abare.gov.au - research report 09.7

1	Introduction

Wine grape production in Australia has increased rapidly in the past 20 years, primarily because of strong demand for Australian wine in export markets, which resulted in higher wine grape prices and the rapid expansion of Australia’s vineyard area.

In recent years the growth in demand for Australian wine has slowed, as competition in export markets has increased. This has placed downward pressure on both wine and wine grape prices. In the past decade, exports of wine from Old and New World wine producing countries have increased, providing consumers with a variety of new, price-competitive wine choices.

The Australian wine industry is expected to continue to face strong competition in both the domestic and export markets, and accordingly wine grape prices are expected to remain subdued in the coming years. Additionally, the availability and cost of water for irrigation is expected to have a major effect on production in the coming years. Because of these factors, productivity will be important for maintaining profitability.

Projections to 2010-11

The wine grape production estimates presented in this paper are part of a series of projections produced by ABARE since 1988 for the Grape and Wine Research and Development Corporation and its predecessor.

This report provides estimates of wine grape production in 2007-08 and projections of production in 2008-09, 2009-10 and 2010-11. Data on the production and use of multipurpose and minor varieties of grapes is also presented. The specific varieties of wine grapes in each of these categories are listed in table B2.

Readers will note the distinction made between warm and cool climate regions. The major warm climate grape growing regions are Murray-Darling – Swan Hill, the Riverland and the Riverina (table B1). These regions are characterised by a greater reliance on irrigation than cool climate regions, higher yields and generally lower wine grape prices.

Since 2006, ABARE has reported wine grape production using geographical indication (GI) regions as defined in the Register of Protected Names, which is maintained by the Australian Wine and Brandy Corporation. Production projections have been made for each GI region and these estimates have been aggregated to the zone level (map 1) for the tables in appendix B. The data for each of the regions and zones is available on the ABARE website, www.abare.gov.au.

Industry growth and development

In the coming years, some restructuring of the national vineyard is likely to occur, particularly in regions where wine grape prices are low relative to the costs of production. However, a large reduction in the total area of vines is not expected to occur in the next three years, and has not been incorporated into these projections.

One indicator of market conditions for wine grapes is the quantity of grapes left on the vine or dropped on the ground at harvest. In 2007-08, the total area of grapes not harvested declined by 10 per cent from 2006-07 to 6235 ha, which is around 4 per cent of the total bearing area of vines in Australia. The area of red wine grapes not harvested in 2007-08 fell by 16 per cent to 3940 hectares while the area of white wine grapes not harvested increased by 3 per cent to 2295 hectares.

Based on average regional yields, the estimated quantity of grapes left on the vine in 2007-08 was 53 915 tonnes, an increase of 19 per cent from the previous year. This quantity of grapes represents around 3 per cent of the 2007-08 wine grape crop. The estimated quantity of red wine grapes left on the vine increased by 14 per cent to 30 500 tonnes and the quantity of white wine grapes left on the vine increased by 26 per cent to 23 500 tonnes.

1	Grapes left on the vine or dropped on the ground, 2007-08

red grapes

white grapes

t e

South Australia

Barossa Valley

363

266

Mt Lofty Ranges

217

1 402

204

1 925

Fleurieu

529

4 820

1 221

Limestone Coast

609

293

Lower Murray

172

3 024

134

2 449

Other

Total

1 047

10 236

488

6 165

New South Wales and ACT

Hunter Valley

488

2 247

435

3 245

Big Rivers (excl. Murray-Darling)

836

510

Central Ranges

602

4 981

334

3 389

Rest of NSW

143

1 012

606

Total

1 293

9 077

884

7 750

Greater Victoria

Central

153

1 299

547

North East

131

1 112

688

Port Phillip

122

830

628

Rest of Victoria

323

1 286

203

Total

729

4 527

230

2 066

Murray-Darling - Swan Hill

339

4 666

438

6 147

Western Australia

360

1 595

186

1 235

Tasmania

182

111

Queensland

150

181

Grand Total

3 940

30 463

2 295

23 525

e ABARE estimate.

Wine grape prices

Reflecting concerns about consecutive below average vintages, wineries offered significantly higher prices for wine grapes in 2007-08 encouraging wine grape growers to purchase water to meet irrigation requirements. Because of these increased water purchases and improved seasonal conditions in non-irrigated regions, wine grape production increased significantly in 2007-08.

Data from the 2008 Australian Regional Winegrape Crush Survey provides estimates of average wine grape prices by region and variety. In 2007-08 the average price of wine grapes in Australia increased by 27 per cent to $817 a tonne. In warm climate regions, prices increased by 40 per cent, to $546 a tonne, while in the cool climate regions prices increased by 8 per cent to $1243 a tonne.

Following the larger than expected wine grape crop of 2007-08 and falling sales, stocks of Australian wine increased by 5 per cent in 2007-08 to approximately 1.9 billion litres. Reflecting this increase in stocks and ongoing weakness in the demand for Australian wine, wine grape prices are expected to decline in 2008-09.