Calculated Prices

In a world of information superhighways, massive data repositories (residing in “the cloud”) and Google churning out multiple answers on every imaginable topic, it’s no surprise that most people take it for granted that information and answers will be available on demand; and that is often the case. The great majority trust the accuracy of the information and reasonably expect it can be and will be used fairly and honestly to guide decision-making in almost every aspect of life.

Over the past decade or so, South Australian grape growers have become accustomed to reading the data published by the Phylloxera Board in July/August each year, outlining the calculated average purchase value (CAPV) of grapes purchased in the previous vintage; by variety and by region. Other states and regions have their own ways and means of estimating similar average values but that’s all these are, average values. In SA these CAPV’s are derived from data provided by wineries in response to an annual survey. It is not compulsory and in many cases the data submitted is not the final price, including bonuses but rather, an offer price or something similar. Most growers are satisfied that the data is reasonably accurate and there is a general belief that it’s good to be able to review one’s own achievements relative to the average. For many, it’s the only feedback they receive for their efforts! Well gone are the days of “post vintage” presentations when growers might be told which wine their grapes produced!

 

There is growing concern however, that these published average prices are being widely used as a basis for setting the following years prices. In conversations around the region between growers and wineries this year, in the lead up to the announcement of indicative prices prior to December 15, there has been much reference to last year’s averages and suggestions that particular wineries have paid above the odds compared to other wineries with the strong implication that this year’s vineyard inputs and achievements are not as relevant as last year’s prices!

Surely in 2015, vintage prices should be determined by many factors other than the calculated average prices others may have paid for grapes of similar standard in previous vintages. There is ample data available on the information superhighways regarding what’s in stock, what’s been produced in other countries, the impact of exchange rates and FTA’s. There should and could be much more accurate indicators in terms of forecast yields if stakeholders really desire to improve the system. For an industry as sophisticated as the wine industry, there must be more modern day methods of developing price signals that motivate and encourage rather than referencing last year’s averages and what competitors allegedly paid. We all know what that leads to.

Some growers are of the view that publishing CAPVs is not helpful. It appears not to be encouraging best practice. The crucial need for sustainability up and down the value chain is often and earnestly spoken about. Implementing the theory seems much more challenging. It might be time to have the conversation about whether the industry would be better off reverting to the practices of our grandparents when growers and winemakers would talk with each other about their respective needs and capabilities, agree on a few targets, shake hands and get on with producing grapes and wine to meet the needs of each other and the needs of wine consumers in good faith!

If you have a few on this topic, please contact Riverland Wine by phone 8584 5816 or email Chris Byrne so that the matter can be discussed at the regional level and if need be with the phylloxera board and other industry stakeholders

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