THE wine industry’s annual period of review is currently underway and National Australia Bank (NAB) Agribusiness is urging wineries to take the opportunity to discuss their options for foreign exchange, interest rate risk and asset finance with their banker.
There’s a flicker of optimism in the industry this year with the prospect of demand and supply inching closer into balance, strong domestic sales and an exceptional grape growing season across most regions.
Khan Horne, NAB Agribusiness General Manager, says now is the time for wineries to plan with their banker, accountant and advisers.
“The strong Australian dollar has seen a spike in demand by our winery customers to invoice American and European buyers in local currencies,” said Mr Horne.
“Our Treasury specialists in our Business Banking Centres are assisting small to medium operations to trade their products in the Euro, Pound or US Dollar to manage their currency risk.
“We’re also helping customers manage interest rate risk.
“The ability to set a ceiling for your interest rate and have some certainty can be very beneficial in forward planning. Locking in rates and taking interest rate swaps is a service NAB’s Treasury specialists are able to provide through your agribusiness banker.
“At this time of year, wineries may also review and buy wine barrels for the next year, which is a significant expense as they are often sourced from France or the US.
“There are options for payment which can protect against currency movements by locking in rates of foreign currency at the time of purchase. This is another area that can be discussed with your banker.
“October and November are traditionally when wineries review their relationships with growers, grape supply contracts for next season, their product range, staffing and their packaging and distribution needs - more important than ever after a number of challenging seasons.
“The wine export market is still in a depressed state due to limited spending in the United States, the United Kingdom and Europe, and large supermarkets sourcing very cheap wine from South American exporters.
“The Australian industry is in a state of oversupply in the order of 20-25 per cent, but we are now seeing some correction in this balance, for example with the decline in the area planted by managed investment funds.
“We have stuck with our winery customers through the past seasons and now look forward to working with them as the outlook becomes much more favourable,” Mr Horne said.