09 Jun 2018 SA’s wine farmers are feeling the pressure
More than a third of wine-grape producers make a loss and the industry has about 25% fewer producers than a decade ago, according to Vinpro.
Vinpro, the industry association, says the only way to ensure a sustainable supply of wine is if farmers increase prices they receive for wine.
Vinpro has said the average net farming income was about R45,000 per hectare compared with the R70,000 per hectare required to be financially sustainable.
Wine is one of SA’s largest agricultural exports, with the country’s nearly 100,000ha of vineyards, mostly in the Western Cape, accounting for about 4% of world production.
“After years of financial pressure wine producers need a significant income adjustment of close to 30% to ensure a more viable environment. At the moment they on average earn a meagre 1% return on investment, which does not justify the establishment of vineyards,” said Vinpro MD Rico Basson.
He said many wine-grape farmers were either leaving the industry, uprooting vines for more profitable crops or not replacing vineyards.
The Bureau for Economic Research and the Bureau for Food and Agricultural Policy predict that the area under wine grapes will be about 10% smaller at 85,000ha by 2022.
In 2017 the South African wine industry sold 447-million litres of wine in the local market and exported 448-million. This totalled 895-million litres, which represents a 3.5% rise in total sales compared to 2016.
A decrease in the volumes that are available for export can also enable South African exporters to negotiate better prices with international importers, said Basson.
Siobhan Thompson, CEO of Wines of SA, said focus on export markets was twofold.
First, the industry aimed to maintain its traditional markets — the UK, Germany, Netherlands, Sweden, Canada and Japan — while growing value (rand per litre). Second, the focus was on growing the volume and value of exports to what were considered growth markets, namely the US, China and the rest of Africa.