Small Farms

Water availability greatly reduces yields across South Australia

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Lack of available water was the key factor at play in the South Australian wine vintage in 2019, with grower yields halved in some regions.

The Clare Valley region endured a long, hot summer and limited river water availability resulted in yields that were up to 50 per cent lower than 2018. This was echoed in the Barossa, with hot and dry conditions leading to smaller, lighter fruit and associated lower yields.

Insights from several of National Australia Bank’s (NAB) large wine customers in South Australia (SA) revealed that across most of the state’s wine regions, quality was very good in 2019 despite a reliance on irrigation and low water availability resulting in a major reduction in yields.

NAB Managing Partner, Stephen Stegmeyer, said water availability is critical to heat management for wine grape growers.

“Growers in SA rely on a mix of water sources – including the Murray system, treated water, and ground water,” Mr Stegmeyer said.

“Both the Clare and Barossa regions struggled with water availability this year (2019). With very little bulk wine in the market, some winemakers are paying up to $4 per litre for generic bulk wines to supplement lower yields.

“Fortunately, the low yields have been offset somewhat by quality, with very high quality fruit reported in most regions. Customers in the Barossa reported a lift in grading, with high volumes of A and B grade wine.”

Despite low yields and tight bulk wine supplies, the impact on pricing is expected to be subdued with many growers contracted to wineries under agreed pricing structures.

“Demand has outstripped supply in the Barossa for several years now, so many growers there are already operating with favourable pricing arrangements,” Mr Stegmeyer said.

In the higher elevation region of McLaren Vale and the Southern, Fleurieu Peninsula Region including Langhorne Creek and Currency Creek, a slightly cooler summer has led to a comparatively lower yield reduction of around 30 per cent.

“The Riverland region saw yields that were only 10 per cent lower on average, with a very hot spell offset by better water availability, albeit at elevated temporary water prices,” Mr Stegmeyer said.

The Coonawarra region was a standout for South Australia in 2019, with access to good volumes of aquifer water resulting in a 10 per cent increase in yield.

“The Coonawarra region normally suffers from frosts, but the warmer summer helped deliver a strong yield this year. Water in the Coonawarra is sourced from confined aquifers, so availability was stable compared to other regions that rely on supplementary water from the Murray,” Mr Stegmeyer said.

Across the board, bulk wine availability is very limited, and NAB predicts that prices will firm across all regional wine varieties, but predominantly reds.

Water allocations are tipped to become more expensive, on the back of increased development of permanent crops like almonds.

“These crops are high value, which allows growers to be very competitive in the water market,” Mr Stegmeyer said.

“Water allocations in SA currently sit around $6,000 per megalitre. Should the upward trend in permanent crops and reduced water availability drive this up to around $10,000 per megalitre, this would equate to a material cost of roughly $100 per tonne for those wine grape growers needing to secure additional water.”

Looking abroad, international demand for bulk and premium wine is not slowing, with China and Europe key players.

“Demand in the Asian market for high quality wines is insatiable, and any drop in yield may be offset by increased export prices for those who can access it,” Mr Stegmeyer said.

“If the exchange rate dips below USD70c, we will likely also see a spike in European export demand.”

Source: NAB

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