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           Sydney Time

  

            

   Copyright © Ric Einstein 2009

 

 

 

 

“Interesting Times” (9 October)

 

I bet that many winegrape growers and winemakers wished that the times they were living in were not quite as interesting.

 

Constellation, the world’s biggest wine producer recently announced a loss for the last three-month reporting period, much of it due to its Australian operation. We all know that Fosters is doing some serious soul searching to see what it can do with its wine division. The two biggest wine companies in the world, with unmatched economies of scale, are having trouble with their wine business, so what chance do the smaller Australian producers have?

 

Things aren’t exactly a bed of roses for those guys either. The high Australian dollar, a fashion shift away for Oz wines in the US, the kickback against high alcohol wines in the UK, and if what amounts to a recession in many of our major markets are not enough, our wine industry has had to endure even more.  Years of drought, restricted water flow and now another old chestnut, which was thought to have been recently buried, has come back to haunt the industry.

 

The old chestnut is oversupply.

 

In 2005, in Oz there was a record 1.9 million tonnes of wine grapes produced. This was the height of the glut. At that time, it was estimated that there was somewhere between 800 million and a billion litres of wine sitting in tanks that were excess to requirements. Volume produced in the 2006 vintage fell by about 3% and the stockpiled wine lake was being sold off cheaply (overseas) as bulk (almost dumped).  Vintage 2007 was a shocking season as far as quantities go, but it was a good thing for the industry in many ways. Output fell by about 33% to 1.264 million tonnes. The wine lake quickly dried up and many producers breathed a sigh of relief.

 

The initial predictions for 2008 vintage looked to be another year with low production. The early ABARE forecast was for 1.503 million tonnes. However, as usual, Mother Nature did not play ball and the weather in January in much of Australia was far better than expected. According to Paul Clancy, chairman of the Wine Grape Growers Council of South Australia, we produced 1.83 million tonnes this year. And that is about 300,000-400,000 tonnes in excess of requirements.

 

In a period of three years, we have gone from having a huge excess wine lake, to having no wine lake and actually importing some low-end bulk wine, to having the start of another wine lake. If next season is up to the official ABARE forecast of 1.925 tonnes, we will have another injection into the wine lake of about another 600,000 tonnes. At 562 litres of wine from a tonne of grapes, that’s about an additional 333,720,000 litres of wine that are excess to requirements. Remember, from the 2008 vintage there could be as much as 224,800,000 litres that are excess to requirements already.

 

If this comes to fruition, in two years the wine lake will be back where it was about six years ago and grape prices will plummet again. That will devastate the industry – again. And after what these poor guys have been through over the past decade, many won’t be able to survive another big hit.

 

Unfortunately, for many growers, it’s even more complex than looking down the barrel of a surplus. Many of our growers have to buy water, especially along the Murray River. That water can be bloody expensive thanks to the drought and years of mismanagement/no management by governments at all levels, and of all persuasions.

 

So, the sixty-four dollar question is:  Do growers go out and buy water so they can produce grapes and hope they can make an adequate return on the increased investment, or do they decided to take a risk and not buy water? Either way, they are looking at a potential financial blood bath. Talk about being between a rock and a hard place.

 

The Federal Government announced a $57 million package aimed at those with 15ha or less. Money is available for them to exit the industry provided they sell back their water rights to the Commonwealth. The growers in the MIA and Riverland also have to consider another factor. Three of Australia’s largest producers have publically stated they intend to move away from the bottom end of the market. That is the domestic cask market and the low cost export (critter) wines. So these producers have to also consider what that will do to the demand for their grapes.

 

The warm climate irrigated areas produce about 60% of the nations wine grapes. The other 40% is produced in premium regions like the Barossa, McLaren Vale, Yarra, and Margaret River etc.  When we had the last glut, as a percentage of production, the more costly grapes from the premium regions were the biggest problem in the wine lake. It represented a proportion of the lake that was far in excess of its production percentage. If there is another glut, and these almost most certainly will be one, then the premium regions will be hit just as hard as the low end.

 

The government’s bail out package may help some of the small growers with water allocation, but it does nothing for the rest of the industry, who are up a dry creek without a paddle.

 

Who wants to live in “interesting times?” Glad I am not in the wine production business.


 

Feel free to submit your comments!

From Mark Cohen: Friday 10th October

Four wine dealers imprisoned for fraud - Four wine dealers who targeted American investors and conned them out of over £1m received sentences of up to four and a half years last week. Following a trial of more than three months, three people were found guilty of operating a fraudulent wine investment business that mainly targeted the American medical community.

 

From Chris Robinson: Friday 10 October

Most readers will know the case the French make for terroir. And whilst many Australian scientists and winemakers take the piss out of the French over their reverence for this subject, the reality is that the terroir is ultimately the absolute expression of "place". Some would argue bringing in truck loads of water defies "place" and probably long term, results in shallow rooting which means the vines take less from the soil potential and thus become even less about potential terroir.

 
The issue for many vineyards is that this commitment to terroir generally means high costs at every point in the viticultural environment. It often means more expensive trellising, more vine dressing and bunch and leaf management using lots of manual labour, less machinery run on the land to avoid compaction and generally more manual labour at harvest time. The ultimate effect is very high costs for fruit, well beyond what any major companies are now willing to pay.
Many cool climate winemakers have made these types of commitment in the belief they would make wines that reflected the terroir and the wine buying public would respect that.

 

Seems we now have a potential wine lake even at this top end and will see many fine vineyards struggle through the next 2-3 years. So it won't necessarily mean the best will survive unfortunately.

 

From Brian Miller: Tuesday 14 October

"...what is most noteworthy about the expression is that it is not Chinese. There is no such expression, "May you live in interesting times," in Chinese. It is a non-Chinese creation, most probably American, that has been around for at least 30 or 40 years. It appears in book prefaces, newspapers (frequently in the New York Times) and speeches, as an eye- or ear-catcher, although I have not found it in Bartlett's Quotations or other quotation sourcebooks. I speculate that whoever it was who first coined it attempted to give the expression a mystique, and so decided to attribute it to the Chinese." Source link.

"... One possibility is that ... phrase is from the following Chinese saying "时势造英雄"(pin-yin:shi shi zao ying xiong), which means heroes(leaders) are made over turbulent times.

No known user of the English phrase has supplied the purported Chinese language original, and the Chinese language origin of the phrase, if it exists, has not been found, making its authenticity doubtful. One theory is that it may be related to the Chinese proverb, "It's better to be a dog in a peaceful time than be a man in a chaotic period" (寧為太平犬,不做亂世人; pinyin: níng wéi tàipíng quǎn, bù zuò luànshì rén) ..."Source link.
 

 

Copyright © Ric Einstein 2008

 

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