Grape tonnage spells trouble for wine growers

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A bumper grape harvest this year could drive more wine companies into the hands of receivers, says a Deloitte partner already involved in a number of receiverships in the industry.

Rabobank senior analyst in food and agribusiness research Marc Soccio last week warned 2011 output could be as large as 300,000 tonnes. That would be a 13 per cent increase on last year's harvest.

In December, New Zealand Winegrowers chief executive Philip Gregan said a harvest larger than 300,000 tonnes would return the industry to the situation that followed the 2008 vintage, when a 285,000 tonne crop resulted in a 27-million litre oversupply - eroding wine, land and grape prices.

At the same time, the onset of the global financial crisis only deepened a dire situation.

Deloitte's Paul Munro said the industry was still recovering from the 2008 vintage, and it would take between three and five years for things to return to normal.

Munro said: "The production capacity is certainly there to produce that volume and the season has been pretty reasonable up and down the country in terms of allowing for those sorts of volumes. If growers choose to harvest it - the capacity or potential for oversupply is there."

New Zealand Winegrowers has advised growers to limit the 2011 vintage to 265,000 tonnes through controlling the harvest. Gregan said it was still too early to tell how large this year's harvest - which takes place between March and April - would be. A pre-vintage grape survey would be completed within two to three weeks when more would be known about the situation.

"Until then, frankly, everything's a bit speculative," he said. "We would like to see a vintage of 265,000 [tonnes]."

But Gregan said he would be "un-surprised" if the harvest turned out to be larger.

"Whether it's 300,000 tonnes - that's another matter. We'll have to wait to see what the survey says."

Alton Jamieson, chairman of the New Zealand Wine Company, an NZX-listed firm, said a strong New Zealand dollar - particularly against the pound and greenback - had been an additional challenge to the industry.

"On top of the surplus, that's made life very difficult for everyone."

He said the NZ Wine Company, which reported its first ever loss of $1.8 million last year, would be limiting its 2011 harvest on the 240ha of vineyard the firm owns and contracts in Marlborough.

"It's in the interests of both growers and wine companies to get supply and demand back into balance so we've got a sustainable business."