Australian wine grape production at 5 yr low

Wed May 2, 2012 3:32am EDT

* Australia 2011/12 wine grape production to total 1.53 mln tonnes

* Forecast represents lowest production in five years

* Production projected to increase over next two years

SYDNEY, May 2 (Reuters) - Australian production of wine grapes is set to sink to a five-year low this year after two wet summers damaged vines in New South Wales and South Australia, data on Wednesday showed.

Production in the 2011/12 season will total about 1.53 million tonnes, down 2 percent on last year, the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) said.

Australian wine exports have waned in recent years after its bold and brassy reds in particular first took the world by storm, while global competition from newer suppliers including South Africa and Chile has seen an increase in the proportion of Australian wine shipped in bulk.

In 2010/11, Australia shipped 47 percent of its wine exports in bulk as opposed to higher-value bottled wine, compared with 40 percent a year earlier, ABARES said.

Prices have also struggled. With the exception of 2007/08, real and nominal wine grape prices have been declining annually over the past decade, according to industry body Wine Australia.

ABARES said it expected the Australian wine market to continue to face strong competition on the back of abundant wine supplies, the global economic slowdown and a strong Australian dollar.

Lawrie Stanford, executive director of industry group Wine Grape Growers Australia, acknowledged the pressures facing the market.

"Although there was upward pressure on prices this year, according to anecdotal reports, we know even with that many, many growers still did not return to sustainable prices," he said.

Despite the prospect of lower prices next year, Stanford said Australia had excellent prospects for sales of high quality wine, but he said growers of lower quality wines would struggle.

ABARES, which expects the harvest to recover to 1.63 million tonnes by 2013/14, said the quality of the current wine grape crop was reported to be good. (Reporting by Colin Packham; Editing by Chris Lewis)