Bulk red wine at 45c a litre: Wineries and growers crushed

Wineries are paying some growers not to grow a crop, as a global downturn slashes bulk red wine prices down to 45 cents a litre.

Murray Valley Winegrowers chair Chris Dent said many growers were wondering whether they should hang on or sell. Picture: Zoe Phillips

Riverland and Sunraysia winegrape growers are battling to find buyers for their 2024 crop, while those still in contract are being paid $150 to $200 a tonne by wineries not to deliver.

Soaring global inflation in the wake of Covid supply-chain disruptions and China’s tariffs of up to 218 per cent on Australian wine, have all but crushed demand for red winegrape varieties over the past two years.

Ciatti global wine and grape brokers’ reports show the global downturn has slashed bulk prices for shiraz, cabernet sauvignon and merlot from $1.45 a litre in September 2020 to just 45 cents a litre today.

Murray Valley Winegrape Growers chairman Chris Dent said many growers were wondering whether they should hang on or sell.

“It’s big identity crisis, asking yourself some very simple questions: what are you doing and how long can I flog a dead horse,” Mr Dent said.

He said some growers, who still had contracts with wineries, were being offered $200 a tonne not to deliver, while other were told not to grow half their crop.

The crisis has brought back memories of what happened in 2007-08, when the federal Labor Government launched an exit package to buy out growers, in return for water that was put towards the Murray Darling Basin Plan.

“If water went for $10,000 a megalitre in zone seven (below choke Murray River), you would see winegrape growers exiting left, right and centre,” Mr Dent said.

Red Cliffs grower and former Lower Murray Water entitlement manager Peter Ebner said the federal government would have to offer closer to $15,000/ML.

Mr Ebner said any federal buyout would have to not only offset winegrape growers’ investments in their properties, but also the exit fees that gravity irrigation district irrigators must pay on water entitlement, equal to 10 times their annual delivery charge.

The industry crisis is already forcing wineries to sell off assets.

Treasury Wines recently struck a deal on 4770ML of water entitlements it sold to Duxton for $39.1 million, which it will lease back at 4.5 per cent of its market value.

Others such as Accolade Wines are in dispute with growers over contract terms and payment.

South Australia’s Riverland CCW Co-operative, representing 600 growers, who produce 200,000 tonnes a year have been in dispute with Accolade over a long-term contract, which states that if neither party can reach agreement on price, the matter is referred to an independent arbitrator.

CCW Co-op chief executive Jim Godden said agreement had not been reached, despite the arbitrator setting a price.

He said growers across the Riverland were distressed as they came off contracts that were not being renewed.