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| This report focuses on the supply of wine grapes, and hence wine, in Australia. One aspect of wine supply is stocks. Changing stocks reflects a combination of responses to expected changes in future wine sales, and differences in the growth of wine production and sales. Each year the Australian Bureau of Statistics (ABS) collects data on the quantity of wine held in stock by Australian wineries. From the late 1980s to the early 2000s the demand for Australian wine in export markets grew rapidly, as interest in Australian wine grew and the relatively low value of the Australian dollar helped maintain competitiveness. The increasing volume of stocks throughout this period reflected the expectation of further increases in wine sales. These expectations were realised and during this period the average price of wine exports increased in real terms. However from the mid-2000s, export growth slowed, particularly in terms of value, as competition in key markets increased. Therefore, stocks accumulated during this period, mainly because wine production growth outstripped sales growth. During this period average wine export prices declined in real terms. The relationship between wine stocks and sales is reflected in the stock to sales ratio. Because wine sales are typically made from stocks, the ratio of stocks to forward sales is used. In the past 10 years, the industry has maintained this ratio at around 1.3 for white table wine and 1.9 for red table wine. Following the large decline in wine grape production, these ratios fell significantly in 2006-07 and wine grape prices stabilised. In 2007-08, the white and red wine stocks to sales ratios both increased, reflecting greater than expected wine grape production and falling wine sales. In 2008-09, despite the forecast decline in wine grape production, stocks to sales ratios are expected to increase further, as wine sales continue to fall in both domestic and export markets. Rising ratios are expected to place downward pressure on wine grape prices in 2008-09. With continued pressure on wine sales and growth in production, stock to sales ratios are expected to rise in 2009-10 and 2010-11. As a result, wine grape prices are expected to remain subdued in the next few years. |
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