ABARE Senior Economist Dr Brenda Dyack said production of wine grapes in Australia is likely to increase by 19 per cent relative to 2006-07 in 2007-08 to around 1.67 million tonnes, but will remain below the historical peak of 2004-05 due to ongoing drought conditions in key production areas.

“Export prices for Australian wine are expected to increase in the medium term primarily because of industry efforts to target higher price points for Australian wine, and higher wine prices globally caused by a reduction in wine production in the European Union,” Dr Dyack said.

ABARE expects Australian wine exports to reach a new record of $3.12 billion in 2007-08 despite a two per cent reduction in the volume exported. Consequently, export unit returns for Australian wine are forecast to increase in 2007-08.

“In the next two years, wine grape price rises are likely to be supported by domestic supply restrictions caused by the drought, which continues to affect key wine grape production areas in south-eastern Australia,” said Dr Dyack.

Davidson Consulting"s Di Davidson told the conference that the issue of viability is more acute in March 2008 than ever before. “Being able to respond to change is the key business management tool for wine grape producers,” said Ms Davidson.

“Transparent relationships and long term contracts between grape growers and purchasers as part of the same value chain would benefit the entire industry,” Ms Davidson said.

Andrew Kay, CEO of Wirra Wirra Vineyards in McLaren Vale told the conference that Australia can no longer be the lowest cost producer in the world, and that Australian wine would face strong competition at higher price points for wine.