Bad weather has destroyed grape harvests across the globe and the fall in production is likely to push up prices.
Output is expected to fall from 264.2 million hectolitres in 2011 to 248.2 million hectolitres this year, according to the International Organisation of Vine and Wine (OIV),
It said the hardest-hit country would be Argentina, where output will drop 24%.
France also took a battering due to winter drought, cold weather, hailstorms, a heat wave and a dry summer.
Production is expected to fall 19% to 40.5 million hectolitres.
Italy also suffered but a less severe output drop of 3.4% should see it overtake France as the world’s largest wine-producing country with 40.8 million hectolitres.
The one major producer to buck the trend is the USA, where output is expected to rise by 7%.
Global thirst for wine is growing – particularly in the developing world – and demand is set to exceed supply.
World wine consumption is estimated at between 235.7 million hectolitres and 249.4 million hectolitres, with a further 30 million hectolitres used to make spirits, vermouth and vinegar.
OIV statistician Victor Magalhaes said: “If we don’t have availability in the market, there’s a strong chance some products will increase in price.”
Federico Castellucci, the OIV’s director general, added: “We’re dipping into the reserves for supply.”