncommon for oil, cocoa, coffee to go to delivery.
Indeed, that was was the point of futures in the first place. For, I don't know, a baker to get delivery of some wheat that they'd need in a years time and for the farmer to fix the price now for the wheat they'd have ready in a year. For futures you buy or sell up front, money changes hands and the underlying item is delivered at the contract end date to the holder of the long from the holder of the short.
The first part of the info-graphic describes an option, where there's an agreement for the underlying to be paid for at a set price at a set point later on.
Yes, exactly — with a futures contract, you commit to buy or sell at a set price in the future which includes delivery. With an option, you pay a premium for the right, but not the obligation, to do so.
I’m not sure that is what my infographic shows, though.
I agree with your point that there’s little value in Bdx ep at current levels - needs to be 30% cheaper.
My point was not that futures contracts never result in delivery. My point was that we need to look at the underlying economics of the transaction and ask what kind of pricing is justified.
En primeur is essentially a two-year loan to the château, and it should be priced accordingly. Too often, it amounts to a free two-year loan from the buyer to the château.
I am sure the futures contracts you mention are not priced on those terms.