Southern Hemisphere Wine


Southern Hemisphere Wine Situation and Outlook

Overall, the production and export forecast for 1999 is favorable for the selected Southern Hemisphere countries (Argentina, Australia, Chile, and South Africa). Wine production in 1999 for these countries is forecast at 37.7 million hectoliters, up 11 percent from the previous year. Chile’s production, however, is expected to fall 13 percent due to adverse weather and restricted water supplies. Also in 1999, exports for these countries are projected at close to 7.4 million hectoliters. As part of their efforts to expand exports beyond 2000, these countries are increasing plantings and making investments that will improve wine production. Argentina and Australia will account for most of the increase in exports and are forecast to increase 21 and 18 percent, respectively. The U.S. wine industry, which has had 14 consecutive record-breaking years of exports, will face increasing competition both at home and in third country markets.

Argentina

Favorable weather and growing conditions are expected to increase wine production in 1999 to 15.9 million hectoliters (hl), a 25-percent increase over 1998. In contrast, adverse weather in 1998 related to El Nino caused Argentina’s wine production to drop to 12.7 million hl, down 6 percent from the previous year.

Argentine wine exports in 1999 are projected to increase somewhat over 1998 levels, although some exporters believe it could be increased by 20 percent or more. Fine wines now account for half of the volume of Argentina’s wine exports. Total Argentine wine exports in 1998 were about 1.1 million hl, down 11 percent from 1997. However, 1998 exports were valued at $102.3 million, the highest since Argentina began exporting fine wines. The United States was Argentina’s top export destination in 1998, followed by the United Kingdom and Japan. Significant investments have been made in the wine industry in Argentina. These investments include modernization and significant mergers and acquisitions by foreign investors with Argentina’s leading wineries.

Australia

The Australian wine industry has grown significantly over the last decade, and since the early 1980's exports have increased nearly 50 percent. The majority of wineries are small but several large companies account for approximately 75 percent of production. Despite unfavorable weather, Australian wine production is forecast to rise 10 percent to 7.6 million hl in 1998/99 due mainly to increased acreage. Increased plantings, mostly of premium varieties (with the majority being red), will result in rapid production increases over the next several years.

The increased wine grape production also led to an increase in wine exports. In 1999, exports are forecast to rise 18 percent to 2.3 million hl. Exports reached 1,977,220 hl in 1998, a 16-percent increase over the previous year. Major export markets by volume include the United Kingdom, the United States, and New Zealand. Australian exports have historically been dominated by white wine but, in recent years, red wine has been growing faster. In 1998, red wine exports represented almost half of total Australian wine exports by volume and value.

The Australian government provides export promotion funds through the Export Market Development Grant Scheme. Applicants under this program may qualify for up to 50 percent reimbursement of eligible export marketing expenses. During the Australian Wine and Brandy Corporation spent US$2.3 million on promotions through the Australian Wine Export Council (AWEC). The Australian wine industry has instituted a levy on wine exports to cover future promotional expenditures by AWEC.

Chile

In 1999, production is forecast to fall 13 percent to 5.5 million hl due to droughts and restricted water supplies, although new output from recent plantings will partially offset the decrease. (See the following table for production, supply, and distribution data.) By contrast, Chile’s wine production reached 6.3 million hl in 1998 due to favorable weather, new vineyards coming into production, and a supply of table grapes used for wine. Additional plantings and replacement of existing vineyards are expected to increase wine production, and by 2002 production is expected to rise to 7.5 million hl.

Preliminary data for 1999 shows that the wine industry has begun feeling the impact of the Asian financial crisis and exports will rise only slightly to 2,550,000 hl, up 2 percent from the previous year. In 1998, Chilean wine exports reached 2,510,000 hl, up 12 percent from the previous year. In 2002, when the new plantings begin yielding, exports are forecast to reach a record 3.5 million hl. While the government of Chile does not subsidize production, it does support export promotions through Prochile, the Export Promotion Bureau of the Ministry of Foreign Affairs.

Imports in 1999 are forecast to rise only 1 percent to 100,000 hl. In 1998, imports fell to 99,235 hl, a 26-percent drop from 1997. Because a large quantity of table grapes was available for wine production in 1998, the largest wineries did not import as much lower-quality, lower-priced wine for the domestic market. The largest suppliers are Argentina, Spain, and France.

South Africa

In 1999, production is projected at 8.8 million hl, an 8-percent increase over 1998 levels. Poor weather led to the decline in wine production in 1998 to 8.2 million hl, a 7-percent decline over the previous year.

Exports are expected to increase in 1999 by 1 percent to 1,175,000 hl. Exports were strong in 1998 because of the weak South African rand relative to international currencies and increasing popularity of South African wines. The top export markets with the largest growth are the United Kingdom, the Netherlands, and Mozambique. In 1999, imports are projected to fall to 95,000 hl, down 2 percent from 1998. In 1998, imports dropped by 33 percent over the 1997 level to 96,948 hl.

South Africa and the European Union have concluded negotiating a free trade agreement, and implementation is scheduled to begin January 1, 2000. Under this agreement, South Africa will phase out the use of the terms "port" and "sherry" on exports to third markets over five years (excluding Southern African Development Council, or SADC, countries) and to SADC countries over eight years. South Africa will continue to use these semi-generic terms on the domestic market during a 12-year transition period.

The marketing board was phased out and a Wine Trust was established and is taking over the management of the industry from the cooperative which traditionally regulated the industry. The Trust is eligible to apply for statutory levies on production to finance research, data collection, and other activities. This is important since the Wine and Spirits Control Act, which was a vehicle traditionally used to collect levies required by the industry, was repealed in June 1999. The South African government‘s Department of Industry offers limited export incentive assistance to South African exporters through the Export Marketing and Investment Assistance Scheme (EMIA) and Export Credit and Foreign Investment Reinsurance (ECRS).

The FAS Attache Report search engine contains detailed reports on Wine Competition or Market Intelligence for 15 countries, including France, Italy, Canada and Japan. (For information on production and trade, contact Shari Kosco at 202-720-9792. For information on marketing contact Yvette Wedderburn Bomersheim at 202-720-0911.)

Last modified: Tuesday, May 08, 2001