Australias wine grape prices have plummeted in the last decade

Australia's wine grape prices have plummeted in the last decade

There is likely to be no end to low wine grape prices in Australia in the next three years, according to the Government's research body for agriculture.

Wine grape prices in Australia have plummeted by between a third and 50% over the last decade, according to figures published this week by the the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES). Red wine grape varieties have suffered the worst falls.

In a report that will throw the spotlight on industry efforts to persuade more grape growers to quit the sector, ABARES said that grape prices are likely to remain low due to an increase in bulk wine exports, ongoing oversupply problems and competition in international markets.

"In the coming years, 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," ABARES said. In 2010, Australia's wine exports by value fell by 9%.

On the domestic front, the Government-funded agency added that Australia's wine grape harvests are not expected to decline over the medium-term. This year's grape crop is set to fall by just 2%, to 1.5m tonnes, but ABARES has predicted that harvests in the two following years will return to around 1.7m tonnes, which was the level recorded in the 2008-09 harvest.

To compound pressure on grape prices, ABARES said that cheaper bulk wine exports now account for 40% of Australian wine exports, versus just 13% a decade ago.

Its report comes only a month after the Wine Grape Council of South Australia (WGCSA) estimated that only a third of wine grape growers in the key South Australia wine region turned a profit in 2010. Out of 1,000 wine grape growers surveyed, 40% have been in the red since 2007, the trade body said. It claimed that there has been slow progress to implement an industry-wide plan to rip out 20,000 hectares of vines in order to reduce oversupply.

"Our research suggests that up to 10% of growers would sell their vineyards if they could but can’t," WGCSA said.

Despite a fall in exports by value in 2010, ABARES drew some positives from a 2% increase in Australian wine export volumes for the year. It said that the industry's stocks-to-forward-sales ratio has fallen slightly in the last 12 months, helping to reduce oversupply.

It added: "Although production is forecast to increase in 2011–12 and 2012–13 (on the assumption of favourable seasonal conditions), further growth in export and domestic sales is projected to lead to a reduction in the stocks-to-forward-sales ratios for both red and white table wine in this period."

For the full ABARES report, click here.