Wine farmers stay positive despite many producers in the red
Wine-grape farmers remain optimistic about their future even as more than a third of producers are making a loss.
Just as worrying is that the industry now has 25% fewer producers than a decade ago. Wine-grape production for the year was nearly 1.23-million tonnes,
about 15% down compared to 2017, according to wine producers body
Vinpro.
It says the only way to ensure a sustainable supply of wine
is for farmers to receive higher prices for their wine. The average net
farming income was about R45,000/ha compared with the R70,000/ha
required to be financially sustainable.
Wine is one of SA’s largest agricultural exports, with nearly
100,000ha of vineyards, mostly in the Western Cape, accounting for 4% of
world production.
Under pressure
Vinpro said many wine-grape farmers were either leaving the industry,
uprooting vines for more profitable crops or not replacing vineyards. The Bureau for Economic Research and the Bureau for Food and
Agricultural Policy predict that at 85,000ha, the area under wine grapes
will be about 10% smaller by 2022.
South Africa plenty of work: Grape pickers in full work mode at the Perdeberg wine estate in the Western Cape. While there are 25% fewer producers than 10 years ago, employment numbers have not been affected. Picture: FILE PICTURE |
Vinpro MD Rico Basson on Wednesday ascribed the decline in the number
of producers over the past 10 years to various factors including
profitability, economy of scale, and mergers.
"This decline is in line with the bigger picture of agriculture globally, as well as in a local context," he said.
South Africa (SA) is the eighth-biggest wine producer. The industry contributes R36bn to GDP and employs nearly 290,000 people. However, citing impact studies, the decline in the number of producers had not affected employment opportunities.
"It’s important to remember that although the number of producers
have become less, the hectares of vineyards have not declined at the
same rate at all and in some instances where vines were uprooted, other
more labour-intensive crops were planted," Basson said.
In 2017 the wine industry sold 447-million litres in the local market
and exported some 448-million. The 895-million-litre total represents a
3.5% increase compared to 2016. The challenge for 2018, said Basson, was that lower production and
stock levels reaching equilibrium could result in a significant shortage
of wine to service the local and export markets at 2017 levels.
"We have in the short term already seen evidence of above-average
adjustment of prices at South African retail level for certain wine
categories with further adjustments expected over the medium term," he
said. "In an environment of short supply, and with the local and export
markets as considerations, the highest bidder will win."
A global wine shortage would have a positive effect on sales volumes and value growth in priority export markets.
Basson said the winter rains in the Cape had brought some relief for
farmers. "We are not out of the woods by a long shot, because the major
storage dams are … only around 50% full, [but it] is considerably better
than the 25% at this stage last year."
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