Last Friday, one case of Chateau Lafite 2009 traded on Liv-ex at £10,000. Nothing remarkable about that you might think. Lafite Rothschild is the brand of the moment and the most traded wine on Liv-ex. But what made this trade controversial is that the Chateau has yet to declare its release price. Normally we wouldn’t comment on an individual trade, but we understand that this is an important issue, both for our membership and the wider market. As one tweet from a major UK merchant asks: “Liv-ex trading 2009 Lafite to Trade Buyers at 10k. One of the worst ideas since en primeur started or innovative and what the market demands?”
First, it is important to stress that although this trade happened on the Liv-ex exchange, it was in no way initiated by us. To be frank, Liv-ex has never encouraged nor even imagined that a pre-release trade would occur on the platform. So if there is any innovation here, then we can not claim the credit. This was entirely market driven.
The Liv-ex trading platform is only available to merchants and professional traders. Liv-ex matches buyers and sellers from within the membership and never takes a market position itself. If one member – a long term participant in the en primeur game – decides to sell one case prior to release, so be it. It does not contravene the exchange’s rules, nor is it unlawful.
There is no question of this trade not being fulfilled. As any member of Liv-ex will tell you, our due diligence on en primeur suppliers is extremely rigorous. Most of our en primeur supply is secured with bank guarantees and all suppliers are confined to strict limits. Whether trading prior to release is more risky than afterwards is open for discussion. In our experience knowing the release price has not protected anybody from losing money in the past. As we have previously outlined, the main risk with en primeur is systemic. Our members understand these risks better than anybody. Furthermore, the actual transaction price was unremarkable and is unlikely to have any effect on the chateau’s eventual release price.
To many – outside of the wine trade – pre-release trading will barely raise an eyebrow. This kind of speculative activity plays a vital part in price discovery in most markets. Indeed, many involved in en primeur have long complained that the chateaux regularly set prices with no reference to the market. We are currently listening to the views of our members rather than pushing a position. But if the Liv-ex membership believes pre-release trading would lead to better pricing, we would support it. To put this debate into context, there has been no further trade since last Friday’s and there may not be another one prior to release. If the market has spoken, it has not been emphatic.
UPDATE: View Decanter's take on the Lafite 09 trade