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Australia Destroys Millions of Grape Vines Amid Wine Market Glut

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Millions of vines are being destroyed in Australia, and tens of millions more must be pulled up to rein in an overproduction of wine grapes that has crushed prices and threatened the livelihoods of growers and winemakers.

Falling consumption of wine worldwide has hit Australia particularly hard as demand shrinks fastest for the cheaper reds that are its biggest product, and in China, the market it has relied on for growth until recent years.

The most recent figures show that the world’s fifth largest exporter of wine had more than two billion litres, or about two years’ worth of production, in storage in mid-2023. Some of it spoils as owners rush to dispose of it at any price.

“There’s only so long we can go on growing a crop and losing money on it,” said fourth-generation grower James Cremasco as he watched clanking yellow excavators strip out rows of vines his grandfather planted near the town of Griffith, about 470 kilometres west of Sydney in New South Wales.

About two-thirds of Australia’s wine grapes are grown in irrigated inland areas such as Griffith, its landscape shaped by vine-growing techniques brought by Italian migrants arriving around the 1950s.

Wine Australia

As major winemakers such as Treasury Wines and Carlyle Group’s Accolade Wines refocus on more expensive bottles that are selling better, the areas around Griffith are struggling, with unpicked grapes shrivelling on vines.

“It feels like an era is ending,” said Andrew Calabria, a third-generation vineyard owner and winemaker at Calabria Wines.

“It’s hard for growers to look out the back window and see a pile of dirt instead of vines that have been there as long as they’ve known.”

Nearby, the remains of 1.1 million vines that once comprised one of Australia’s largest vineyards were piled in heaps of gnarled and twisted wood as far as the eye could see.

Red wine has suffered the most. In regions like Griffith, prices of the grapes going into it fell to an average of A$304 ($200) a tonne last year, the lowest in decades and down from A$659 in 2020, data from industry body Wine Australia show.

The government, which forecasts lower prices again this year, said it recognises the significant challenges facing growers and is committed to supporting the sector, though many growers say it can do more.

Cremasco said some red grapes sold for over A$100 a tonne.

Jeremy Cass, head of Riverina Winegrape Growers, a farmers’ group in Griffith, said that up to a quarter of the vines in areas such as Griffith must be pulled up to balance the market and lift prices.

Reuters calculations based on Wine Australia data show that doing so would destroy over 20 million vines across 12,000 hectares (30,000 acres), or about 8% of Australia’s total area under vine. Growers and winemakers in other regions have also been pulling out vines.

Australian wine

“If half the vines in Australia were ripped out, it still might not solve the oversupply,” said a winemaker in Western Australia.

Still, many growers who are unwilling to pull up vines are losing money while hoping for the market to turn around.

“It’s chewing up wealth,” said KPMG wine analyst Tim Mableson. He estimates 20,000 hectares (49,000 acres) of vines need to be removed nationwide.

Health concerns are prompting consumers worldwide to drink less alcohol, and when they do drink wine, they pick pricier bottles.

Chile, France, and the United States are among the other large wine producers grappling with oversupply, with even prime areas such as Bordeaux uprooting thousands of hectares of vines.

When China blocked imports during a political dispute in 2020, Australia lost its biggest wine export market by value. And unlike Europe, it offers farmers no financial aid to help them destroy vines and excess wine.

Even though China is expected to allow imports again this month, that will not mop up the glut, as demand has fallen much more rapidly than elsewhere.

Wine sold for less than A$10 a litre — mostly made from grapes grown in areas like Griffith — accounted for two-thirds of Australian wine exports worth A$1.9 billion in the year to December 2023, Wine Australia says.

Some areas are faring better, such as Tasmania and the Yarra Valley in Victoria, which produce more white wines and lighter, more expensive reds that are growing in popularity.

But across Griffith, there are clusters of metal storage tanks, each holding thousands of litres.

“Everyone is trying to clear wine,” said Bill Calabria, Andrew’s father, adding that wineries were “all but giving it away” to make room for the incoming vintage. Many growers are turning to citrus and nut trees instead.

Cremasco hopes to earn greater profits from the pruned trees he is planting in his grubbed-up acreage. Meanwhile, GoFARM, a corporation, is planting more than 600 hectares of almonds nearby and replacing vines.”  There’ll be no next generation of family grape growers,” Cremasco added.”  It is all big corporates, and all the local young guys will be working for them.”

Source: Reuters

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