Wine

The gross value of wine grape production is forecast to increase by 1.5% in 2024–25 to $888 million, driven by a slight rise in prices for premium wine grapes following the removal of China’s import tariffs in March 2024. Although higher than recent years, the forecast for 2024–25 is 20% below the 10-year average to 2023–24 in real terms, as low prices for warm inland varieties and below average production continue to limit growth.

Wine grape production for crush is forecast to remain steady in 2024–25 at 1.43 million tonnes, below the 10-year average. High water availability and a neutral rainfall outlook for key growing regions is expected to support higher production potential. However, production for crush will continue to be constrained, as high domestic stocks and falling global demand continue to suppress demand from winemakers.

The re-opening of the Chinese market is expected to support a slight increase in prices for cooler climate and premium wine grapes. However, weak household consumption conditions and increased competition from other alcoholic beverages are expected to continue to suppress China’s demand for wine imports. In addition, the re-opening of the Chinese market is not expected to have a meaningful impact on wine grape prices in warm inland regions, which account for two-thirds of the national crush. Wine grapes grown in these regions are primarily used to produce commercial wine priced below $5 per litre free on board (fob), servicing markets in the United States, the United Kingdom, Canada and Australia.

The gross value of wine grape production in 2024–25 is forecast to be slightly higher than the forecast in the June 2024 Agricultural Commodities Report. This reflects a slight upward revision to prices for premium wine grapes.

Wine export values are forecast to increase by 5% in 2024–25 to $2.4 billion (Figure 1.1), supported by the re-opening of the Chinese market following the removal of import tariffs in March 2024. The forecast annual increase in 2024–25 follows a stronger than expected rise in export values over the final quarter of 2023–24, as exporters rapidly re-established supply chains. However, export values to China are not expected to reach pre-tariff levels as the Chinese import market for wine has more than halved in recent years (see Opportunities and Challenges).

Wine export values increased 15% in 2023–24, the first year of growth since 2018–19. However, export values to North America and the United Kingdom – Australia’s second and third largest markets by value and biggest destinations for commercial wine – both declined 3% in 2023–24 year-on-year.

Figure 1.1 Value of Australian wine exports to the World

Wine export volumes are forecast to increase by 2% to 648 million litres in 2024–25, driven by higher exports to China following the removal of import tariffs in March 2024. Australian export volumes to China are expected to stay well below pre-tariff levels due to falling Chinese wine consumption. Outside of China, the demand for Australian wine exports is not expected to improve in 2024–25 due to continued pressure on disposable incomes and a shift in consumer preferences towards other beverages. Export volumes to all major destinations (including North America and the United Kingdom) declined in 2023–24, with the biggest falls in unpackaged wine exports priced below $1.50 per litre.

Australian wine grape prices are forecast to increase 1% in 2024–25 to $619 per tonne, driven by an expected rise in prices for premium wine following Australia’s re-entry into the Chinese market.

Prices for cool climate and premium wine grapes are expected to increase slightly in 2024–25, given the re-opening of the Chinese market. In addition, global demand for high-end premium wines remains relatively strong despite the long-term decline in global wine consumption. Health-conscious consumers in major wine consuming countries are reducing their overall alcohol intake but opting for premium wines when they do drink.

Prices for red varieties in warm inland regions are expected to remain low at $243 to $277 per tonne in 2024–25 as high stock levels and declining consumption of commercial wine continue to suppress demand from winemakers (Figure 1.2). Reflecting this decline in consumption, the proportion of red wine grapes sold at lower price points in warm inland regions increased in 2023–24 with 51% of red wine grapes sold in warm inland regions sold for less than $250 per tonne, compared with 21% in 2022–23 (Figure 1.4).

Prices for white varieties in warm inland regions are expected to remain steady at $371 to $495 per tonne in 2024–25 with a more favourable demand outlook compared to red varieties (Figure 1.3).

Wine export prices are forecast to increase 3% to $3.77 per litre in 2024–25, driven by the re-opening of the Chinese market. The average export price increased for the first time in five years in 2023–24 to reach $3.65 per litre. In 2023–24, Australian wine exports priced at or above $20 per litre increased by $344 million with over 90% exported to China.

Figure 1.2 Warm inland red variety grape prices

Figure 1.3 Warm inland white variety grape prices

Figure 1.4 Volume of red wine grapes purchased in warm inland regions, by price point

Wine grape production for crush is forecast to remain steady in 2024–25 at 1.43 million tonnes, but below the 10-year average (Figure 1.5). Despite higher yield potential, production for crush is expected to be constrained as high domestic stocks and the long-term decline in wine consumption continue to suppress demand from winemakers.

High water availability and a neutral rainfall outlook are expected to support higher yield potential in 2024–25:

• High opening water allocations and low water allocation prices are expected to continue in 2024–25. Despite falling from last year, major water storages are still sitting well above long-term averages, supporting irrigated grapes in warm inland regions.
• Despite a dry start to winter for wine growing regions in south-eastern Australia, recent rainfall has improved soil moisture reducing the risk of poor shoot growth. With a neutral rainfall outlook expected through spring, yield potential is expected to improve in 2024–25.

Offsetting higher yield potential, high red wine stocks are expected to continue to weigh on the amount of grapes winemakers contract in 2024–25. Red wine stocks, particularly in warm inland regions, increased significantly in 2021–22 following record production and weakening demand. Lower red grape production in 2022–23 and 2023–24 led to stock levels easing but remaining elevated due to continued weakness in demand. In addition, with margins squeezed, growers may look to reduce production costs by cutting back on inputs, impacting their ability to manage disease pressures if they arise, reducing production.

In contrast, the white grape crush increased in 2023–24 to exceed the red grape crush for the first time since 2007, driven by chardonnay and pinot gris (Figure 1.6). This trend is expected to continue in 2024–25 with prices for inland red varieties forecast to remain low.

Figure 1.5 Australian wine grape production for crush

Figure 1.6 Production for crush for top varieties in warm inland regions

World wine production is expected to decline in 2024–25, reflecting a reduction in vineyard area as growers in major wine producing regions react to subdued global demand and lower prices.

In California, the world’s largest wine producing region, over 12,000 hectares of vineyards have been removed in recent years. Rationalisation is expected to continue in 2024–25 as the industry looks to reduce bulk wine supply in line with long-term demand.

In France, vine removals are set to continue, supported by government subsidies announced in February 2024. The French wine industry has signalled its intention to reduce vineyard area by up to 100,000 hectares. Alternative uses have been found for some excess stock, with government funding allocated to the distillation of unwanted wine into industrial alcohol. In addition, French wine production in 2024–25 is expected to face pressure from a wetter than average spring resulting in mildew pressures for growers in Bordeaux, and drier conditions in the Aude area and Pyrénées-Orientales region reducing yields.

In Chile, the rate of vine removals is expected to ease in 2024–25, reflecting a below average 2024 crop that has seen inventory levels fall.

World wine consumption is expected to continue to decline in 2024–25. Per capita wine consumption in major wine consuming markets has been falling for the past decade, driven by competition from other alcoholic beverages and the rise of the health-conscious consumer looking to cut back alcohol consumption. The shift in alcohol preferences is most pronounced in younger cohorts, with a stronger preference towards spirits.

In China – Australia’s largest export market – declining wine consumption has been driven by an overall fall in alcohol consumption and a substitution towards other forms of alcohol, such as spirits. In 2024–25, weak economic conditions (see Economic Overview) is expected to keep wine demand relatively subdued.

In advanced economies, discretionary spending is expected to increase in line with an improved outlook in most economies, providing some support to wine consumption.

Removal of Chinese import tariffs no silver bullet for warm inland regions

Although welcome news for exporters, the removal of Chinese import tariffs on Australian wine in March 2024 is not expected to significantly alleviate the ongoing pressures faced by warm inland growers. The main beneficiaries of the tariff removal will be exporters of high-end premium wine, with Chinese demand for Australian wine geared heavily towards the highest price points. The majority of wine produced in warm inland regions is lower value product priced below $2.50 per litre (fob), primarily servicing commercial wine consumers in the United States, the United Kingdom, Canada and Australia. Prior to the introduction of the tariff in 2021, exports of wine priced below this threshold accounted for less than 5% of Australian export values to China (22% in terms of volume) (Figure 1.8).

Falling wine consumption and weak economic growth has seen China’s import market for wine more than halve over the past five years (Figure 1.7). In a global market with high stocks and falling consumption, Australian exporters will face strong competition in a significantly smaller Chinese market. This may lead to reduced prices as exporters compete to attract buyers and establish new relationships in the Chinese market.

Figure 1.7 Wine export values to China from Australia and the Rest of the World

Figure 1.8 Australian wine exports to China by price point