Friday, May 7, 2010

Doom and Gloom in the Wine Industry

Many parts of the Australian wine industry are under sustained economic attack. While there is broad recognition that the vineyard area of Australia needs to be reduced, there is much debate about the where and the when. The when is a bit like carbon trading, with a lot of grape growers waiting for others to make the first move. The where is even more contentious. The Winemakers’ Federation of Australia has sent briefing teams around the majority of the premium regions outside the Riverina/Riverland irrigation areas suggesting that anything up to 40% of the vineyard area in the region being visited is not economically viable, and there should be a substantial reduction in the vineyard area.

So far as I can understand it, the rationale is that it is in fact only the Riverina/Riverland areas that are capable of growing grapes at a sustainable price per tonne. If that is true, the logic is very strange. The Riverland Winegrape Growers Association executive Chris Byrne has given an interview in which he makes the following points:

“The Riverland grape grower was getting 66c from a bottle of wine in 2000, but it has dropped to only 27c a bottle this year.”

The Riverland Winegrape Growers Association has reported that the price per tonne for Riverland grapes has fallen from $673 in 2002, to only $265 this year, lower than the price of grapes 20 years ago.

Quite apart from the fall in prices per tonne, Riverland production has dropped from 432,000 tonnes in 2005 to just 260,000 tonnes this year.

Mr Byrne is quoted as saying “The region’s grape income this year is utterly unsustainable, with businesses only surviving by liquidating assets.” He added that at least 4,000 hectares of vines had been taken out of production in the Riverland in the past three years. He continues “If the price we receive for grapes this year continues, we could lose that many more hectares again.”

The Catch 22 is that a sufficient rise in grape prices to make the growers happy, matched by a reasonable margin in the FOB prices for wines headed to Britain, will make the wine unsaleable.

1 comment:

Chris Dix said...

While I was born & bred in the Riverland & worked there & Sunraysia winemaking for a number of years, the reality is that grapegrowing is unsustainable from an environmental & economic standpoint. While the towns were set up as irrigation schemes for small 'blockies', the broadacre grape 'farms' that arose through the mid '90's boom have skewed the winery supply base. There is simply too many fingers in the water pie, whether it be cotton, rice, citrus, avocados, citrus or grapes and the margins just aren't there. Cooler climate with natural rainfall has to be the sustainable & sensible move & it appears that the wine market is now moving to cooler climate producers throughout Australia. Natural selection perhaps?

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