INLAND Wine Regions Alliance chair Jim Caddy is cautioning the whole Australian wine industry not to look at China through rose coloured glasses when seeking a significant recovery of the red-wine market.
Mr Caddy said there was a strong belief, expressed by some in the wine industry, tariffs imposed on Australian wine will follow barley and be lifted in the near future, possibly this year.
He said all the belief was achieving was the creation of an expectation among some growers the trade will immediately resume and bring the red-grape supply back into balance.
“The facts simply do not support this somewhat desperate hope for a solution, and a very quick one at that,” Mr Caddy said.
“While it may help a little, it will not be enough to make a difference to the current oversupply of red wine and increase demand (and hence prices) for the major varieties of red grapes.
“Any growers who are choosing to ‘hang on’ and wait for this to happen, rather than making the difficult decision to exit the industry based on the current situation, would be well advised to think again.”
Mr Caddy highlighted what he said was the most critical evidence.
He said there has never been a duty on Australian unpackaged wine entering China, however, it is extremely difficult to get it into China.
Despite there being no duty, Australian unpackaged wine decreased in volume from 44 million litres (23 per cent of total China bulk imports) in 2018 to 1.4 million (1.4 per cent) last year.
Mr Caddy said that at its peak in 2018, total Chinese wine imports from all sources were 783 million litres per year (about 1.1 million tonnes grape equivalent).
Referencing a graph with World Trade Atlas data, since February 2018 total imports of wine into China from all countries have steadily reduced to 280 million litres (about 395,000 tonnes grape equivalent) as of June this year.
Given the current economic situation in China, this was not expected to improve soon.
He said Australian wine exports to China were at about 168 million litres per year (about 235,000 tonnes grapes equivalent) during the peak period, of which 95 per cent was red, with shiraz and cabernet 75 per cent of red exports.
At that time Australian wine represented about 22 per cent of China’s total imports by volume.
If the tariffs were removed, then even getting back to 22 per cent of China’s total imports, this would only mean exports of about 61 million litres to China.
Mr Caddy said any increase in imports to China would be likely to result in a corresponding reduction in wine into Hong Kong.
Taking this into account, the total increased sales could be about 60,000t equivalent.
While total increased sales would help, he said there was about 10 times that volume currently in excess stock.
