Key observations and a perspective on area adjustments
Author: Lawrie Stanford – Executive Director – Wine Grape Growers Australia
21 October 2010
In 2009-10, there was a solid start to the process of adjustment in the national vineyard with a net removal of roughly 6 750 hectares. There was a seven-fold increase in the area removed in 2009-10 compared to the year before.
While not yet representing the final 2009-10 tonnage, the Vineyard Survey production estimate shows that the off-take was around 9% smaller than last year at 1.53 million tonnes. It should be noted that the Vineyard Survey traditionally under-numerates the final ABS crush number by 2% to 5%. The latter is taken to be the final tonnage and which is usually available in November-December each year,
The major contributor to a smaller off-take in 2009-10 was the lower yields per hectare rather than the net removal of vines. Lower yields are thought to have resulted from constrained fruit set after heat in November 2009 and caps on yields per hectare set by the major off-takers.
Not only were there more vines removed in 2009-10 but a greater number of hectares were also left uncropped. While uncropped hectares were greater in 2009-10, uncropped tonnages in 2009-10 are estimated to be less. With a greater proportion of relatively lower-yielding Coastal-Temperate vine in the mix of hectares left uncropped this year compared to last, the tonnages uncropped this year, are estimated to be less than the year before.
The warm inland held a 70% share of the estimated tonnages removed from the system in 2009-10. This share is 10 percentage points ahead of warm inland’s traditional share of total production and therefore represents an over-indexing in the warm inland for removals.
While accounting for the higher share of tonnages estimated to have been removed compared to the Coastal-Temperate districts, the warm inland districts accounted for a lower share of estimated tonnages left on the vine or dropped at harvest. By definition, the converse is also true: the Coastal-Temperate districts held the higher share of tonnages left or dropped but a lower share of tonnages removed from the system.
It is concluded from the preceding point that a larger share of warm inland surplus in 2009-10 was dealt with by removal than in the Coastal-Temperate districts. Moreover, it is thought that the higher proportion of Coastal-Temperate tonnage thereby left in the system, is suppressing warm inland prices and accelerating its exit.
Unless demand dramatically improves for the 2011 season, the 2009-10 Vineyard Survey data suggests that the adjustment needed in 2010-11 is a minimum of twice that which occurred in 2009-10. The data does not however provide insight into the fruit that was traded at unsustainable prices and additional adjustment for this fruit should also be considered.