Bumper harvest in 2021: what does it mean for growers?
By Sandy Hathaway, Senior Analyst, Wine Australia
The 2021 Australian winegrape crush is estimated1 to be 2.03 million tonnes, the largest ever recorded after a season characterised by near-perfect growing and ripening conditions across most states and regions.
The 2021 crush was 31 per cent higher than the 2020 crush of 1.54 million tonnes2, and 17% above the 10-year average of 1.74 million tonnes. The estimated yield was just under 14 tonnes per hectare, slightly lower than in 2017 when it is estimated that the area of vineyards was about 5000 hectares less.
The 2020-21 season was a perfect contrast to the previous one. While summer 2019-20 was the second hottest on record, 2020-21 was the coolest in 10 years (0.28°C below average) under the influence of the La Niña climate pattern. South Australia had its coolest summer in 19 years and Western Australia its coolest in 15 years. December 2020 was the third wettest on record nationally, whereas December 2019 was the driest. Fewer heatwaves and good rain at the right time allowed grapes to ripen optimally, reducing bottlenecks at wineries and ensuring excellent fruit quality. Good fruitset, strong grape prices and the need to recover incomes after the low 2020 vintage drove cropping levels up, facilitated by good water allocations through the inland regions, while a lack of disease pressure meant low levels of rejected fruit.
The value of the 2021 crush at the weighbridge is estimated to be $1.56 billion, an increase of 36 per cent compared with 2020, providing $400 million in additional income for the sector at the weighbridge.
Winegrape prices increased slightly in 2021, despite the large crop and despite widespread pre-vintage concerns relating to the impact of the sudden closure of the China market to Australia due to the imposition of extremely high tariffs on our bottled wine exports.
Does a bumper crop mean over-supply?
There remain many unknowns and it is too early to speculate as to whether this large vintage will lead to an oversupply in future across some or all of the sector, nor what impact it will have on grape pricing. While this was a record crush, the larger tonnage balanced out the two previous low-yielding vintages, with the average of the three being closely in line with the long-term average. Wineries went into vintage 2021 with stocks at historically low levels, after three years where sales (domestic and export combined) exceeded production3.
The China market, although significant, accounted for 10% of Australia’s average production. In an average year, Australia produces around 1.2 billion litres of wine. The domestic market is very stable at 450-500 million litres, leaving around 650-700 million litres available for export. In the year ended June 2021, Australia exported 643 million litres to destinations other than mainland China.
The harvest also needs to be seen in a global context. Australia accounts for around 5% of world wine production. Reports from France are indicating that it may have lost around 30% of its total 2021 harvest due to frost, which would amount to more than Australia’s entire average annual production. Until the harvest is complete in the northern hemisphere, it is hard to predict how competitive the global market will be. However, global supply generally exceeds demand, and the long-term decline in consumption trend may be exacerbated if there is a post-Covid-19 recession in major European countries.
What are winegrape prices telling us?
The average value across all purchases in 2021 was $701 per tonne, an increase of 1% on the 2020 average value of $694 per tonne. However, the overall increase was made up of a 4% decrease in the average value of reds to $833 per tonne, offset by an 11% increase in the average value of whites to $538 per tonne (see Figure 1).
The average value for reds was down overall in both the inland ‘river regions’ and across the rest of Australia, while the average value for whites increased in both areas (Figure 2).
This is the first year since 2014 that the average value for red winegrapes has fallen. It reflects a clear shift in demand towards whites, reversing the trend of the past 10 years, which has favoured red over white in terms of a price premium and, hence, seen the share of white varieties fall from 55% in 2011 to 43% in 2021 (Figure 3).
What is the outlook for the next season?
Overall demand, particularly for reds, will depend on how successfully Australian winemakers are able to expand into other markets. The shift in demand towards whites is likely to be exacerbated due to the loss of the China market, which was almost entirely red wine, although that will depend on which other markets are found to take its place.
The large 2021 crush has put pressure on winery storage capacity, and there are reports of global shipping delays and container shortages4, making exporting wine difficult. If the next six months are slow-moving due to market forces and/or logistical issues, capacity will be an issue ahead of vintage 2022, potentially leading to reductions in fruit intake.
The impact of the China tariffs is widely varied across the supply chain and exposure is highly variable from business to business and region to region, depending on ability to diversify, cash flow and the ability to physically hold stock.
Growers are strongly encouraged to have early and open conversations with their potential buyers and to stay informed about market conditions. Although the 2021 vintage is undoubtedly an exceptionally positive one that will put growers and winemakers in a strong position going forward, another large vintage in 2022 could not easily be absorbed into a global market where supply generally exceeds demand.
1Based on responses to the National Vintage Survey 2021
2Department of Agriculture, Water and Environment, May 2021
3Wine Australia Production, Sales and Inventory Report 2020
4 Ciatti Global Market Report May 2021