Grape growers told to dispute low prices

Wine Grape Growers Australia has advised growers to trigger pricing disputes under their contracts with wineries to force a review of low 2008 vintage grape prices.

WGGA Executive Director, Mark McKenzie, said that despite a second consecutive low national vintage wine grape prices were still at unsustainable levels - with a large proportion of the sector suffering a third year of prices below their costs of production despite the tight supply of many varieties - particularly premium reds.

WGGA has assessed the current early-vintage potential at 1.4 million tonnes - the same production level as the low 2007 vintage. However, the continuation of hot weather and limited irrigation water in the key Riverland and Murray Valley regions, together with continuing wet weather along the eastern seaboard is very likely to see further shrinkage in regional tonnages as vintage progresses, with a likely outcome much closer to the Australian Wine & Brandy Corporation's pre-vintage estimate of 1.22 million tonnes.

Post- Christmas vintage estimates by some wineries of up to 1.6 million tonnes have been described by WGGA as "fanciful".

"Once again we see some wineries using overestimates of the vintage to talk down grape prices. These wineries continue to rebuild their profits while growers' incomes remain negative. The reality is that we are currently estimating a national crop of between 300,000 and 500,000 tonnes below the grape production required to meet our current annual wine production demand, without any allowance for export market growth," Mr McKenzie said.

The market is not reflecting these shortages of fruit, because a number of major wineries amended their prices downwards before Christmas on their own grossly overstated revised national crop estimates. With vintage underway and crops lighter than predicted, wineries are now revising their production estimates downwards in line with the real outlook, but grape prices are not reflecting this."

WGGA is critical of a number of winery pricing tactics for the 2008 vintage, including:

- The decision by a number of major wineries to revise prices down from 'indicative prices' or the conversion of 'minimum prices' to 'maximum prices' despite the fact that many growers purchased additional irrigation water at high cost on the basis of those prices.
- The lack of any significant movement in the base level prices over last year - particularly once the cost of additional water purchased (at an average cost of $200 per tonne) is taken into account.
- The use of misinformation about national crop levels by some wineries to justify low prices to growers - particularly in the Riverina region.

In response WGGA has advised growers to:

- Trigger price disputes with wineries to force a review of low prices, and if needed, employ a solicitor or financial advisor as a growers advocate to argue their case.
- Use the grape pricing of other regional processors or other regional prices for like fruit to argue for improved prices.
- Seek legal advice on joining with other growers in joint negotiations and 'class actions' to dispute prices and renegotiate contract pricing to reflect 'district weighted average prices' as a minimum.
- Where possible not supply wineries offering low prices - supply to another processor or wine grape marketing group in regions where these exist.