Murray Valley Winegrowers’ release of the annual grape crush report for the Murray-Darling and Swan Hill wine regions shows production from independent growers and winery-owned vineyards had collapsed to 205,000 tonnes.
This is down significantly on the 327,000 tonnes produced in 2022, and way below the 355,000-tonne average of the previous five years.
MVW chief executive Paul Derrico says not even a revival of the Chinese market will be the lifeline the industry needs right now.
Mr Derrico said even if Australia could recover its 21 per cent slice of current wine imports into China, it might add up to about 70 million litres of wine (90,000 tonnes).
He said this figure would be well below the 2018 volume of 168mL (250,000 tonnes) imported by China in 2018, with its global wine imports down as much as 50 per cent.
“While the immediate outlook for whites is relatively stable – and thankfully half our region’s production is whites – we have observed several wineries recently suggest vintage 2024 will see a continuation of oversupply of the main red grape varieties of shiraz, cabernet and merlot,” he said.
“And, if not for the major crop losses in 2023 due to disease (predominantly downy mildew), we believe significant volumes of reds would have remained unsold this year.
“In fact, growers of contracted reds may have already been approached by their wineries to look at reducing yields or mothballing”, which means enforced caps or renegotiating contracts by mutual agreement.
“We urge all growers to consult their winery or regular buyer as soon as possible to gain direction for the upcoming challenges,” Mr Derrico said. “Growers need to do this now, the increased costs at the vineyard level suggest the price to recover the cost of production is likely to be much higher than the likely red grape price to be offered next season.”
“The devastating effect of poor red prices, widespread disease pressures through the local growing season, and to a lesser extent, localised flooding, have seen many growers face the most difficult time they would have experienced growing wine grapes.”
He said timing of sprays, timing of vine growth stages, chemical choices and availability, chemical rates, cultural practices, site-specific conditions and general vineyard management all combined to determine whether growers could save their crops this year.
“Our weather conditions have been relentless, and while some thought they may have had it under control early, they soon discovered it wasn’t,” Mr Derrico said.
“For some, crop losses have been significant. For others, it hasn’t been as bad, but it is rare to find a grower that hasn’t been affected in some way by the spring weather events.
“Fruit that was managed through to vintage relatively unscathed was basically all sold, albeit many reds were sold below the cost of production. Varieties in demand and reflecting better pricing included pinot noir, prosecco, pinot gris and sauvignon blanc.
“The effect of reduced income for the industry will not only be felt by growers, but all the connected employees and businesses in the region, evidenced in part by the recent announcement Treasury Wine Estates will cease operating at its Lindeman’s site at Karadoc next year.”
Mr Derrico said growers must also be realistic in any plans to switch varieties.
He said it would not take too many growers to shift focus to jeopardise the stability of that market as well.
“Despite the lower crop level, it is projected red grape intake in 2023 will not be low enough to reduce the red-wine stock levels to a comfortable ratio, meaning winemakers will probably be restricting intake of red grapes next year.
“If you didn’t have a market for some of your red grapes in 2023, there is a high probability you will not sell them in the near future.”
At the same time, world wine consumption is also declining due to several factors.
Total world wine consumption is down by about 1000mL (1.4 million tonnes since 2018), and due to oversupply and wine discounting in previous years Brand Australia does not have the power to command or demand a premium in the commercial sector.
Mr Derrico said lack of brand power was allowing customers to source wine from the cheapest source country.
This meant Australian commercial wine had gone from a commodity with a small premium to having to compete with the rest of the world, where the lowest price gets the contract.
“It is clear there needs to be a readjustment to the whole industry,” Mr Derrico said.
“As in 2009-10 there is an oversupply of fruit in what can be described as ‘commercial’. A viable sustainable industry tonnage for growers is in the 1.4 to 1.5- million-tonne range, with the fruit being split evenly between red and white. This will mean a reduction of about 250,000 tonnes of reds, and whites remaining stable.
“The 2023 harvest report shows independent growers were collectively paid $55.5 million for the 135,000 tonnes they produced, down 40 per cent from 2022, a loss in income of approximately $122,000 for each of the 300 winegrowers in the region (and a staggering $245,000 when compared to the 2021 vintage), depending on vineyard size, yield, disease, and saleability of fruit.
“In 2023, grower tonnages reduced by 38 per cent, being 135,000 tonnes (216,000 tonnes in 2022), while winery-owned vineyards decreased 37 per cent, producing 70,000 tonnes (111,000 tonnes in 2022).”
Most red grape prices also continued to weaken. The average price of cabernet sauvignon fell 12 per cent to $339 a tonne, shiraz averaged $337 a tonne, down 13 per cent, and merlot ($336 a tonne) slumped 15 per cent.
Pinot noir was in demand again in 2023, reflected in an improved average price of $715 a tonne, an increase of 3 per cent. Mainstream red grape prices are half what they were only three years ago.
White grape prices tended to decrease or were somewhat static. Chardonnay averaged $383 a tonne, a reduction of 7 per cent on 2022 prices, and gordo was at $335 a tonne (down 1 per cent).
Prosecco continued to lead the way with the whites, pricing at $661 a tonne (despite a fall of 12 per cent), sauvignon blanc held at $570 a tonne ($571 in 2022), semillon $330 a tonne (down 6 per cent) with pinot gris at $532 a tonne (down 1 per cent).
Across all varieties this year, the average price was $412 a tonne, down 4 per cent from $428 a tonne recorded last year.
