“The supply of wine grapes exceeds demand and this is affecting those grape growers whose economic fortunes are dire because the crop they grow is worth less than the cost of production,” writes wine columnist RICHARD CALVER.  

The Senate Rural and Regional Affairs and Transport References Committee recently published its report on the Australian winegrape purchases code of conduct. 

I know that’s a boring first sentence, but the report is important because it highlights a trend that reflects one of the basics of economics: when supply exceeds demand, prices reduce.

In this case, the supply of wine grapes exceeds demand and this is affecting those grape growers whose economic fortunes are dire because the crop they grow is worth less than the cost of production. 

Mr Micawber in Dickens’ David Copperfield got it right: “Annual income twenty pounds, annual expenditure nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery.”

It is clear from the report that many grape growers are feeling that misery. 

The Senate committee heard evidence from growers and others that the oversupply of grapes and a depressed market are having a profound effect on the mental health of those in the industry. Financial instability and uncertainty, higher debt levels associated with sustained low grape prices, climate uncertainties, and the impact of power imbalances between some growers and wineries were raised as contributors to declining mental wellbeing. 

The committee’s inquiry was established to look into the adequacy of the voluntary code of conduct for Australian winegrape purchases. 

The code is clearly inadequate as a means to protect the livelihood of grape growers, especially as it is voluntary and has failed to create a fair and equitable trading environment for wine industry participants. 

Let’s cut to the chase and look at what the committee recommended by way of government action. Some of the recommendations are anodyne but two, I believe, would make a real difference. 

Recommendation 1 was to look at an appropriate model for a mandatory code that would regulate Australian winegrape purchases for all growing regions, but with a specific focus on the most impacted regions of the Riverland, Riverina and the Murray Valley. 

The code would ensure more timely payment and a better pricing model so that growers were not left with last-minute price taking. There would also be quality requirements built in and binding dispute resolution mechanisms set out. This would be a good progression from the current voluntary code. 

Recommendation 4 is that the Australian government, in consultation with Australian Grape and Wine Ltd, the national association of winegrape and wine producers, investigates potential support packages to aid growers in transitioning out of winegrapes and into other crops or land uses in the warm inland wine regions. 

That sounds like a good idea: where there is a viable alternative crop that could be grown, that aids sustainability and lets farmers stay on their land. 

But that recommendation is unlikely to go any further under the current government: in the report’s additional comments Labor senators oppose Recommendation 4. 

One of the reasons is that they believe a subsidy to mothball vineyards would assist some growers to leave the industry but would not reduce the long run supply capacity and be difficult to target. 

On that basis and other grounds, the Labor senators said that the government should not act on this recommendation but instead wait for the recommendations to be made by former Labor minister Dr Craig Emerson. 

He is currently leading an independent impact analysis of regulatory options for the Australian grape and wine sector about fair trading, competitive relationships, contracting practices and risk allocation. 

While the website for this process indicates that a final report will be released in “early 2025” any recommendations are likely to be caught up in the forthcoming election byplay with grape growers set for another round of misery.