Australia's dry threatens wine drought

By Rob Taylor

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.