Feb 15, 2012
wine industry is losing $80 million a year in exchange rate
fluctuations, prompting an industry spokesman to call for "sensible
A strategic review of the $1.1 billion wine
industry by PriceWaterhouseCoopers said exchange rate changes since 2007
were robbing the sector of tens of millions of dollars annually.
Zealand Winegrowers chair Stuart Smith said exporters had watched as
relatively high interest rates here pushed up the value of the Kiwi
He was not advocating currency intervention, but "what
the Reserve Bank could and should do is to discourage offshore
borrowing. And they could do that by lowering the base OCR rate, because
it's not effective. Or if they believe it is effective, they could
leave it where it is and put a tariff on offshore deposits".
Such a strategy would help the currency to settle at its true worth, "not this artificial level, which it is at the moment".
the wine industry can do little to address the exchange rate, growers
say all the signs are pointing to a shortage of wine, which could well
Export volumes of 2011 sauvignon blanc to
December are 45 per cent ahead of the previous year, even though it was a
bigger than usual vintage, and stocks may well run out. At the same
time, the coldest December in Marlborough for five years has delayed
flowering for this year's harvest.
Smith said while that would not affect the 2012 yield greatly, the following harvest could be a different story.
heat at this time of the year ... determines the productivity of the
shoots for next vintage. Given that we've had cool weather through this
period, I think it doesn't augur that well for the next vintage."
A shortage could also curb the growing "bulk wine" sector, which relies on cheap grapes.
A surplus in 2008 saw bulk wine volumes jump from 5 per cent to nearly a third of all wine exports.
winegrowers blamed the cheaper wine for dragging down the price of top
New Zealand brands overseas. However, the PWC report dispelled that
theory, showing that while bulk prices had fallen, exports of top wine
had grown strongly.
Premium wine exports grew 53 per cent by
volume and almost 43 per cent by value between 2007 and 2011, and after
exchange rate adjustments, the price per litre remained relatively
"More NZ Wine Inc participants would have suffered
greater financial distress sooner had bulk not acted as a safety valve
to clear the industry's inherent agribusiness risk," the authors added.
said the report had shown bulk wine was a legitimate segment of the
industry and could easily disappear again in a shortage.
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