Wine regains some sparkle

20 Jul, 2015 06:46 AM
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Our analysis shows that 92 per cent of production in warm inland areas is unprofitable

JUST about every grape picked in the last harvest was plucked from the vine at a financial loss for Australian growers, but there are glimmers of hope as prices have started to rise.

About 85 per cent of the national 2015 grape harvest of 1.67 million tonnes was produced at a loss, particularly in lower-quality inland regions.

The wine industry, though, is looking forward to better times as rising grape prices, up on average by 5 per cent in the past 12 months off a low base, complement a strong impetus from the diving Australian dollar.

This makes wines much more competitive on the shelves of overseas retailers where 60 per cent of Australian wine is sold.

For wine drinkers the optimism is better still, with the 2015 grape harvest regarded as generally high quality, particularly from regions such as the Barossa Valley in South Australia where Australia's most popular wine variety, shiraz, is a mainstay.

A detailed assessment of the 2015 vintage was released on Friday by the Winemakers Federation of Australia.

It showed the grape crush across Australia was 1.67 million tonnes, marginally lower than the eight-year long-term average of about 1.70 million tonnes.

Winemakers Federation of Australia chief executive Paul Evans said the broader economic factors were starting to swing in the industry's favour with the lower Australian dollar a big plus for exporters, and free trade agreements helping to accelerate demand in Asia.

But conditions were extremely tough for grape growers in warm inland regions such as the Riverland in South Australia, Mildura and Swan Hill in Victoria, and around Griffith in NSW.

"Our analysis shows that 92 per cent of production in warm inland areas is unprofitable," Mr Evans said.

A breakdown of region-by-region profitability showed Tasmania was top of the list, with 99 per cent of grape production profitable. In the Barossa Valley, 57 per cent are profitable, while only 30 per cent are profitable in the Margaret River region of Western Australia. The Hunter Valley in NSW is struggling, with 94 per cent of production at a loss, according to the report.

Ken Semmler, a grape grower for four decades, who has 25 hectares of shiraz, merlot and cabernet around Lyndoch in the Barossa Valley, says there are inevitable cycles in the industry, but hailed the falling dollar.

"With the dollar coming down, that really means a lot for competitiveness."

The currency hit a peak of $US1.10 in mid-2011, which hurt exporters, after being as low as $US0.48 in 2001, which helped the Australian industry make major inroads into the UK and US markets. It is now sitting at $US0.74.

Mr Semmler, whose grapes go into wines under the Dutschke Wines and Grant Burge Wines labels, said the quality of the 2015 grapes in the Barossa is high.

"The aroma and the colour are quite something," he said.

The Winemakers Federation report showed that shiraz was still the most popular grape, with 391,649 tonnes produced in Australia in 2015, followed by the white variety of chardonnay at 376,339 tonnes. Cabernet sauvignon was the second most popular red grape variety with 209,588 tonnes.

Vineyard areas expanded in Australia from 96,000 hectares in 1999 to a peak of 157,000 hectares in 2008.

There is still an oversupply of grapes in some price segments in 2015.

The top 20 wine companies led by Treasury Wine Estates, which makes Penfolds, Wolf Blass, Wynns and Rosemount, account for 85 per cent of the grape crush.

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