Too Much Grape Production With Demand Declining

The wine industry continues to struggle with the oversupply problems with total wine grape produced this year down nearly 12 per cent from last year, at 1.5M tonnes.

The ABS reports that in 2010 winemarkers left approximately 13,000 hectares unharvested and as a result cultivating a total of only 157,000 hectares of vines.

With 731,000 tonnes of grapes produced, South Australia is the largest grape growing region, with NSW producing at 443,000 tonnes and 284,000 tonnes in Victoria.

There is an 20% to 25% oversupply of grapes as estimated by the industry. This situation is not aided by the continued strength of the dollar against its competing markets plus lower demand overall.

When the dollar was around the US60c, this had a big impact on the success of the Australian wine industry during the late nineties.

Stephen Strachan from Winemakers’ Federation of Australia said production numbers are headed in the right direction with more vineyard removals planned next year.  “A lot of fruit has been processed that hasn’t got a market,” he said.

“The rise of the Aussie dollar is also a challenging environment for growers. Mr Strachan said “It’s leading to a major impact on sales versus our competitors internationally.”.

Statistics indicate that there’s a static export market for Australian wine which grew by 2 per cent to 772 million litres, while falling in value to $2.10 billion for the 12 months to the end of September.

Mr Strachan further stated “Wineries are reducing their intake and growers have got to control growth.”.

While there has been much vineyards removed from production, the industry reform process still has a long way to go.

He stated “Viability in the industry is at an all-time low, but that’s not the story for all businesses.”.

With South Australia being the largest wine region, growers and winemakers would be impacted the most, but they know that, Mr Strachan said.

He said “It means the adjustment is going to be most acute in this state.”.