Australia's drought could produce a corker vintage

GRIFFITH/BAROSSA, Australia (Reuters) - If Australia’s big dry has a silver lining, it’ll be worth cellaring, according to vintners, who are scrambling to irrigate vines while preparing for a smaller but sweeter vintage.

Spring, when vine buds burst into fruit and flower, has come with much of Australia’s east gripped by a drought that has turned usually fertile pastures barren.

Winemakers say the next few weeks could make or break the A$6.2 billion ($4.4 billion) industry’s season, with soils across three quarters of the continent’s east classified by the weather bureau as dry or very dry.

If vines stay thirsty, yields will suffer. But the grapes that survive should hold a stronger flavor, more sugar, and might fetch a higher price for their superior quality, industry participants say.

“No rain means the berries are much smaller ... if the grapes or berries are smaller, their intensity is much higher, so they’re much richer,” said Vince Salpietro, managing director of high-end Australian cellar and wine merchant Grand Cru.

“But there is a point where if there is no rain at all, the vine really, really struggles along and the vines will effectively shut down and not produce anything.”

While drought years can produce small but great vintages, grape growers and winemakers say it is difficult to lift bottle prices accordingly, and with hardly any rainfall since last summer they are desperate to dampen the soil.

In South Australia’s premier red wine region, Barossa grape grower Greg Knight said he needs good rainfalls soon, or the vines won’t shoot evenly.

“We are totally reliant on weather and climate here - we have some supplementary water available via the dams but it’s only minimal,” he told Reuters, while taking a short break from hand-pruning the vines.

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Grape growers will be looking to extract a higher price from winemakers for their sweeter grapes to offset a reduced yield.

According to Rabobank wine analyst Hayden Higgins, while it is too early to predict market movements with much accuracy, a volume shortfall could prove tricky for both sides of the deal.

“The ability to negotiate price is probably limited from a grower’s perspective,” he said, referring to the fixed-contracts many are locked into.

If yields are significantly depleted, spot prices for leftover crops could jump, cutting into winemaker margins, Higgins said.

Australia's largest wine exporter, Treasury Wine Estates Ltd TWE.AX told Reuters it was too early in the season to forecast the impact. No. 3 winemaker Pernod Ricard SA PERP.PA said it does not expect the drought to effect grape supply "at this stage".


Not all Australian vineyards are suffering the effects of the extended winter drought.

Australia’s west coast wine country has been spared the dry weather, and irrigated vineyards in the east also have a cushion against the kind of steep production shortfalls seen last season in South Africa and Europe.

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Australian growers are also not subject to the strict controls on irrigation which apply to some of Europe’s oldest wine regions as a check on supply.

But even irrigated vineyards can’t fully compensate for mother nature, especially in the drought-savaged Hunter region of New South Wales.

Hunter Valley winemakers speak reverently of drought-year vintages in 1991, 2006 and 2007 but Col Peterson said he has never turned the taps on so early in 45 years growing grapes in the region.

Peterson plans to use his entire water allocation on the land over the four months from August.

“This time of year it is critical that we water the grapes,” he told Reuters, though adding he already expects yields will drop.

“I expect significant price rises, especially for reds this year. In a good season you make a bit more; a bad season, yes it costs you a bit more but you’ve got to balance it out.”

Further inland at Griffith, where duststorms are raking over dry fields, growers and winemakers are hoping the worst drought in living memory produces a once-in-a-lifetime vintage.

“In general, you would expect your yields to be lower,” said Lorraine Brewer, owner of vineyard and winery Yarran Wines.

“In saying that, you often get fantastic quality wine in drought times ... so if you’re starting a cellar and we have a dry (harvest) this would be a really good year to put some stuff aside.”

Reporting by Jonathan Barrett in the BAROSSA, Tom Westbrook in GRIFFITH and Stefica Nicol Bikes in the HUNTER VALLEY; Editing by Lincoln Feast.