Shortly ahead of Christmas, Riverina Winegrape Growers CEO Jeremy Cass published a two-part open letter addressed to NSW and Federal Governments outlining the current pressures being faced by grape growers and wine producers in the region.
The letters coincide with rising fears ahead of the upcoming vintage 2025, prompted by rising debt levels and a similarly dire economic forecast.
"The triggers are already in place as vintage 25 will not see an improvement in the prices that our growers will receive for their fruit," said Cass.
“I believe that without some sort of intervention that we will see a massive overcorrection in the industry that we won’t be able to bounce back from... Unfortunately, you - [the Federal Government] - were wrong in thinking that China would fix the industry as can be seen by prices that continue to drop or remain less than the cost of production, with warning by the wineries that they cannot see an end to this soon.”
The public letters follow on from a difficult year in 2024 for Australia's bulk wine producing regions, with an increasing number of Riverland grape growers also looking to exit the industry due to economic pressures. Since 2021, the crush values of both Riverland and Riverina - 31% and 18% of Australia’s total crush volume respectively - has fallen by 56%.
Following protests by Riverland grape growers early last year, Riverland Wine issued a proposal to State Government asking for direct financial support for growers looking to exit the grape and wine industry.
“There's growers in the region who are having trouble selling their grapes at a price that is enough to pay for the cost of production, and it's very hard for them to sell their land because banks won't finance the buying of it, and they can't get finance to grow a crop,” then-Independent Chair of Riverland Wine Darren Oemcke told Drinks Trade mid last year.
“The reason that we've gone out and asked for support is because some of them just won't be able to wait very much longer. We think that there's at least two more years of suppressed prices until it washes through on the assumption that Asia and China do take up some of the wine.”
Despite Riverland attracting more media attention and political support, Jeremy Cass believes that growers and producers in the Riverina region have experienced tougher operating conditions over recent times. Over the past three years, total Riverina vineyard area has decreased from 22,000 hectares to 19,000 hectares and from 275 to 225 independent grape growers.
“When I broached the subject earlier this year with our local state member on the back of protests in the SA Riverland, I was aghast at the reply that they were worse off than we are,” said Cass.
“This is not the case. In fact the reverse is true, as prices in the three warm inland regions are very similar, the average yields are not. The average yields in the other two regions are considerably higher than the Riverina, and the negative returns for growers reflect this.”
Additionally, the larger average size of vineyards in Riverina has also exacerbated issues.
“One of the other reasons that the Murray Valley and the Riverland have not removed many vineyards is that many of them are small. At 10 to 15 hectares it is a lot easier run these vineyards as hobby farms,” said Cass.
“We note that the wine industry working group was put together by the federal and state governments to investigate this, which happened coincidentally not long before China dropped the Tariffs. I remember telling my chairman at the time that the cynic in me believes that within a week we will see the prime minister claiming in the press that they have fixed the wine industry. I hate it when my cynical side is correct, but it was.”
The economic pressures being faced by Riverina growers and producers are largely a consequence of the ongoing red grape oversupply affecting Australian wine production. Whilst Australian wine sales have outstripped production for the past two years, the oversupply has been getting worse even on the back of two low-yielding vintages.
Cass said, “there is in fact a glut of aging wine that is becoming a significant threat to the industry, in that it is rapidly becoming unsaleable. What can we do with this wine? We could slowly blend it into the latest vintage at the rate of 15% other, which will take a very long time and risk the quality of the product.”
Whilst the reduced volumes and number of growers and producers in the region may result in some respite, recent exits from large-scale producers - such as Australian Vintage's cancellation of its Balranald vineyard lease seven years ahead of its scheduled expiry date - are impacting vineyard value: "Wineries are also suffering a devaluation of winery assets due to the fire sales of 2 large interstate wineries recently, while at the same time telling growers that they can’t see an end to the industry problems in the foreseeable future."
Cass is calling on Federal Government support to finance mental health aid programs, Sustainable Winegrowing Australia accreditation, and general support to help the many debt-riddled growers remain afloat.
“The decision by the federal government to ignore the 2024/25 prebudget submission by Australian Grape and Wine should be revisited, especially the $30 Million allocated for growers to move out of the industry to bring it back into balance,” he said.
“Secondly you - [the Federal Government] - need to make a one off purchase of aging unsaleable wine that is depressing the bulk market rendering supply and demand obsolete, this wine is in storage with no way to get rid of it, as to let it go down the drain would cause environmental issues and fine from the EPA. It could however be distilled into ethanol; this system has been used in both France and Spain recently.”
Cass also outlines the need for Federal Government support in providing interest rate relief, implementing a mandatory code of conduct, and increasing disaster assistance.
“Interest rate relief: a lot of our members have debt that they cannot service, recognition of this by way of interest free loan would help a lot of families breathe a little easier especially with the rate of inflation in the past couple of years... [Also] a mandatory code of conduct that starts with the grower and ends with the retailer. The present voluntary system pits growers against wineries, while wineries suffer the same issues at the hands of the retailers.”
The call for disaster assistance coincides with what Cass describes as “the worst ever frost the region has seen in living memory, followed by the worst wind/hailstorm that I have seen hit Yenda and surrounds." Following the event, the Riverina Winegrape Growers estimated that the overall damages caused by the September frosts could equate to up to 40% of its total volume produced last year.
“These storms add cost to an already over committed budget and add to the mental burdens that these growers must carry, which is distressing to see at best and at worst will see us lose members of our community in the worst way possible,” said Cass.
Additionally, Cass recommends that the NSW State Government collaborates with Federal Government to provide disaster support and to implement a mandatory code of conduct.
“We have spoken to the state minister for agriculture before about passing laws to protect growers as they have in SA. This law stops wineries from procuring grapes if they have not finalized payment for the previous crop. At the time the minister was horrified that this had happened, but we have seen no change, and the problem continues to happen.
“I would urge both the federal and state governments to listen to our pleas for help and [to assume] a leadership role to intervene before we start to lose people. I look forward to seeing help for our industry that is far from fixed even with the return of China as an export market.”
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