Situation and Outlook for New Zealand Agriculture and Forestry (August 2008)
10 Wine
A bumper harvest of wine grapes in 2008 looks set to push up export wine volumes by 30 percent in the year ending 31 March 2009, providing the industry with a tough market development challenge.
In 2008, tonnages rose dramatically to an estimated 285 000 tonnes, due to higher yields. Settled spring weather led to good flowering and fruit set, while a long warm summer increased berry weights more than expected. Added to the favourable growing conditions was the increase in bearing area, especially in the main growing region, Marlborough.
New Zealand wine has had its own market niche at the upper end of the wine market spectrum. However, orderly market development for the unexpectedly large increase in wine production will be challenging for exporters in the year ending 31 March 2009. Some of the wine may be held over and exported in the year ending 31 March 2010 to reduce pressure on the market.
A further factor that may dampen prices is the slow-down in economic growth in developed countries. An erosion of wealth among New Zealand’s target market segment may affect purchases of goods such as wine.
On the upside, world production of wine fell in 2007. This was mainly for climatic reasons, but was also influenced by vine removals in the EU. In reaction to this, prices for domestically produced wine began to rise in Europe in the latter part of 2007. In addition, the fast-growing Australian market became more attractive for New Zealand wine exporters in the first half of 2008. The catalysts were a more favourable exchange rate and lower Australian wine production in 2007.
Prices for New Zealand wine in international currencies increased in the year ended 31 March 2008, as wineries lifted in-market prices to offset the effect of exchange rate movements. These were particularly unfavourable for the key wine exporting currencies (UK pound, US dollar and Australian dollar) when the new season’s Sauvignon Blanc started to be exported in the September quarter. FOB prices for the year fell marginally due to exchange rate factors.
International prices for New Zealand wine are forecast to rebound in the year ending 31 March 2010. This assumes a return to more average yields and increases in production keeping pace with market development. Moderation of the exchange rate is expected to improve FOB prices in the medium term.
Exports
Exports of New Zealand wine continue to increase dramatically. In the year ended 31 March 2008, 85 million litres of wine were exported – almost 17 percent up on the previous March year and more than 220 percent higher than five years ago. Export volumes for the year ending 31 March 2009 are forecast to increase a further 30 percent, with rises expected to continue in the medium term. The domestic market is relatively static, so any increase in production is exported.
The value of New Zealand’s wine exports increased by 16 percent to $764 million in the year ended 31 March 2008 and is forecast to increase further in the year ending 31 March 2009.
The key export markets in the year ended 31 March 2008 were the UK, Australia and the US, which took over 80 percent of the volume of New Zealand’s exports between them. Sauvignon Blanc made up 75 percent of the total volume exported.
Table 10.1: Wine export prices, volumes and value, 2005–2012
| Year to 31 March | Actual | Forecast | ||||||
|---|---|---|---|---|---|---|---|---|
| 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | |
| Export volume (mil litres) | 46 |
57 |
72 |
85 |
110 |
123 |
127 |
130 |
| FOB1 price ($/litre) | 8.7 |
8.5 |
9.1 |
9.0 |
8.7 |
9.2 |
9.9 |
10.4 |
| Export value ($ mil) | 402 |
483 |
659 |
764 |
957 |
1 131 |
1 254 |
1 347 |
Note
1. Free on board – the value of the goods delivered to the port of export and loaded onto a vessel for transportation out of the country of origin.
Sources Statistics New Zealand and MAF.
Production
The land devoted to viticulture continues to increase rapidly. Wine grapes are now the largest single horticultural crop in New Zealand in terms of bearing area, at more than 25 000 hectares (at 30 June 2007). The bearing area is forecast to continue to increase, as existing planted areas come into production and new areas are planted. However, towards the end of the forecast period, the rate of increase is expected to moderate as the availability of suitable land becomes an issue.
Figure 10.1: Vineyard area, by variety, as at 30 June 2000-2007
Source New Zealand Wine.
Contact for Enquiries
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