MGW moving up strongly - either a t/o or perhaps the poor grape...

MGW moving up strongly - either a t/o or perhaps the poor grape harvest is having a beneficial effect ?
article;

"THE drought threatening to wipe out large swaths of Australia's crop production could be good news for the wine industry, with a smaller vintage allowing wine makers to clear out a billion-litre surplus.
Alexandra McPhee, associate director of KPMG's wine industry consulting group, yesterday said dry conditions and recent frosts in key growing areas would accelerate the rebalancing of the wine sector, reducing the oversupply problems that had slashed returns for wine makers and grape growers alike.

Grape growers in the Goulburn Valley, Victoria's Alpine region and the Sunraysia/Riverland areas along the Victorian-NSW border have all been hit by frost over the past month, destroying newly budding fruit on the vine.

While an accurate assessment of the impact of the drought and frost will not be possible until vine bud tests can be carried out next month, some industry figures are predicting the 2007 vintage to be as much as 30 per cent below the 2 billion tonnes of grapes picked in 2006.

And Ms McPhee said dry conditions this year would also have an impact on the 2008 vintage, as the formation of new grapevine buds was affected by poor subsoil moisture and water allocations for irrigators were reduced in line with lower catchment levels.

"The fact that it could be down by a meaningful amount is being taken as a positive by the industry," she said.

"It may mean little or no income (for growers) but in the long term if it brings prices off sub-economic levels it is a positive."

Growers left grapes to rot on the vine this year after being offered as little as $150 a tonne, down from more than $1000 in the late 1990s and about half the cost of production, while retailers have resorted to selling unlabelled wine at $2 a bottle as wine makers struggled to shift tanks full of unsold wine from previous vintages.

The Australian Wine and Brandy Corporation has forecast the supply and demand imbalance to remain in place until 2010.

Ms McPhee said this timetable might now be shortened - grape growers would not see a rise in the price of their fruit until the balance shifted the other way and a shortage developed.

In the meantime, wine makers would face higher costs as smaller vintages reduced the economies of scale they could achieve in processing and bottling. And with drinkers having grown accustomed to bargain prices, it would be difficult to pass on this added expense at the checkout, leading to tighter margins for producers.

Wine Grape Growers Australia executive director Mark McKenzie said while the drought would undoubtedly lead to short-term pain for farmers, the news was good in terms of the industry's sustainability.

"It's not good for individual enterprises, but from an industry-wide perspective the quicker we can get back into supply-demand balance, the quicker we can take off the downward pressure on prices and get rid of some of this stock that is depressing the market," he said.

"Things like frost and drought don't take any prisoners ... it's indiscriminate."