The Australian Wine Industry: oh boy!

The new year has started slow for me as a wine blogger. I have a couple of pieces in the making, for instance on my winery tour in Thailand where we visited three wineries and tasted their produce. But reading through the mail on the internet does not lend itself to optimism if you are an Australian vintner like me.

Here are some of the facts, suggestions and ideas for 2010 and beyond:

– rip out 35,000 ha of vineyards to restore a balance between demand and supply

– overproduction of 20-40 million cases of wine equivalent to 300,00 to 500,000 tonnes of fruit, ergo the need to rip out between 20,00 and 40,000 ha

– “clean skin” bottled wine available for A$ 1.99 or “two buck chuck”

– wine surplus being sold for 50 cent a litre

– grape prices of around A$ 150-200 per tonne of fruit

– in only seven years, I guess from 1995 to 2002, Australians planted 75,000 ha which was meant to be planted over a 25 year period

– estimated financial losses in the Australian wine industry of about A$ 124 million in 2009

-medium-sized producers such as De Bortoli Wines (our neighbour in the Yarra Valley) posted a loss of A$ 1.6 million in 2008-2009

– vineyards are unsellable, Cockatoo Ridge Wine, for instance, could not sell its Monash Winery (valued at $14.3 million) in Riverland

– more than 300 grape-grower contracts cancelled in the Murray

– Murray Valley Winegrowers removed about 2,000 ha of vineyards.

I could continue this list of bad news (for instance mentioning the strong Australian dollar) but do not want to depress you further. However, there is good news too. Consumers can finally enjoy good quality wines at much more affordable prices. I can feel this even in my Bangkok supermarket where Australian wines sell cheaper than last year.

I personally think that Australian wine prices were too high in the past. In my native Germany, many family wineries survived on much lower producer prices for many years. In my hometonw Trier you can get an excellent Riesling wine bought from the producer directly for about 5-8 EURO/bottle (A$ 8-12). These are Riesling wines from ultra steep cliffs, and everything is done by hand. On an aggregate, of course, German farmers and vintners are supported by various government subsidy schemes which we (alas) do not have in Australia.

Peolpe who say, that “the Australian wine industry did not know where to stop” are of course mistaken in their analysis. In a market economy the “overshooting” is punished by declning prices and unsold produce which in turn will lead to the reduction in production capacity. But since wine is an agricultural good which relies on a three to four year growing period before you can have additional grapes, the delay in decision-making can be costly.

The “irrational excuberance” was in fact the result of rational decision-making. Investors wanted to make a profit. That some of it was tax-fuelled is proof of irrational government interference by providing wrong incentives (tax credits). The second group party blamed for the glut is “lifestyle winemakers and vintners” to which I also belong. I still hope that my long-term view will “save” me and that I can indulge in grape growing and wine making after my retirement for a couple of more years. Since there is no succession plan, our enterprise might be short lived but such is life.

Cheers folk, after such heavy stuff I need a drink. Maybe, as Jancis Robinson suggest in her latest column, a German Riesling. How about a Forster Ungeheuer from the Pfalz or a Van Volxem Riesling from the Saar?

2007 Forster Ungeheuer, Grosses Gewaechs

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