The state of play for the Australian wine industry

Posted by Isobel Drake on 4th March 2009

The 2008-2009 growing season has presented more challenges for the Australian wine industry than would normally be expected in a generation, according to the latest Rabobank report analysing the impact of the heat wave on the Australian wine industry.

Hammered by the after-effects of the heat wave, forecasts have tumbled ahead of the 2009 harvest. The Rabobank report says the extent of damage cannot be quantified until the grape harvest is complete, but evidence suggests a wide range of estimated yield reductions as a result of the heat wave.

Crop damage and losses

Vineyard- Wine grapes

‘Mother Nature’ lashed out in late January 2009, unleashing a heat wave across South Australian and Victorian wine regions resulting in devastating crop damage, while the Victorian bushfires impacted the Yarra Valley wine-growing region.

“One of the regions hardest hit in South Australia was McLaren Vale, where crop losses are estimated to be between 40 and 50 per cent,” Australian-based Rabobank analyst Adam Morris advised. “The Victorian bushfires did cause losses to vines and infrastructure, but the agricultural loss is hard to consider when compared to the tragic loss of human life.”

Oversupply still possible

The irony of 2009 will be that although the harvest forecast is being dramatically reduced, the impact of the global economic crisis will mean that the industry is still drastically oversupplied for today’s market.

“The UK and US markets account for 66 per cent of Australia’s wine exports by volume, so if these markets do not recover soon, the Australian wine industry could be in serious trouble,” according to Mr Morris.

Should the global economic crisis start to ease, the long-term forecast looks positive, particularly in the US market. Those producers capable of cutting costs, gaining access to water and shouldering their interest burden throughout the downturn will emerge in a strong position to capitalise on these longer-term opportunities, the report concluded.