Demand for Australia’s wine may exceed supply this year
The drought is proving to be a double-edged sword for the Australian wine industry. While production volumes are down due to heatwaves and lack of water, the value of our wine exports is growing. This comes at a time where overseas buyers are becoming more interested in our wine industry. In combination, these factors have led industry experts to predict that demand for Australian wine may outstrip supply as soon as this year.
Climate change is affecting volumes
Over the last 10 years, the national vintage crush, that is the number of wine grapes that are crushed to produce wine, has been 1.8 million tonnes on average. This is expected to be lower this year due to the significant heat experienced in parts of eastern and southern Australia.
This reduction in supply means many anticipate the 2019 vintage to sell out quickly due to wine shortages. The Barossa Grape & Wine Association expects yields for the region to be down 40% which is the Barossa’s lowest yield in a decade.
There is a positive though – low yields are proving to be a bonus for the grapes being produced. Red varietals are demonstrating a great colour with intense flavours and firm tannin structure. Margaret River Wine Association has also found that the quality of white varietals being produced in their region is high despite the lower volumes. These all point towards 2019 being an exceptional vintage.
Grape growers are also looking at new ways to expand their production in the face of climate change. This includes looking at new grape varieties that are drought-resistant which may start to change the types of wine that we produce.
Higher margins are encouraging innovation
While volumes are lower, according to Wine Australia exports grew by 15 per cent in value to $2.56 billion in 2017. This represented a growth in volume by 811 million litres which have come in higher price segments as international consumers demand our premium wines. Much of this demand is being driven by North East Asia, China and Hong Kong in particular, while the United States, the United Kingdom and Canada also continue to be significant export markets.
The reduced volumes and increased demand also mean that margins are increasing. The average purchase price for wine grapes in 2018 was $609 per tonne, up from $565 in 2017. This is also the highest the average price has been since 2008. As a result, revenue to wine producers has increased by 11% in the past year.
The increase in demand and revenue is allowing some growers to expand and upgrade their vineyards. Some producers have even put some vines back into production after many years. This all points towards an exciting time ahead in Australia’s wine industry.