Hot on the tail of news of a 7% decline in Australian wine exports by volume in the year ending March 2012 comes an assessment from the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) that the country’s grape production is forecast to increase by 5 per cent to 1.61 million tonnes for the 2013 vintage (an increase of 80,000 tonnes from 2012), assuming the widely expected favourable post La Nina weather conditions. Production is expected to increase marginally to 1.63 million tonnes for the 2014 vintage.This is not great news for Australian wine. The overall poor quality of fruit in 2011 has led to a sharp increase in the price of the cheapest Australian wine, while there has also been a scramble by eastern state-based wineries to source premium quality 2011 vintage wine from Western Australia. The latest figures show a decline in bulk Australian wine exports below A$0.50 per litre from 3.3 ML to 0.4 ML, but a 1% increase in bulk exports between A$0.50-$1.00 per litre (to 223 ML) and a 5% increase above A$1.00 (to 132 ML). Interestingly, while bulk exports to the UK and the US increased by 12% and 31% over the last year, bulk wine exports to China dropped by 43%. China is not driving Australia’s bulk wine exports.It’s of note that the two reasons given by Wine Australia that are currently driving down sales of bottled Australian wine in overseas markets as are the increased use of in-market packaging facilities (of bulk wine exports) as well as some Australian producers exiting unprofitable entry level price points.However, there’s still a shortage of fruit able to fill profitable niches in the wine market. The key question is this: will the imminent increased supply of river-based fruit from regions like Murray Darling, Swan Hill, Big Rivers and Lower Murray (which account for around 60 per cent of national wine grape production) solve the problem? Or will such an increase simply add to downward pressure on grape prices? It’s already costing more for many wine grape growers to pick their grapes than what they can sell them for. Laurie Stanford, executive director of Wine Grape Growers Australia, has said it is clear that efforts to reduce Australia’s grape glut had hit a wall. Our wine industry is simply not acting quickly enough to redress the balance between the kind of fruit that can be made into wine that it can profitably sell and what our growers currently have in the ground. Simply put, too much of the Australian vineyard cannot produce wine of a quality that the world wants, at a price the world is prepared to pay for it. Orlando, owners of Jacob’s Creek and Richmond Grove, have blamed the oversupply and the high Australian dollar for its recent decision to shed 85 jobs (hopefully through natural attrition) from its South Australian operations.According to ABARES senior economist, Caroline Gunning-Trant, the industry should pin its hopes on stronger demand. That’s hardly a strategy to succeed. Why doesn’t the industry make the hard decisions and reassert control of its own destiny? It could begin by delivering on its spoken intent to reduce the areas of uneconomic vineyard Ð as Adrian Hoffman of the Barossa Grape and Wine Association has said is needed to restore a supply and demand balance Ð and by spending more to raise the profile of Australian wine in its key markets, including the one right here.
