March 26, 2008

Warming Climate Threatens Australia’s Vineyards

Amid a long drought that has jeopardized this year's harvest, Australia's winemakers are reconsidering the areas in which they can grow grapes and the styles of wine they can produce.

As the driest inhabited country on the planet, Australia cannot support it's winemakers without the extensive use of irrigation. And the high cost of water has made maintaining the vineyards a very expensive proposition, with water prices spiking from $300 AUD ($275 USD) to $1000 AUD ($915 USD) per megaliter.

"On the back of three very ordinary years, this year is probably the worst that could have occurred with the drought and the high costs of water," Michael de Palma, a mid-sized grower in Redcliffe near Mildura in the Murray Valley, told Reuters.  Murray Valley is one of Australia's three largest wine regions.

"In this depressed situation, growers have only two choices, stick it out as long as they can or to cut their losses and get out," he said. De Palma is in the process of a weather-influenced early harvest on his 40-hectare vineyard, which mainly supplies Foster's Group, Australia's largest wine company.

Rainfall in recent weeks has skipped the country's dry inland vineyards, and fallen too late in the season in eastern Australia, causing a mildew-like disease instead of helping grow the berries.

De Palma, who serves as chairman of Murray Valley Winegrowers, said he would wait for this year's harvest results before deciding whether to keep or sell his vineyard. He estimated around 40 percent of the valley's grape growers with access to water trading couldn't afford to buy water last year, while most of the others had to borrow to do so. Industry groups estimate one in seven winegrowers may be forced out of the industry this year due to their vineyards' lack of financial viability.

"There's a Darwinian economics going on at the moment, and the outcome remains to be seen," Paul Henry, general manager of market development at Australian Wine and Brandy Corp., told Reuters.

"One might say we're guilty of the charge of being slow to change thus far, but the experience of this harvest will change the outlook for Australian producers."

In some regions, such as the Murray Valley, wine grape yields are down 30-40 percent.  Overall, Australia's harvest is expected to be lower than average this year, potentially cutting into exports in the A$6 billion industry. As the number one supplier of imported wine to the United Kingdom, Australia has a 23 percent market share, and it is the second highest wine importer to the United States.

This year's drought and record-breaking heatwave has withered grapes on the vines and made the smaller 2008 vintage worse, which is expected to push up prices and mark the end of low-cost bulk wine after a three-year supply glut that produced a variety of no-name brands called "cleanskins".

Scientists say the Riverland on the Murray River in South Australia, the Murray Valley, and the Riverina on the Murrumbidgee River in New South Wales face the greatest degrees of warming.

Grape-growers in these arid, inland areas already face the greatest hardship, and are reaching out to rural financial counseling services in recent months.

"We believe there are 800 to 1,000 growers predominantly in Murray Valley and the Riverland in South Australia who are going to have to make a decision this year about whether they stay or go," said Wine Grape Growers chief Mark McKenzie.

The Commonwealth Scientific and Industrial Research Organization (CSIRO) predicts these areas will warm by 2.5 degrees Celsius by 2030. Indeed, last year was one of the warmest on record for southern Australia, which includes all of the country's winegrowing regions, as well as one of the driest. That is enough to cause berries to ripen earlier, altering their quality.

"Climate change is the biggest issue we face. Relatively small changes in temperature and precipitation do have reasonably large impacts in terms of wine style," Winemakers' Federation Chief Executive Stephen Strachan told Reuters.

"Wine is a bit of a bellwether in terms of some of the very immediate impacts you see from climate change."

According to the CSIRO, climate change could cause grape quality to fall by 23 percent by 2030, and suitable land for viticulture to drop by 10 percent. The study also found that 44 percent of current grape-growing areas would be affected by 2050.

The solution may be to expand the varieties of berries grown in Australia's cooler climate areas, such as the bayside Mornington Peninsula south-east of Melbourne and the Yarra Valley to the east.  With its mild weather closer to that of New Zealand, the southern island state of Tasmania is also attracting interest as a region that could significantly increase its grape cultivation.

Wine-growers in nearby New Zealand are upbeat about climate change, because higher temperatures are forecasted to make the country's colder areas more temperate and better suited to growing grapes. Additionally, warmer temperatures and less rainfall will mean changes in the varieties of grapes that can be produced.

"Styles in existing regions will change," said Strachan of the Winemakers' Federation.

"Most regions can produce most grape varieties, but whether they can produce them to quality levels that the market expects is the big question."

While Australia's flagship shiraz grow quite well in a hot climate, cabernet, pinot noir and merlot among the reds and chardonnay, sauvignon blanc and riesling among the whites are under threat in the hot, dry weather.

"Merlot is relatively intolerant of water stress, and it doesn't cope well with periods of very high temperatures," said Snow Barlow, the co-author of the CSIRO study and a winemaker and the chairman of the agriculture school at Melbourne University.

Experts say Australian growers should experiment with tougher varieties, such as those from Sicily and Spain. Tempranillo from Spain is one of Australia's fastest-growing varieties, while the Corsican grape Vermentino is being planted along the Murray river.

"Wine companies build up brands. Whether we can convince the world to take to Australian Sicilian varieties in same way they take to Australian shiraz, that's quite a big commercial question," said Barlow, who owns the boutique Baddaginnie Run vineyard nestled in the foothills of the Strathbogie Ranges in Victoria state. He told Reuters that climate change shaped his decision on what varieties to grow in the vineyard he started 10 years ago.

But merlot has proved problematic for Barlow, and last year he did not produce a merlot because of poor quality.  This is a sharp contrast to other years, when his $20 merlot won awards.

Over time, different root stocks that are able to provide good fruit with lower water requirements will become more prevalent among Australia's vineyards.  However, it can take months or years to import new varieties of grapes due to Australia's strict quarantine system, and then another three to four years beyond that to establish new rootstock for commercial production.

Already deep in debt, Australia's troubled grape growers may not be able to wait that long.  


On the Net:

Murray Valley Winegrowers

Foster's Group

Australian Wine and Brandy Corp.

Wine Grape Growers

Commonwealth Scientific and Industrial Research Organization (CSIRO)

Winemakers' Federation