Wine glut nearing an end: analysts

A new report on the international wine market gives grape growers and wine makers signs of hope that the global glut may be ending.

Rabobank's latest wine quarterly for the three months to October says a massive global oversupply of wine between 2004-10, that depressed prices and led many growers to rip up vines, looks like coming to an end.

The bank says global wine grape production has declined dramatically since large global harvests between 2004-06, and demand has also recovered somewhat since slumping during the peak of the global financial crisis.

While US wine grape growers, mostly in California, are expecting a bumper and good quality harvest in 2012, Rabobank's analysts say an extremely low harvest across most of Europe is likely to offset this.

France, Italy and Spain are all on track to report wine grape harvests significantly below last year's levels, cutting wine output from those three countries by as much as Chile's total annual production of wine.

Rabobank says, outside Chile and South Africa, wine production in the Southern Hemisphere was relatively light in 2012.

However, the good news for Australian growers is that conditions in south-east Australia have so far been favourable for good yields in the upcoming 2013 harvest, and grape prices have posted their first significant rise since 2008.

The bank's analysts note that Australia saw a 3.6 per cent rise in wine export volumes in the first half of 2012, however the value of wine exports fell 2.9 per cent as bulk shipments took market share away from wine bottled locally.

Bulk exports come with far lower margins than bottled wine exports, with average import prices ranging from as low as 43 cents a litre in France in 2011 to as high as $1.84 per litre in Sweden.

However, Rabobank says Australia's wine export data has been skewed by the decision of another major supplier, Treasury Wine Estates, to ship its wine in bulk to the UK for bottling there.

Source: ABC News, 10 October 2012