Australia is grappling with a massive surplus of wine, amounting to over 2.8 billion bottles, which translates to around 100 bottles for each individual.
This surplus has arisen due to a trade dispute with China, a key consumer of Australian wines, which has led to a significant reduction in wine exports.
Excess stock kept in large steel tanks across Australia equivalent 859 Olympic-sized swimming pools
This excess stock is being stored in large steel tanks within wineries across the country, equivalent to the volume of 859 Olympic-sized swimming pools filled with wine.
While the recent removal of Chinese tariffs on Australian barley has sparked optimism among grape growers that the five-year wine tariffs might also be lifted prematurely, a report from Rabobank casts doubt on this possibility.
The report’s author, Pia Piggott, indicates that even if the Chinese tariff issue had not emerged, other factors such as logistical challenges and high shipping costs during the Covid-19 pandemic would still have contributed to an oversupply, albeit to a lesser extent.
At its peak, China accounted for a substantial portion of Australia’s wine exports, constituting 18% of volume and 40% of value in 2020.
However, due to the ongoing trade dispute, annual exports to China have plummeted to a mere $8.1 million, resulting in plummeting prices for red grape varieties and a decline in domestic red wine prices.
The trade minister of Australia, Don Farrell, has expressed the government’s determination to eliminate all trade barriers affecting Australian exports and aims to restore Australian wine to Chinese markets.
However, the oversupply challenge remains, and the end of an extended La Niña weather pattern could lead to further growth in supply, aggravating the issue.
Grape growers, particularly those producing red varieties in warmer climates, are particularly affected by the oversupply, witnessing drastic drops in grape prices.
Some are even forced to leave their grapes to rot in the fields due to the excess supply. Despite the surplus, consumer prices are expected to remain stable, as increased expenses related to storage, transportation, and packaging have offset potential reductions in grape prices.
In light of these circumstances, Pia Piggott emphasizes the importance of supporting the Australian wine industry, suggesting that purchasing Australian wine is a way to contribute positively to the sector’s recovery.
