"Very few Australian vineyards are more than 50 hectares in area, and at current prices, producers need 150 hectares of production to receive decent returns. As a result 90 per cent of the Australian grape growing industry is unprofitable," says Michael De Palma, a grape grower and Chairman of the Murray Valley Wine Growers Inc and Director of the Australian Wine and Brandy Corporation.

"Export volumes have shown solid growth, with the United States and the United Kingdom remaining Australia's major export markets; however, prices per litre have remained constant, with bulk wine showing the greatest impact on total average price per litre," explained Mr De Palma.

In ABARE's March Australian Commodities, released at OUTLOOK, the average unit export price is forecast to be around A$3.61 a litre in 2006-07, with a projected drop to A$3 a litre by 2011-12.

In 2006, nearly 80 per cent of Australian wine exports were sold for less than A$5 a litre, an increase of 15 per cent in this lower price category since 2000. With 60 per cent of Australian sales to export markets, industry will need to continue to invest in research and development to identify and embrace new technologies and market opportunities and improve productivity.

Greg Corra, the Managing Director for Inland Trading Co Australia, told the conference that Australian wine has not been promoted enough in emerging markets including China, South Korea and Taiwan, compared to the United States and United Kingdom.

"The wine equalisation tax has inadvertently increased incentive for wine producers to sell a greater amount on the domestic market or to earn less and maintain an export market," Mr Corra also told delegates.

"The cost of regulations, particularly testing and labelling is also contributing to the increase in export costs and places small producers at a disadvantage," explained Mr Corra.