Wine surplus Down Under

MELBOURNE, Australia — The Australian wine industry is suffering from the best of times and the worst of times. This country, which once smugly ridiculed the European Union over its so-called “wine lake,” now has one of its own.

Australia has a surplus of 900 million liters of wine — enough to fill 300 Olympic swimming pools or pour 7.5 billion standard glasses — and, while exports have rocketed to Europe and the United States and have not affected prices there, the glut has led to domestic prices dropping as low as $2 a bottle. That’s cheaper than water in some cases.

Even that hasn’t helped. The latest figures from the Bureau of Statistics show 35.4 million liters of Australian wine were sold domestically in May, down 2.5 percent from the previous month.

Wine lovers can pick up bargains as some quality winemakers are selling off quality wine as “cleanskins” — labeled without the estate or maker’s name, with only the variety and region of origin.

“It’s never been like this before,” said Adam Murphy of Dan Murphy’s, a liquor supermarket that boasts the lowest prices in Australia. “We have a 2005 cleanskin Cabernet merlot [$1.48] a bottle and even brand names at $5 and $6 — about half the usual price.”

The boom in Australian wine sales overseas began 10 years ago, when 16 percent of production was exported. Today, with foreign sales up nearly 400 percent to 700 million liters, wine is ranked third behind beef and wheat as the nation’s third-largest agricultural export.

Farmers who clambered aboard the bandwagon and tore down their fruit orchards to plant grape vines are in trouble. Bumper harvests for the past three years have pushed grape prices down, so that farmers are lucky to break even, and overproduction in the industry this year has seen 200,000 metric tons of wine grapes left to rot.

The Australian government has been wary of appeals for assistance and turned down a proposal by the Wine Grape Growers Association to pay growers to leave another 300,00 tons on the vines for the next two years, at a cost of $45.6 million.

“Nobody made growers plant these grapes … despite it being apparent several years ago that a glut was on the horizon. Government can’t be responsible for the commercial decisions of individuals or businesses,” said Agricultural Minister Peter McGauran.

The Australians heard even gloomier news this week from across the Tasman Sea, when archrival New Zealand reported its wine production and exports hit record levels in the year ended in June and would grow even further next year.

Exports of New Zealand-made wines rose 18 percent and were worth $328 million. New Zealand exports about 55 percent of production, with Britain, the United States and Australia as its key markets.

Despite wine gluts around the world, exports were expected to increase another 17 percent next year and “the industry is on track to earn through exports about $1 billion,” said New Zealand Winegrowers Chairman Brian Vieceli.