Wine signs are good

THERE is a glimmer of hope for winegrape growers in northwest Victoria.

Murray Valley Winegrowers chief executive Mark McKenzie said there had been early signs of a lift in winery demand for grapes, with major and second-tier wineries in the three main inland growing regions - Murray Valley, Riverina and Riverland - actively seeking fruit ahead of next vintage.

Despite the surge in market activity, Mr McKenzie warns growers should not expect "an extraordinary leap in prices".

"Price improvements will be constrained by flat domestic and export demand for wine, tough market conditions overseas and an unfriendly Australian currency, and because much of the improved wine-grape demand is coming from second-tier processors who are not traditionally market-price leaders," he said.

"These wineries generally sit just below the major corporate winery price levels, due to the significant portion of their production destined for the bulk market, on-sale to the majors, or lower-priced popular premium brands.

"Nevertheless, these market developments are a pointer to incremental improvement in grapes prices over the next couple of vintages."

Among the second-tier wineries Mr McKenzie identified as "expanding aggressively" is Andrew Peace Wines, at Piangil, north of Swan Hill.

Managing director Andrew Peace said his company planned to process 30,000 tonnes next year - a rise of 8000 tonnes compared to this year. But the company had access to more than enough grapes and the expansion should not be seen as an indicator that the industry needed more grapes.

"Some of the equipment that we've put in has been purchased second-hand from other facilities so ... the expansion we're doing doesn't actually give an overall increase in production capacity because it's just being moved from one site to another site," he said.

"One of the reasons we're taking the opportunity to expand is that under our current business model, crushing about 22,000 tonnes, we can't really make the necessary returns, so we're scaling up so that we can amortise our overheads and increase our profitability.

"I don't believe there's any more fruit required, (it's) just that the fruit is going to different purchasers."