- Value of wine grape production to fall by 2% to $926 million in 2024–25.
- Value of wine exports to fall by 3% to $1.8 billion in 2024–25.
- Declining demand for wine and high existing stocks weighing on prices, both domestically and globally.
- National prices to fall by 4% for red wine grapes and 1% for white wine grapes in 2024–25.
The nominal gross value of wine grape production is forecast to increase by 11% in 2023–24 to reach $947 million. Higher production volumes are expected as drier conditions have improved wine grape yield potential from a severely disease impacted crop in 2022–23. However, higher production volumes are forecast to be tempered by falling prices for wine grapes, particularly of red varieties with high red wine stocks from previous vintages. In 2024–25, the nominal gross value of wine grape production is forecast to fall by 2% to $926 million. Lower prices for wine grapes, especially for red varieties, is forecast to more than offset a marginal increase in production.
Over the medium term to 2028–29, the real gross value of wine grape production is projected to fall, reaching a low of $823 million in 2027–28, as prices for red grapes remain below long–term averages. At the end of the outlook period in 2028–29, the real value of production is projected to rise marginally as assumed wetter weather boosts yields and production volumes, despite lower bearing areas and flat prices for wine grapes (Figure 1.1). The projected reduction in bearing area over the medium term is largely driven by persistent low prices and growers exiting from the wine industry, including through moves into other irrigated crops such as almonds or citrus.
Under the alternative scenario, assumed wetter conditions could support higher yields, but lower assumed world economic growth and weaker consumer discretionary spending would drag on demand more than under the baseline scenario. This is assumed to lower prices further than in the baseline scenario, mostly offsetting the assumed higher production volumes. Overall, the alternative scenario assumes higher average annual volumes of production, despite the heightened risk of disease and lower prices, which would both devalue the crops and provide less incentive to harvest the full potential of vines, particularly in warm inland regions.
The nominal gross value of wine grape production in 2023–24 is forecast to be $14 million lower than forecast in the December 2023 Agricultural Commodities Report. This reflects a downward revision in red grape prices in warm inland regions based on early indications from the 2023–24 crush. It also incorporates a small downward revision in prices for white varieties, which is likely being driven by an effort of winemakers in the warm inland regions to subsidise expected losses on the purchase of red grape varieties that are already predominantly selling below cost.
Figure 1.1 Real gross value of annual wine grape production
Figure 1.2 Real value of annual wine exports
The medium-term outlook is projected to see the real value of wine exports fall further in 2025–26, reaching
$1.7 billion, before starting to trend upward to reach $1.8 billion by the end of the period in 2028–29 (Figure 1.2). The projected increase in the second half of the outlook period reflects improving export prices driven by progressively less global carryover stocks as global production slows.
In an alternative scenario characterised by slower global economic growth and more persistent cost of living pressures around the world, the real value of wine exports could be 23% lower than under the projected baseline scenario by the end of the period in 2028–29. While production of wine globally may be negatively impacted by consecutive La Niña events assumed in 2026–27 and 2027– 28. These weather patterns tend to have mixed effects on global producers and production is more contingent on the timing of rain in the season and availability of water for irrigation. On balance, any reduction in wine grape production is assumed to have less of an impact on prices than the reduction in demand caused by higher cost of living globally.
Wine grapes prices are forecast to fall by 9% to reach an average of $590 per tonne in 2023−24. The forecast fall is driven by substantially lower red wine grape prices (down by 12%) as high stocks of red wine varietals and subdued demand continue to challenge the industry. In 2024–25, prices are forecast to fall a further 3% to reach $573 per tonne. Subdued demand and high carryover stocks from previous vintages in warm inland regions are expected to keep prices at historic lows. White wine grape prices are also forecast to fall, albeit by much less (down by 3% in 2023–24). The stronger demand for white wine varietals is helping support prices, however, some winemakers may offer lower prices for white grape varieties in a bid to mitigate losses on red wines in the 2024 crush.
Per capita wine consumption has been falling in the domestic market over the last decade, driven by moderation and health concerns, and in the last two years has been exacerbated by cost-of-living pressures. Despite falling consumption overall, Australians are buying more premium wine. This has resulted in solid demand and production of premium wines, which represents a growing share of the wine produced in Australia. This trend is likely to continue in 2024−25 but be constrained by subdued household discretionary spending.
Cool climate region and premium wine grape markets are expected to remain strong despite a softening domestic and global market, keeping prices steady in 2023–24 and softening only marginally in 2024–25. In recent years, a larger share of wine consumed domestically is from the premium wine market, which is benefiting wine sales at a higher price point.
Warm inland region red grape variety prices are expected to fall substantially in 2023−24 due to historically high carryover stocks of red varietals and declining domestic and international demand. Winemakers are contracting far less red variety grapes per hectare in these regions compared to the production potential, and there is a significant risk of grapes being left on the vines. Early indications are showing that red varieties of grapes could be selling for less than $200 per tonne in some warm inland areas. Furthermore, consultation as part of the March 2024 Agricultural Commodities suggested that some growers in the regions are being contracted to produce well below potential yields or paid modest amounts to forego production. Uncontracted red grapes are expected to receive well below production cost prices, if they are purchased at all. In 2024–25, prices for red varieties of grapes are expected to fall modestly, but not to the extent of the expected drop in 2023–24 (Figure 1.3).
Prices of white grape varieties in warm inland regions are expected to fall between 2-4% in 2023– 24. While white wine varietals currently have higher prices for grapes, it is expected that winemakers will seek to mitigate losses on red wines by cross-subsidising with white varietals. Consequently, white grape varieties in warm inland regions are likely to be sold at a modest discount. In 2024–25 diminishing global demand for wine and a slightly higher volume of production is expected to have a further dampening effect on white wine grape prices. However, Chardonnay grapes are expected to rebound slightly after a challenging 2023–24, but Pinot Gris and Sauvignon Blanc prices are expected to decline (Figure 1.4).
Figure 1.3 Average nominal price per tonne, red grape varieties, warm inland regions
Figure 1.4 Average nominal price per tonne, white grape varieties, warm inland regions
Over the outlook to 2028–29, the real average price of grapes is projected to trend down, as continued high stocks of wine and falling demand continue to weigh on the price of wine (Figure 1.5). The low prices have not seen substantial exits from the industry in recent years. However, sustained low prices will likely accelerate exits of growers in the outlook, particularly in assumed drier years if the price of water begins to rise. Under an alternative scenario, assumed lower economic growth and higher inflation would be likely to keep real prices of wine grapes lower, as cost of living and lower disposable incomes weigh on demand.
Figure 1.5 Average annual real price, total grapes in all regions
Australian wine grape production is forecast to increase by 21% to 1.6 million tonnes in 2023−24 as production recovers from excessively wet conditions in 2022−23. After widespread heavy rainfall and waterlogging in 2022−23, predominantly drier weather through the growing season in 2023–24 has helped reduce the risk of mildew. This has provided a better opportunity for growers to actively manage the issue through improved access to vineyards for spraying. Despite heavy rains in some regions around harvest, the quantity and quality of grapes harvested is expected to be good in 2023– 24.
In 2024–25, wine grape production is forecast to increase marginally. This is on the back of forecast good growing conditions, high water availability and easing disease pressure. However, the higher production potential will likely be constrained as growers leave grapes on vines, or engage in heavy pruning to put their vines in “survival mode”. This is due to continuing low prices with the ongoing excess supply of red wine varietals in warm inland regions and sluggish domestic and international demand for wines.
Over the medium-term outlook, production is expected to range between 1.4 and 1.7 million tonnes. With low prices and a sluggish export market, a portion of wine grape growers are expected to leave the industry or switch to other more profitable industries, such as almonds. This is projected to be particularly prevalent in the assumed drier years of
2026–27 and 2027–28, where previous successive years of lower rainfall have seen water prices rise. As a large input cost, the wine grape industry will be responsive to modest increases in water prices while wine grape prices remain at historic lows.
Despite having the lowest export prices of any major wine producer according to CIATTI global wine market reports the volume of Australian wine exports is likely to remain at current levels and even decline marginally. While a stronger December 2023 quarter showed a boost in export quantities and prices, this is more likely a cyclical change, rather than a structural one. The expectation for 2024–25 is for slightly declining export volumes, reaching 634 million litres despite slightly lower prices, as global stocks of wines remain high. Stronger opportunities exist for white varietals than reds, but with high existing global stocks of wine, and competition from other regions across the world, few opportunities exist to grow Australia’s share of the market. Australia’s prices are already well below most competitors, and while buyers are particularly price sensitive, there is not much room to move below the current historically low prices.
Over the outlook period, export volumes are projected to remain relatively flat, or trend down slightly, as global demand remains subdued (Figure 1.6). However, the value of exports is projected to improve slightly by 2028–29 as global production slows, as major wine producing regions begin to reduce production in response to the structural problems that have plagued the industry over the last decade. Under the alternative scenario, characterised by lower global economic growth and higher inflationary pressures, discretionary expenditure, such as on wine consumption would likely be curtailed. This would mean even lower prices and export volumes than the baseline scenario. Assumed wetter conditions are likely to improve yields, however, it would also increase the risk of diseases such mildew, which could act to diminish crop potential.
Figure 1.6 Volume of wine exported to major markets in millions of litres
Global wine grape harvests through 2023 were mainly down from the previous year and generally coming in below average in most major wine producing regions, including Italy, Spain, Argentina, Chile, and California. However, high carryover stock from previous vintages, particularly in red varietals, is likely to largely offset declines in wine production. High stocks of wine are still expected to be carried into 2024 and beyond, as global consumption continues to fall.
In recent decades, global wine production has consistently been substantially higher than consumption. International Organisation of Wine and Vine data estimates that between 1995 and 2022, annual global production averaged nearly 14% higher than global consumption of wine. Over the outlook, production is expected to continue to outpace global consumption, which will mean that carryover stocks take some time to clear. This is expected to continue to depress global prices for wine, particularly with more favourable growing conditions expected in many of the regions that had smaller than average crops in 2023.
Due to current challenge of high global stocks, some wine grape producers in key countries are limiting production. For example, producers in Chile have been uprooting large areas of vineyards, estimated to be anywhere between 15% of total area in 2023. Similarly, in harvests in many regions including California and Australia, grapes are being left on vines, as the profitability of harvest wanes.
According to the International Organisation of Wine and Vine global wine consumption in 2022 was its lowest since 2002, at just over 23 billion litres. Over nearly two decades, wine consumption has been trending down. Competition from other alcoholic beverages, health-conscious consumers and cost of living pressures have all contributed to falling demand for wine. Between 2017 and 2022, the International Organisation of Wine and Vine estimates that global consumption fell by an average of 1.2 per cent per year.
As cost-of-living pressures from high inflation and interest rates continue to impact consumer confidence and discretionary spending globally, demand for wine is expected to remain subdued in 2024–25. Over the outlook to
2028–29, global consumption growth is projected to be limited by continuing consumer preferences away from wine, despite growth in consumer incomes and discretionary spending.
Return to the Chinese market would ease excess supply pressures
Loss of access to the Chinese market in 2020 due to the introduction of high tariffs presented enormous challenges to Australian wine exporters. There is muted optimism in the wine industry that China may be in a position to reconsider these tariffs going forward. While this would offer some welcomed relief, it is not the solution to some of the structural issues the industry has been facing over the last decade and a half. Between 2017 and 2022, China’s wine consumption fell by around 54%. Much of China’s import market is also now served by Chile and Italy, the former is able to compete with Australia’s low export prices, and the latter produces significantly more wine annually, so is highly capable of competing on volume.
With excess supply of red varietals, input costs may outweigh potential revenues
As the Australian wine industry grapples with the excess supply of red wines specifically in warm inland regions, winemakers are likely to limit their purchases of grapes in the upcoming vintages. Not only does this put downward pressure on already low prices for some red varietals, it also creates a disincentive for growers to harvest their crops. With prices likely to fall further in 2024–25 than the already below cost prices for many reds, and production potential increasing, individual wine grape growers may struggle to recoup their input costs for the current 2023–24 harvest and will need to consider their options for future harvests, before committing to producing on a large scale. This may mean that some producers could be put in a position where it is no longer profitable to produce grapes for the 2024–25 year and beyond.