Oversupply still threatens Oz

Despite predictions to the contrary, Australia is still blighted by an overabundance of grapes. Both press and trade had forecast a return to equilibrium following the oversupply of recent years, but, according to a statement issued yesterday by the Barossa Grape and Wine Association, it is still the biggest threat to the wine industry.

Sam Holmes, the BGWA’s inaugural CEO, said recent restructuring by Constellation Wines and Foster’s, and other issues facing the industry such as global oversupply, demonstrated the need for cautious planning and planting.

He recommended calling a halt to new plantings in order to deal with an overabundance of cool climate grapes and to address increasing international competition and rising costs. It is also feared that excessive new plantings will affect Australia’s (already scarce) water supplies. "Oversupply remains a very real concern for both grape-growers and winemakers across Australia,” he said.

The Australian Government is currently holding an inquiry into the costs and benefits of non-forestry managed investment schemes (MIS), which apply to the horticultural and agricultural sectors, including viticulture. Government contributions to MIS have nearly tripled in the past three years, leading to concerns about the effect on the wine industry, which is already in oversupply.

The BGWA believes that, by using tax incentives, MIS encourage large-scale vineyard plantings, regardless of demand, and distort natural market forces. Holmes said the tax break inducements had been a useful tool to bring external investors into the wine industry at a time when additional grape supply was required but he urged anyone considering investing in viticulture to seek independent advice before doing so.

Fionnuala Synnott 10/09/08