Back to the Future

Austwine Director Jim Moularadellis has shone a ray of hope on the wine industry in his latest commentary following the 2016 vintage. The following is an excerpt from his piece in which he writes: “It’s back to the Future for the Australian wine industry. The rapid shrinkage of Australia’s vineyard area has gone largely unnoticed in recent years: the vineyard area in 2015 has taken us right back to the vineyard area of 2001. Combined with a lower exchange rate, multiple Free Trade Agreements, and China’s rapid demand growth, the shrinking vineyard area is a game changer for Australian wine.

The main question he’s been asked by domestic and international customers over the last two months has been: “What is the size of this year’s Australian wine grape crush?” Some areas were up slightly (e.g. a number of premium SA regions), some areas were down slightly (e.g. Murray Darling) but we will not know for sure for several months yet. It is most likely that 2016 will be an average sized, good quality vintage. But the reality is that the exact size of the 2016 vintage probably does not matter much and here’s why:

In recent years, Australia has removed a very significant quantity of vineyards, which far eclipses any natural variation in crop levels that can ordinarily be expected each year. Even if nature produced a bumper crop in 2016 across the country (unlikely), we will be facing supply challenges very soon.

Yes, you have read it correctly: supply challenges from Australia. If the current fundamentals remain in place, it is only a question of time: a larger vintage this year will delay it, and a smaller one will accelerate it. But there is no doubt that the difficult oversupply conditions experienced by Australian winemakers and grape growers over the past 15 years are coming to an end. Jim says “I am certainly not saying that every variety and every region will be short, or is even currently short – we are certainly some way from that scenario. Some regions are still experiencing structural oversupply (for example, many of the newer premium regions that experienced rapid growth in the late 1990’s and early 2000’s). Other regions are in a much better position following years of painful restructuring to reduce supply (e.g. Riverland & Murray Darling)”.

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