The Guardian – 16 August, 2023
New report suggests glut will last years, even if Beijing drops tariffs early, while prices of Australian red wine grapes plummet by more than half
Australia has an oversupply equivalent to more than 2.8bn bottles of wine – a little more than 100 bottles per person – after the trade dispute with China slashed exports to the biggest consumer of Australian wines.
The excess wine is being stored in large steel vats in wineries across Australia, equating to 859 Olympic wine-filled swimming pools.
The removal of Chinese tariffs on Australian barley has some grape growers optimistic that the five-year wine tariffs implemented in 2021 may be dropped early, but a new Rabobank report suggests even this would not be enough to prevent further years of oversupply.
Pia Piggott, the report’s author and an associate analyst for RaboResearch, said: “During Covid, we had logistics bottlenecks and high shipping costs and weren’t … able to grow much in other markets.
“Even if the China tariff hadn’t happened, if the shipping situation had been better and the cost had been better … the oversupply would have been less severe.”
At its peak in 2020, export of Australian wine to China was valued at $1.2bn and made up 18% of export volume and 40% of value. Now annual exports are worth just $8.1m, contributing to a plummeting price for red varieties of grapes and a decline in domestic red wine prices.
The trade minister, Don Farrell, said the government would continue to press for all trade impediments affecting Australian exports to be removed.
“We want to use a process similar to what we used to resolve the barley duties, to ensure that fantastic Australian wine gets back on the tables of Chinese consumers,” he said.
The end of an extended La Niña weather system is likely to bring more favourable growing conditions across parts of the country, which could lead to a further rise in supply.
In Australia’s wine regions, which span the country’s interior, the prices of grapes for red wine have fallen by more than half. In South Australia’s Riverland, the largest growing region in the country, the price growers get for the most common variety – shiraz – is down 67% since 2020.
Bruno Altin, a third-generation grape grower who has run a 120-hectare vineyard outside Griffith in central NSW for more than 20 years, said he was now picking grapes used for red wine at a loss as costs went up and returns went down.
“By the time you pick it and cart it, it’s going to cost you $100 per tonne, then you have pruning, spraying and everything else. We are going to lose a lot of money this year on the reds,” said Altin, who is on the Riverina Wine Grapes Marketing Board.
“Dad has been on the farm since he left school, he’s 76 and it’s the worst he’s ever seen … In the 80s the prices were the same if not higher than now … it’s really hard.”
Altin said his income from grapes for white wines was “more stable”.
He said he expected all wineries to cap the amount of grapes they bought from growers, as a result of the oversupply. Altin said he would have to leave many grapes to rot in the fields.
The chief executive of the Australian Grape and Wine Association, Lee McLean, said commercial grape producers in warm climates that produced red varieties, such as Altin, were most vulnerable to the oversupply.
“You are really struggling if you’re a grape grower. You are struggling to get good prices for your grapes, if you can sell them at all,” McLean said.
“But if you’re in a cooler climate, a sort of high-value producer region, generally speaking, things are not too bad and they’re not suffering the same sort of pressures.”
Piggott said that in spite of the oversupply, she expected consumer prices to remain stable as increased costs for storage, transport and glass had cancelled out reductions in the price of grapes.
“I’m not trying to give advice and I don’t want to encourage more alcohol consumption,” she said. “But … it’s a good time to support the Australian wine industry.