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Whisky in the current economic and geo-political climate

26th Jul 2022

Whisky in the current economic and geo-political climate

Overheating is an issue at present. The weather, the economy, the combined fuel and cost of living crises, and the geo-political climate. Hot. As whisky casks around the world mature slowly and peacefully in their cool warehouses, one might be excused for thinking that the whisky game is insulated against such market shocks. But it is not, and many assessments indicate that the current disquiet is set to increase with the industry really feeling the heat in the years to come.

Bleak forecasts from 2021

As far back as last year, industry experts began talking of a ‘perfect storm’ of conditions, brought about by the combined impact of Brexit, the pandemic, and soaring demand, which could place never-before-seen stress on the Scotch whisky industry. We are being warned of distilleries struggling to put products to market and spiralling single malt prices for years to come. This is not exclusive to the UK; the burgeoning global whisky scene is facing the same challenges.

First of all, hardly any whisky was produced while the pandemic was rampant. Distilleries were unmanned during lockdown, with zero supplies of raw materials arriving. Any activity was focused on making hand sanitizer to assist with efforts to keep people safe. Even as nations recovered, social distancing and self-isolation kept production levels way below normal.

Massive supply chain issues continue to plague the sector. Raw materials and dry goods have become much harder to source, taking months instead of days to arrive, and the cost of shipping containers has skyrocketed. As Dawn Davies, Head Buyer at The Whisky Exchange, explains (The Daily Record 5/12/21):

During lockdown distilleries weren’t able to get liquid into casks. It’s going to be very interesting what happens in the next 10 or 15 years because there is going to be a massive shortfall. The other issue is that absolutely everything – because of Brexit and Covid – is taking a hell of a long time. Sales have gone up, people haven’t forecasted correctly and there are huge issues trying to get glass, caps, cork – things you wouldn’t even think about.

Additionally, American Oak casks - fundamental to whisky maturation - are in shorter and shorter supply, driving prices up. Buffalo Trace for example, one of the largest bourbon brands in the world, has completely ceased supply to many whisky distilleries. No more ex-bourbon casks basically means no more maturing single malt. 

The Ukraine Conflict

Next, while the Russian invasion of Ukraine is taking a devastating human toll, it has also decimated their economy and vast agricultural sector. Ukraine is normally one of the world’s leading grain producers and the second largest producer of barley in Europe, after Russia. Stockpiles are facing ruin as next to nothing is getting out of Ukraine, and no new grain is likely to be produced while the conflict continues. 

Coupled with the embargos on Russian exports, the world now faces a severe grain shortage. Whisky producers need to source their barley elsewhere, placing huge pressure on the supply chain which is already being felt. Cask World’s partner distilleries are reporting price increases with greater regularity - one well-known UK distillery has just been forced to halt our allocation due to a combination of supply chain problems, the single largest being the increase of grain pricing from £400 per tonne to almost £700 over recent months, with that figure expected to continue rising.

All of this is likely to be further exacerbated by the situation in the unstable nitrate fertiliser market - essential for cultivating barley - which saw £100/tonne increase in pricing in January. This was then compounded by Putin’s ban on the export of ammonium nitrate during the early stages of the invasion, resulting in a continuing £220/tonne price hike on the pre-war price of ammonium nitrate.

A perfect war-torn storm indeed.


What consumers are seeing with household bills and cost of living spikes are largely a reflection of what is happening in industry. The shocks we are experiencing in the supermarket are directly correlated with the supply chain issues, increased fuel, power, production and transportation costs felt across the entire food and drink sector. 

Production levels in most whisky distilleries around the world were decimated in 2020-21 due to lockdowns, demand for hand sanitizer, and staff shortages. Meanwhile, demand increased as the world stayed home and consumed more. As the industry tries to catch up whilst facing the challenges outlined above, the knock-on effect of all this will be severe shortages of mature spirit in the coming years, with well-matured casks at an all time premium. This could be viewed as a silver lining for those already invested in maturing whisky stock, and a nudge to acquire casks while still available at reasonable prices.

Could there be another silver lining here? The disruption to barrel supply may well prompt greater diversity in whisky maturation practices and finishing in a wider variety of woods and cask types - more ex-wine and local/regional spirit casks etc. - which could carry the benefit of more variety and innovation in single malt offerings! While this outcome will be attractive to increasingly whisky-forward consumers, it also means the value of more traditional maturing casks such as ex-sherry and port is likely to skyrocket.