Australia's dry threatens wine drought

YENDA, Australia Tue Sep 4, 2007 8:19pm EDT

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YENDA, Australia (Reuters) - The winding lines of shipping containers outside Casella Wines may mark the high-point of Australia's A$3 billion wine export market as drought and possible climate shift bite.

John Casella heads the country's biggest family winery, based 600 km from the coast in the farming town of Yenda, the "enda the earth" jokes Viticultural Manager Kelly Drysdale.

The booming business dispatches 40 containers of wine to the world every day, turning over A$300 million ($244 million) a year, mostly on the back of exports to the United States.

But Casella fears the halcyon days may be past as Australia endures the worst drought in decades and with the specter of climate change and a hot summer ahead.

"If we don't get rain the budget end of Australian wine will disappear and it will be replaced by budget imported wines, casks, cheap sparklings," he told Reuters in his modest office facing towering wine storage tanks.

"I would say if it does dry significantly, I'd say we will lose two-thirds of our exports."

Casella's budget Yellow Tail tops the U.S. import market. More than 8 million cases made their way to America in 2006, up 7.3 percent and commanding a healthy slice of the 73 million cases imported in the United States.

Australia's wine industry is one of the country's export successes, with sales to China and the U.S. pushing exports worth around A$3.007 billion and 805 million liters in the year to July, according to the Australian Wine and Brandy Corporation.

The country's high-tech approach to harvesting and wine manufacture, backed by aggressive marketing and soft-drinking styles has led the global push by so-called New World makers.

The United Kingdom remains the most lucrative market, with A$974 million in sales, ahead of the United States (A$972 million), Canada (A$273 million) and New Zealand (A$102 million).

But Casella says grape shortages and severe price increases lie ahead without urgent rain to end a drought that has lasted years in Australia's interior and is intensifying.

"It will be very damaging to a lot of Australian brands because you're coupling that with an 80c dollar for the U.S. market and all of a sudden wine is having to change several price points and the competitors move in," he said.

CLIMATE CRISIS

Australia's top science organization, the CSIRO, has predicted global warming will force wholesale change on Australia's A$4.8 billion wine industry, threatening the very existence of some varieties as temperatures soar.

"With earlier harvest in a warmer climate, the temperature of the ripening period in some regions will become too warm to produce balanced wines from some or maybe all grape varieties growing there now," lead researcher Leanne Webb said.

Temperatures in most Australian wine regions are projected to rise by up to 1.7 degrees Celsius (3 degrees Fahrenheit) by 2030.

That in turn, Webb said, would reduce grape quality in some regions by 12 to 57 percent, with the temperamental Pinot Noir and Sauvignon Blanc grape varieties, as well as some Chardonnay varieties, almost disappearing from the mainland.

The harvest-time temperature in the current cool-climate Coonawarra region of South Australia, which grows some of Australia's best known reds, would rise from 13C to 19C on average by 2050.

"They're predicting a lot of things and you really can't go out and change things on the basis of predictions," Casella says.

"You can change grape varieties in a timespan of three years if we have to, so we'll look at things then. It's hard to predict how the vines will react to the higher temperatures."

Drysdale, a talkative, energetic 36-year-old, says the industry may cope by reducing croploads, or encouraging grapes to ripen earlier or find more heat-tolerant varieties.

She constantly patrols the vineyards and grower farms, guiding Indian contract workers as they prune back vines, and planning expansion along a line of wooded hills in the distance.

Wine and Brandy Corporation's chief executive Sam Tolley says the drought will be the biggest challenge facing the local industry into 2008 with many wineries told to expect only minimal supplies of irrigated water to keep vines alive.

"The drought has been managed well, but the question intensifies for the next year, though, in view of the very small allocations of water," he says.

FROST DISASTER

Further east, on the cooler hills near Australia's capital Canberra, Tim Kirk is taking action against climate shift.

An intense early frost on his Clonakilla vineyard this year wiped the production of his premium shiraz-viognier from 85 barrels in 2006 to just eight in 2007.

To ensure it never happens again Kirk has brought more land on hills nearby to keep the grapes above the frost in the valleys -- an expensive but necessary decision.

"We are certainly seeing a warming trend and an earlier vintage progression," he says. "I have no doubt that there is something different going on, but I don't know whether it's short-term or long-term change."

Kirk, whose prized viognier sells for A$85 a bottle, is also trialing different grape varieties like grenache, which traditionally grow in warmer regions than the Canberra hills.

Other wine makers are experimenting, trying heat-tolerant Sangiovese and Brunello from Italy and colder climate Tempranillo, originally from Spain.

"We'll have to see how it goes I guess," he says.

NOT FAILING

Casella says the industry is not failing despite drought.

"It's based on one resource and that's water. Growers have to be confident and look forward to something happening," he says.

"Should those vines die, the brands will just fall off the shelf and, given the amount of capital that you need to establish vineyards, the grape industry may never come back I'd say."

Casella has put in an advanced water recycling facility for his sprawling 80 acre winery site to help guard against climate shift and cuts bringing his normal irrigation entitlement to 30 percent in the face of the crippling drought.

"At the very minimum the vines will survive. There is still time for rain and if the water allocations reach 60 percent we'll see this season out without a problem," he says.

He says if the drought continues, many Australian winemakers will move out of budget production and into the premium wine sector, producing less, but of higher quality and value.

But his family, which came to Australia from Sicily in 1952, has begun to think the unthinkable and consider whether global warming could also force a production move overseas.

"If we can't see that Australian production will return in the foreseeable future, how we will take advantage will be with a combination of imported wine and maybe branding will go to a place like South America, even Europe, south of France or somewhere like that, setting up a production place and marketing wine out of that area," Casella says.

"But that would be a worst case scenario. We need to remain optimistic."

($1=A$1.22)

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