Wine Grapes

GVP $207 million est. Down 18% year-on-year.
The total value and volume of NSW wine exports declined in 2021-22 with value down 9%.
Grape quality across the various wine regions was mixed depending on how growers and wineries chose to manage the challenging seasonal conditions.

Vintage 2022 saw wine grape production return to more average cropping levels. Consistent wet weather, localized flooding, and mild summer temperatures all tested the industry and put grape yields and quality under pressure. Prices on reds softened because of China’s imposition of import tariffs on Australian wines. The average overall purchase price of 2022 grapes was down 13% year-on-year and, combined with the reduction in intake, resulted in a 18% decrease in the overall wine grape crop value.

Production

The state crush for 2022 was 495,088 tonnes made up of 295,856 tonnes of grapes purchased from independent grape growers and 152,789 tonnes supplied by wineries through their own vineyards.¹⁰⁹ The crush was down 14% year-on-year however, this reflected a return to more normal cropping levels after an exceptionally large crop last year.

Vintage 2022 was marked by extreme weather fluctuations, influenced by the ‘La Nina ‘ weather pattern which resulted in significant spring and summer rainfall and milder temperatures. Prolonged and heavy rain was a key feature of many key wine growing regions. Whilst ample soil moisture over winter and spring facilitated good bud burst and growth and reduced the need for supplementary irrigation, this, combined with cool summer nights and mild daytime temperatures increased disease pressures, with mildew the chief concern, and ripening was extremely slow.¹¹⁰In some regions, particularly some high-altitude cool climate areas, the mild summer temperatures resulted in low sugar levels which affected grape maturity and in others, continued heavy rain affected fruit set and yields.¹⁰⁹¹¹⁰

In addition to the seasonal impacts, the 2021–22 season was also challenged by capacity limitations going into vintage following the record harvest in 2021 with made it difficult to get wine into available tanks.¹⁰⁹¹¹¹ Combined with softening global demand and prices for red wines, this may have resulted in wineries and growers reducing overall production and/or intake of grapes.¹⁰⁹ Anecdotal evidence indicated that some growers elected to abandon excess volumes of uncontracted red grapes on the ground.¹¹¹

Grape quality across the various wine regions was mixed depending on how growers and wineries chose to manage the challenging seasonal conditions. As with the previous 2021 vintage, harvest in many areas was delayed, whilst in other regions, the ongoing threat of inclement weather and frosts prompted a rush to harvest, picking grapes that were not yet fully ripe. However, for many, the delayed harvest proved a blessing in disguise. allowing the fruit to hang until some very welcome drying winds and warm, sunny periods during late summer and early Autumn.

Year-On-Year percentage change in crush by region³²

Download data (.XLSX)

Price

The NSW wine grape purchases collected in the Wine Sector Survey 2022 totaled 278,031 tonnes, valued at $119 million.³² The average purchase price for 2021-22 fell by 13% year-on-year to reach $434 per tonne, mainly due to a decrease in the value of red varieties.³²

The overall average purchase price of red grapes decreased by 22% year-on-year from $556 per tonne to $431 per tonne, while the average price of white grapes remained steady at $436 per tonne.³² At a national level, the divergence between red and white average price has increased steadily since 2011, driven by strengthening relative demand for red wine.

Individually, most of the NSW red varieties declined in average value, with Shiraz down 26% year-on-year, Merlot down 18%, and Cabernet Sauvignon down 22%. Pinot Noir was the only red variety that recorded an increase in average price, up 11% year-on-year. For the whites, average prices remained relatively steady for Chardonnay, Verdelho, Semillon and Pino Gris/Grigio. Sauvignon Blanc had the largest increase in average value, up by 10%, followed by Riesling (up 2%). Average prices softened for Prosecco, down by 16%, Chenin Blanc by 7% and Gewürztraminer by 6% year-on-year.³²

NSW wine grape prices by region and year-on-year change in value¹⁰⁹

2020-21 (LHS)
2021-22 (LHS)
YOY change (RHS)

Download data (.XLSX)

Trade

The total value and volume of NSW wine exports declined in 2021-22 with value down 9% to $471 million and volume declining by 13% to 173 million litres.³⁵ Key drivers included the continued decline of exports to China brought about by the imposition of high tariffs on bottled wine, and the ongoing impacts from the global COVID pandemic including freight and shipping delays and increased costs.

Exports to China decreased in 2021-22, down 88% year-on-year by volume and 91% in value.³⁵ The loss in value of NSW exports to China from June 2020 to June 2022 totaled $58 million and over the same time period, NSW wine exports to the rest of the world also decreased, by $21 million. Whilst NSW traditionally exports less wine to the China market than other states, and exports may diversify over time, the loss of a market as big as China to NSW wine exports cannot be understated. Anecdotal evidence suggests that some Australian wineries have been swapping their own source of supply for Chilean material in an attempt to continue sales of their brand in China.¹¹¹

Excluding China, in 2021-22, NSW wine exports declined by 12% in volume to 172 million litres and 6% in value to $469 million.³⁵ The US was the number one destination by value, decreasing marginally by 0.5% year-on-year but received a larger proportion of NSW wine at 48% of total exports. The UK was the second most valuable market for NSW wine but was the largest market by volume.

NSW bottled red wine exports decreased by 10% in value to $202 million and 14% in volume to 46 million litres.³⁵ The US was the most valuable destination by value for still red wine exports in 2021–22, yet exports declined by 3% to $106 million. Over 62% of all NSW bottled red wine exports were shipped to the US in 2021-22.³⁵

NSW bottled white wine exports increased 0.6% in volume to 41 million litres and increased by 2% in value to $152 million, supported by minor increase in the average unit value to $3.73/L.³⁶ Similar to bottled red wine exports, the US was the most valuable bottled white wine destination and exports increased by 4% to $116 million. Over 78% of all NSW bottle white wine exports were shipped to the US in 2021-22.³⁵

Macroeconomic Conditions

The UK government announced in October 2021 that they are considering changing the way alcohol is taxed to impose a duty based on alcohol content. As most Australian wine has a relatively high alcohol content this potentially means 97% of Australian wine will be taxed at a higher rate under such a scheme. Whilst the recent FTA with the UK is expected to deliver $43 million in immediate benefits to Australian wine growers from the elimination of tariffs,¹³⁸ industry has estimated that these intended tax changes will increase alcohol duty payable on Australian wine by $144 million.¹³⁹ At the time of writing however, no changes to excise taxes in the UK have been implemented.

The total global area under vines for all purposes (wine, table grapes, raisins, and young vines not yet in production) was estimated at 7.3mha in 2021¹³⁷ and total global wine production for the 2021 calendar year fell 1% year-on-year to 260 million hectoliters. Production varied greatly by hemisphere. Southern hemisphere wine countries increased production by 23%, whereas Northern hemisphere wine countries recorded sharp declines in production in response to unfavourable climatic conditions. notably in Italy, Spain and France.¹³⁷ Global consumption indicated partial recovery from the impacts of the COVID pandemic, increasing 1% compared to 2020 which recorded the lowest level of annual consumption since 2002.

Outlook

The loss of the Chinese market and high production in recent years has created an oversupply of wine grapes, especially for red wine and lower quality grapes. This has created challenging conditions for many NSW growers. ABARES estimates that in 2025, 60% of Australia’s wine exports that would originally have been destined for China that year will be diverted to alternative markets. However, total Australian wine export value (which included both bottled and unpackaged or bulk wine) is forecast to be around $480 million lower than would be the case without the duties.¹⁵⁴ Over the medium term, NSW and Australian red wine grape growers and wine makers will likely adjust production and/or marketing decisions to help lessen the impact of China’s duties by either phasing out red vineyards, cross-planting to white varieties, or possibly switching to alternative crops.

The potential impact of the intended UK wine excise changes is unknown and no changes have yet been legislated. The UK is an important destination for NSW wine exports and has become more important following the loss of the Chinese market. Whilst Australia and NSW primarily export lower value wine to the UK, the real value is likely much higher as significant quantities of wine are exported in bulk and bottled in the UK. The impact will likely be greatest for lower priced wines (where many NSW exporters operate) as the excise will make up a greater proportion of the final retail price.

Stronger Primary Industries Strategy

Development of an artificial intelligence-based tool for licensing of facilities and equipment

An expanding regulatory remit, and increased response to biosecurity emergencies and natural disasters necessitates the need for additional regulatory tools. Similarly, many licensees regulated by NSW DPI are facing unprecedented cost and resource burdens that reduce their availability for physical inspections of facilities and equipment. To address these resource constraints, NSW DPI is investing in digital tools to automate processes for some licensing and compliance functions, particularly those that involve low-risk, high volume activity.

Strategic Outcome

Food Safety and Animal Welfare

An initial proof of concept tool utilising artificial intelligence (AI) has been developed to automate the process for licensing of food transport vehicles. Approximately 1,000 food transport vehicle licensing applications are reviewed annually by NSW DPI, which includes an inspection by regulatory officers in the field. This is a time consuming process for vehicle owners and NSW DPI compliance staff. The AI proof of concept tool allows vehicle owners to complete a food transport license online, including the upload of several photos to demonstrate that the vehicle is in a suitable condition and complies with relevant food safety regulations.

Photos must show the general hygiene of the vehicle, intact refrigeration seals, digital temperature display, and registration plates. Machine learning allows the AI tool to determine if the photos show that the vehicle is compliant, vastly simplifying the current licensing process that can take several days or weeks. A comparison of the current and AI-based process is shown in the table below.

Use of the AI tool will save an estimated $120,000 in salaries per year, and over 1,000 hours in the field for compliance staff that can be utilised elsewhere. Vehicle owners will no longer need to have unnecessary time off the road and receive their license in a matter of minutes.