Red wine growers pin hopes on thawing of relations with China

Prime Minister Anthony Albanese’s meeting with a Chinese leader has given the struggling wine industry a beacon of hope.

Struggling red wine grape growers are seeing out the coming vintage amid signs of a thawing of relations between Australia and China before deciding the fate of their vines.

Earlier this year grape growers were being urged to pull out their vines or consider switching to more profitable varieties or even alternative crops as the nation’s red wine inventories grew following China’s overnight decision in 2020 to slap punitive tariffs on the industry.

Following the new import tariffs, $1 billion was wiped off the export market as exports to mainland China decreased by 97 per cent.

But Australian Grape and Wine chief executive Tony Battaglene said fewer vines had been pulled out than expected so far, as growers pinned their hopes on re-entry into China.

Chinese premier Li Keqiang and Australian Prime Minister Anthony Albanese hold a short informal discussion at the ASEAN gala dinner in Cambodia. PICTURE: TVK

Prime Minister Anthony Albanese broke a three year silence when he spoke to Chinese Premier Li Keqiang at the ASEAN summit in Cambodia on Sunday, signalling a meeting with President Xi Jinping in Bali this week was likely.

“Will that turn around the China situation? A lot of people will hold out in hope,” Mr Battaglene said.

“We haven’t seen a lot of vines being pulled out at this stage. A lot of wineries have told growers they won’t take grapes this year, but we haven’t seen that reflected in vines being pulled out, that will be seen in 2023.”

A New Wine Australia report has found the national wine inventory has grown for a second consecutive year due to a reduction in total sales. This was despite a drop in wine production in 2021-22, which is estimated to be just over 1.3 billion litres, a 12 per cent reduction compared with the previous year.

Wine sales were down 9 per cent in 2021-22, and 14 per cent below the 10-year average.

Mr Battaglene said a continuation of constrained shipping channels, compounded by the loss of sales to China, were to blame.

“There’s still a real shortage of container ships to Australia, and we’re going to have this problem for some time,” he said.

A catch bin receives freshly harvested Cabernet Sauvignon grapes in the Barossa Valley earlier this year. PICTURE: CARLA GOTTGENS/BLOOMBERG

Accolade Wines is believed to have told its growers it would only take 40 per cent of their crop this vintage and to have offered financial assistance to switch grape varieties.

Inland Wine Regions Alliance chair Jim Caddy said the industry was wary of too many growers going down that path and creating an oversupply of white grapes.

“We don’t want to be in a position in 2-3 years time when chardonnay and other white varieties are in over supply, that’s the big problem going from red to white,” he said.

“This is a really rough period. We went through this 12-13 years ago, we developed China over a number of years and that was a good market until politics came into play and they got upset with us … (But) it’s quite expensive to rip vines out, cut all the wires, pull the posts out then go through with an excavator and then burn them.”

Mr Caddy suggested any grower nearing retirement age may have their vineyard on the market.

But Tom Langley, managing director of specialist advisers to the wine and beverage industry Langley & Co, said he wasn’t seeing any “panic selling”.

“We’re not seeing a flood of people wanting to sell. That’s not to say it might not happen. I don't underestimate how serious it is but I don’t think there’s an unusual amount of vineyards of the market,” he said.