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It's not about the 2009 vintage

By Paul Clancy Chairman Wine Grape Council of South Australia

It seems that there is a misconception among some commentators that my recent paper on the over-supply of winegrapes was about predicting the size of the 2009 harvest.

My paper was not about that at all. In fact I made no estimate of the 2009 vintage — I was expressing my concern that when ‘normal’ conditions return, the national vineyard is capable of producing more the 2MT against an acknowledged demand of around 1.6MT. My point was that a potential over-supply of 500,000t, which has been possible since at least 2006, is of such magnitude that it is severely affecting both sides of the industry. It is weighing it down and anchoring it in a mire of depressed grape prices and unprofitable wine market segments.

I was suggesting that this crisis needed to be discussed by all industry participants and a collaborative approach found to address it. Market forces will, eventually, correct the supply/demand imbalance, however, as Stephen Strachan has said, market correction will be slow and painful. I thought it worthwhile that the industry has a conversation about the over-supply and examine any propositions which might alleviate some of that pain and also give the industry some control over the restructure which takes place.

It is naive to suggest that any discussion about the massive over-supply will put further downward pressure on grape prices for the 2009 vintage or that it will affect wine markets. The over-supply is a whole-of-industry problem; it has existed for years and has been well documented and exposed for some time. The industry held a Federal Government sponsored national summit on the over-supply in 2006. There is no evidence to suggest that openly discussing the problem will have any more negative effects on the industry than it is already enduring.

I also made the point that these days the community expects an industry to adopt more of the principles of triple bottom line reporting — taking more responsibility for environmental and social impacts in addition to economic reporting. The economic impacts of the over-supply on grapegrowing and wine producing entities are obvious and are being addressed by individuals the best they can. However, the social and environmental impacts are also severe and the industry must take them into account.

For example, right now, public policy on water has failed and failed miserably. Despite the announcement of various transition/exit packages and water-buyback schemes by Government, their failure in execution at this late stage in the irrigating cycle means that large volumes of precious water are being used to water vineyards which will not grow a commercial crop, and worse, vineyards which will produce a crop which is not wanted.

I regret that my comments were interpreted as merely an exercise in commentary on the size of what the 2009 harvest might be. It was absolutely nothing to do with that.

My point is that the industry is in a crisis caused by a grave error in judgment about the market opportunities for wine above certain price points and the resultant massive over-planting of the national vineyard. While market forces can and will correct the supply/demand imbalance over an extended period, I believe the industry should also discuss strategies to take some control over the process of restructure and to examine ways of alleviating not only the economic impacts but also those of a social and environmental nature.

It is a conversation the industry must have.



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