WINE exports to Asian markets are skyrocketing but Australian grape growers struggling to stay afloat, drowning in a glut of grapes.
A report on the state of the wine industry released today by the Standing Senate Committee for Rural and Regional Affairs shows a staggering portion of grape growers and winemakers are operating at a loss.
The report said a staggering 70 per cent of total current Australian wine grape production may be uneconomic. Using data from Wine Federation Australia, it showed 84pc of grape producers in 2014 were not covering their variable costs, up from 77pc in 2012.
These figures follow more than 15 years of declining grape prices owed to a tripling of local production in the decade to 2007. In 1999 grapes were $1026 a tonne but they plummeted to a historic low of $413/a tonne in 2011.
In recent years, Australian prices haven’t been helped by the high Aussie dollar, global financial crisis and an oversupply of European grapes.
The on-farm reality of the grape industry is a far cry from the news stories which hit the stands last month following the release of Wine Australia’s December Export Report.
The report boasted exceptional export increases to China, Japan and Korea. China had the strongest growth of 66pc to $370 million; Japan increased by 12pc in value to $46m, and exports to Korea had jumped 38pc in value to $11.7m.
Commentators’ excitement centered on the growth prospects in China, where the under China Australia Free Trade Agreement, the tariff on bulk wine has been reduced from 20pc to 12pc, and the tariff on bottled wine has reduced from 14pc to 8.4pc.
But growers aren’t likely to cash in on the promises of this lucrative market. According to the Senate Committee’s report, grape growers have little power to negotiate sales in the face of extreme market consolidation by Woolworths and Wesfarmers, whose power and influence spans domestic and export markets.
In response, the committee recommended in responding to the Competition Policy Review’s final report, the Government specifically consider commercial agreements between growers and producers of wine and the major retailers.
Meanwhile, conditions might be looking up for grape producers. Rabobank’s latest global outlook which projects a rise in the industry-average wine grape price thanks to tightening stocks of some commercial white wine varieties and premium red wine varieties.