Australian farmers rip out millions of vines amid wine glut

Australian farmers rip out millions of vines amid wine glut - Business and Finance - News

Title: The Unyielding Crisis in Australia’s Wine Industry: Overproduction, Plummeting Prices, and the Demise of Family-Owned Vines

The Australian wine industry is grappling with an unprecedented crisis as millions of vines are being destroyed, and tens of millions more need to be uprooted to combat overproduction. This situation has resulted in crushed grape prices that threaten the livelihoods of growers and wine makers.

Global wine consumption has dropped significantly, leading to a shrinking demand for Australia’s biggest product – cheap red wines. The Chinese market, which had been a significant growth driver until recently, has also declined, leaving the fifth largest exporter of wine with over two billion liters in storage as of mid-2023. Some of this wine is spoiling as owners try to dispose of it at any price, adding to the financial burden on the industry.

James Cremasco, a fourth-generation grower near Griffith in southeastern Australia, expressed his concern as he watched yellow excavators rip out rows of vines that his grandfather had planted. About two-thirds of Australia’s wine grapes are grown in irrigated areas like Griffith, which have been shaped by vine-growing techniques brought by Italian migrants.

As major wine makers such as Treasury Wines and Accolade Wines refocus on more expensive bottles, areas around Griffith are struggling. Unpicked grapes shrivel on the vines as growers face financial losses. Andrew Calabria, a third-generation vineyard owner and wine maker at Calabria Wines, echoed Cremasco’s sentiment. “It feels like an era is ending,” he said.

Nearby, the remains of 1.1 million vines once comprised one of Australia’s largest vineyards, now piled in heaps of gnarled and twisted wood as far as the eye could see.

Red wine has been hit hardest, with prices for grapes falling to an average of A$304 a ton last year – the lowest in decades and down from A$659 in 2020. The government, which forecasts lower prices again this year, acknowledged the challenges but growers believe more support is needed. Some grapes sold for little more than A$100 a ton to balance the market and lift prices.

To counteract oversupply, up to a quarter of the vines in areas like Griffith need to be pulled up – destroying over 20 million vines across 12,000 hectares or around 8% of Australia’s total vineyard area. Growers in other regions have also been pulling out vines as the market struggles.

However, many growers unwilling to pull up their vines are losing money while hoping for a market turnaround. Tim Mableson, a KPMG wine analyst, estimates that 20,000 hectares of vines need to be removed nationwide. Health concerns driving consumers to drink less alcohol and choose pricier bottles are further compounding the problem for producers in Australia and other large wine-producing countries like Chile, France, and the United States.

Even when China reopens its market this month, it may not be enough to absorb the wine glut due to falling demand there. Cheaper wines sold for less than A$10 a liter accounted for two-thirds of the value of Australian wine exports worth A$1.9 billion in the year to December 2023, according to Wine Australia.

Some areas like Tasmania and the Yarra Valley are faring better with their production of white wines and lighter, more expensive reds. But across Griffith, there are clusters of metal storage tanks, each holding thousands of liters. “Everyone is trying to clear wine,” said Bill Calabra, father of Andrew Calabria, adding that wineries are “all but giving it away” to make room for the incoming vintage.

As growers face financial losses and the possibility of uprooting their family-owned vines, many are turning to alternative crops like citrus and nut trees. Cremasco hopes for greater profits from prune trees on his grubbed-up acreage, while GoFARM is putting in more than 600 hectares of almonds nearby. “There’ll be no next generation of family grape growers,” Cremasco added, “it’ll be all big corporates, and all the local young guys will be working for them.”