AUSTRALIA is experiencing a massive oversupply of wine with 859 olympic swimming pools worth of wine in storage.
Create a free account to read this article
$0/
(min cost $0)
or signup to continue reading
A new Rabobank report said Chinese tariffs placed on Australia wine had significantly disrupted the industry, with Australia's value of wine exports decreasing 33 per cent over the past two years.
RaboResearch associate analyst, Pia Piggott, said Australia's wine industry is facing at least two years to work through its current wine surplus.
"That's over two billion litres of wine, or over 2.8 billion bottles of the wine," she said.
Industry reeling from Chinese tariffs
CHINA placed import tariffs on several Australian exports from wine and red meat to lobsters and timber in 2020.
Improving trade relations between Australia and China has some grape growers optimistic that the wine tariffs may be dropped early, but the report said even this would not be enough to prevent further years of oversupply.
"When a slew of Chinese anti-dumping tariffs and soft bans hit various products exported by Australia in 2020/2021, wine took the most notable hit, losing about one third of export value from its peak in 2019," Ms Piggott said.
The tariffs also coincided with an exceptional growing season.
"For wineries, particularly those selling commercial wine, stocks will remain high for some time as businesses slowly work through selling inventory," she said.
In good news for consumers, the oversupply is keeping prices of many quality Australian red wines at reduced levels.
Cost of living has consumers drinking less
THE Chinese market had been central to the Australian wine industry's success in recent years.
Australia exports wine to over 100 markets, but in 2020 China was the largest destination for Australian bottled wine in value terms, according to department of agriculture data.
But Chinese consumers are moving away from wine as part of a broader decline in alcohol consumption on a per capita basis, the Rabobank report said.
"COVID lockdowns and the economic slowdown curbing discretionary spending have also played a role in declining consumption to levels not seen since the 1990s," Ms Pigott said.
Wine Australia said it was a global trend, with rising cost of living forcing consumers to cut back on alcohol spending and drink less often.
Trade minister Don Farrell recently signalled his hope that trade breakthroughs with China will pave the way for further tariffs to be removed.
"We will continue to press for remaining trade impediments affecting Australian exports to be removed, which is in the interests of both Australia and China," he said.
The UK and US will remain key export markets for Australian wine, but new duty rates in the UK could increase the price of a typical bottle of Aussie wine by 20 per cent.
According to Wine Australia, exports to Europe and North America both declined during the 12 months to June 2023.
Sign up here to Good Fruit and Vegetables weekly newsletter for all the latest horticulture news each Thursday...
