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Brown Brothers chairman forecasts better days
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Better market and production information and more heed to the wine industry’s cyclical patterns could help reduce acute over-supply of wine grapes in the future.
Brown Brothers chairman John Brown said while recent times had been hard for growers, he was confident supply could be soon back in balance.
Mr Brown forecast a possible return to balance as soon as next year – and the prospect of a shortfall by 2015 because of the current downturn in plantings.
“I strongly believe there will be more interest in wine grapes next year, and the year after we will see demand – I would encourage growers to hang in there,” he said.
Mr Brown, speaking at a recent rural press club gathering, said the industry’s traditional demand-supply cycle had been aggravated by an influx of speculators and investors from outside the industry.
“I’ve seen a lifetime of market fluctuations in the wine industry,” he said.
“The supply demand pattern is consistent and quite predictable.
“In the 1970s when the industry was in oversupply we had gold medal-winning wine we had to send to the distillers because we couldn’t sell it.
“We’re currently oversupplied, prices are low and rationalisation is occurring, but as the cycle moves through, prices will stabilise, quality will improve and sales will increase.”
Mr Brown said the industry was now bearing the fruit of the prosperity of the 1990s.
“Wine sales increased, investment increased, and tax incentives were introduced in a bid to keep up to the demand for winegrapes, and building the oversupply,” he said.
“The sad part is that these people (speculators and investors) often bring few skills compared to our experienced growers.”
Mr Brown said the lag time between planting and production for grapes meant growers should be looking to plant now.
“The prosperity of wine consuming countries is rising, and that trend will continue,” he said.
“Wine is an important part of their lifestyle and they’ll want better wine – and countries that are currently non-wine drinking will increase their consumption.”
Targets to continue the growth of Australian wine exports by 10 percent a year were realistic, Mr Brown said.
“It takes four years for new plantings to produce, and if 10 percent export growth is achieved, to meet demand in 2010 we’ll need 46,000 additional hectares to meet demand.
“Growth in the domestic market will mean an extra 8000 hectares is needed to meet that demand.
“With vines begin grubbed now and growers taking such a beating, no-one is likely to plant much in the next two years, so who’s going to grow these grapes?
“I believe by 2008 there will be a shortage and by 2010 the planting shortfall should be catching up and prices will be trending sky high.
“There’ll be investment in new plantings, and the speculators will move in again.
“By 2017 we’ll move into oversupply, with a crisis similar to 2006 again likely around 2019.” Mr Brown said prospects would improve for growers in the next few years, but closer attention needed to be paid to longer-term patterns.
“When people are planting grapes when prices are falling they would be better putting their money in the bank,” he said.
“And when the masses are planting red grapes, that’s the time to plant whites.
“Sometimes I wish we had a system to make it easier, but generally market forces are best.
“People just need to look closer at supply demand cycles before investing.”
Mr Brown said Brown Brothers had just planted another 100 hectares of grapes, and had paid some of its growers to pick fruit onto the ground in 2004 to ensure grower viability and secure its supplies when the market improved.