Australia's grape growers have issued their forecast on the widely-predicted reduced vintage this year.

Wine Grape Growers Australia (WGGA) said today (12 February) that 2007 grape volumes will be 800,000 tonnes lower than last year - a fall of 40%.

WGGA said the "massive drought-driven correction" would wipe out the industry's grape glut over the next year.

However, the association said such a sharp fall in yields would "deepen the economic plight" of growers selling less grapes at prices that remain low.

WGGA executive director Mark McKenzie said there is clear evidence of market failure in the wine grape market, where prices have remained low despite growing evidence of a serious production shortfall this year.

McKenzie said: "Wine grape prices have failed to fully reflect the change in the 2007 vintage production position or the prospect of a severely drought-affected 2008 harvest, meaning the majority of growers were still being paid at below the cost of production.

"Bulk wine prices are improving, but most grape prices are not. Wineries must immediately lift grape prices to avoid a financial crisis in the wine grape sector."