Blue skies for wine industry, but dark clouds on the horizon

Harvesting the 2016 grape crop is now complete. Photo: James Davies
Harvesting the 2016 grape crop is now complete. Photo: James Davies
Winemaker Rodney Kempe at Lakes Folly Winery in Pokolbin. Photo: Steven Siewert

Winemaker Rodney Kempe at Lakes Folly Winery in Pokolbin. Photo: Steven Siewert

Not a drop of rain fell on Hunter Valley vineyards for most of the summer and the grapes so overdosed on sun winemaker Rodney Kempe is convinced this will be one of the better harvest in his 16 years at Pokolbin's Lake's Vineyard.

"Textbook stuff," Kempe says. "Not a cloud, very dry, nice and warm. It's been ideal."

The 2016 harvest has just been picked and the Hunter had its best Easter ever, with tourists flooding in, but across the world the wine industry is undergoing massive upheaval.

Italy and Spain have knocked France of its perch as the world's largest wine producer and exporter, US scientists are warning climate change is progressively bringing forward harvesting times and a Senate inquiry into the Australian grape and wine industry recommended phasing out a generous tax rebate worth potentially $500,000 a year to producers and perhaps redirect it to cellar door operators.

Despite all this, the Australian vineyard remains a remorselessly blue sky industry where the sun seems to shine eternally.

But a joke is doing the rounds in the US that this year's presidential race threatens to cast a dark cloud over the vines.

According to the American website, Donald Trump will ban Australian wines if he wins the White House. Trump owns a winery in Virginia. raised the spectre of Trump shutting the door to Australia when riffing on his Mexican xenophobia.

"In 2016, Trump will pledge to make American wine great again," the website says.

"Trump will also warn of the dangers of more and more foreign wines coming into our country. 'They send the bad ones over,' Trump says, accusing the governments of France, Italy, Spain, Germany, Portugal, Argentina, Chile, Australia, New Zealand, South Africa and all the other winemaking countries ... In 2016, Trump will propose a ban on all foreign wines."

Of course, was being satirical but there was an edge to the joke.

With the Australian export market starting to approach the value of the $2.8 billion domestic market, the US is now the top destination for our wines.

Greatly assisted by the falling Australian dollar, wine exports last year to the US were worth $443 million.

There are 122 countries that import Australian wines – the latest Wine Australia Export Report says the value of exports grew in 15 markets to $2.1 billion in 2015, up from $1.82 billion the previous year.

China and Hong Kong combined purchased just over $500 million of Australian wines (with demand up by 66 per cent and 22 per cent respectively) while the UK market was worth $376 million.

"China has already doubled its consumption of wine twice in the past five years and many are predicting it's expected to overtake the US as the world's largest consumer of wine this year so China still holds significant potential," says Tony Battaglene, the Winemakers' Federation of Australia international strategy and international affairs general manager.

The Australian industry is poised to take advantage of changing mores in Asia where the middle classes are reforming their alcohol tastes and starting to embrace wine.

The continuing rise in Australian exports last year was achieved without the full benefits of free trade agreements with Japan, Korea and China.

Until the 1980s overseas was foreign territory to most Australian winegrowers.

Exports accounted for about 5 per cent of the wine produced but these days more than 60 per cent is exported and in the case of dry reds, more than 70 per cent is sent away.

But although exports are up, there are fewer wine producers and the size of vineyards are shrinking as the Australian industry struggles to cope with an estimated excess of about 1.5 million tonnes of grapes.

The latest annual Australian and New Zealand Wine Industry Directory shows the number of wine producers decreased for the second consecutive year to 2468 in 2016, down by 13 since 2015 and 105 fewer than the all-time peak of 2573 in 2014.

The directory lists Australian wine companies which have commercially sold wine every year since 1983.

Editor Elizabeth Bouzoudis says the number of wine producers is on a downward trend after three decades of booming growth, although winegrape intake has increased marginally to 1.7 million tonnes.

"We have to go back to 1987 to find the last time the number of wineries decreased for two consecutive years. We are seeing now the results of low profitability across the industry, and we believe there will be more exits from the list over the next year through closures and mergers.

"While that will mean difficult decisions for many producers, consolidation of winery numbers will ultimately lead to a stronger and more profitable industry," Bouzoudis says.

The change in the number of wine producers is uneven around the country. Numbers in NSW/ACT dropped from 469 to 463; they also fell in Queensland (85 to 79) and Western Australia (366 to 358) but rose slightly in South Australia, Victoria and Tasmania.

Responding to calls from industry bodies in recent years to reduce production, many grapegrowers have left the industry. This is reflected in the total area of Australia's vineyards continuing to decline in 2014-15.

The Australian Bureau of Statistics reported the total vineyard area in Australia, including not-yet-bearing areas, decreased by 9 per cent from 148,507 hectares in the previous survey in 2011-12 to 135,178 hectares in 2014-15.

ABARE says the vineyard area has declined 22 per cent from the record level of 2006-07, and is lower than any time since 1999.

At Lake's Folly Vineyard, winemaker Kempebelieves growers are responsible for their own destinies and he takes the rise and fall of the dollar, the weather and Mother Nature all in his stride.

He agrees climate change has had an impact and has watched harvests vary on the backs of El Niño and La Niña but most of all Kempe notes that the dormant period, the time when the vines rest and relax, has grown progressively shorter over the years.

This story Blue skies for wine industry, but dark clouds on the horizon first appeared on The Sydney Morning Herald.