Wine grapes production cut further

Latest figures from the Australian Bureau of Statistics' Vineyards Estimates report show substantial adjustment by the winemakers with  the total area of grapes not harvested now at 13,147 hectares.

Wine grape growers cultivated 157,000 hectares of vines for the 2010 season.

South Australia remains the largest wine grape producer with 731,000 tonnes, followed by NSW (443,000 tonnes) and Victoria (284,000).

Industry estimates show there is an oversupply of about 20-25 per cent.

The update comes as the sector grapples with the ongoing problem of the rising Aussie dollar against its trading partners and lower demand in a crowded marketplace.

The dollar has played a huge role in the success of the Australian wine industry in the late 1990s when it was around the US60c mark.

Winemakers' Federation of Australia chief executive Stephen Strachan said production numbers were moving in the right direction with more vineyard removals planned over the next 12 months.

"A lot of fruit has been processed that hasn't got a market,'' he said.

"The rise of the Aussie dollar is also a challenging environment for growers. It's leading to a major impact on sales versus our competitors internationally,'' Mr Strachan said.

Recent figures show a near static export market generally for Australian wine which grew by 2 per cent to 772 million litres, but fell slightly in value to $2.10 billion for the 12 months to the end of September.

"Wineries are reducing their intake and growers have got to control growth,'' he said.

Though a significant level of hectares had been removed from production along with land not used, the reform has a long way to go.

"Viability in the industry is at an all-time low, but that's not the story for all businesses,'' he said.

South Australian growers and winemakers would face a higher degree of pain being the largest producer of wine, but they know that, Mr Strachan said.

"It means the adjustment is going to be most acute in this state,'' he said.