Southern Hemisphere Wine Situation and Outlook

Wine production in 1998 for the selected Southern Hemisphere countries (Argentina, Australia, Chile and South Africa) is forecast at 35.3 million hectoliters (hl), up 3 percent from the previous year. A higher wine production forecast for Australia, Chile and South Africa is expected to offset a 7 percent decline in Argentina ‘s wine production because of adverse weather. The selected Southern Hemisphere countries are investing in improving wine production as part of their efforts to expand their export potential by 2000. Wine exports for the selected countries are forecast at 7.6 million hl in 1998, up 18 percent from 1997. Australia and Chile are expected to account for the majority of the increase in Southern Hemisphere wine exports. Australian and Chilean wine exports are forecast to increase 26 and 30 percent, respectively. The Southern Hemisphere countries are aggressively marketing and promoting their wines overseas. The U.S. wine industry, which has had 13 consecutive record-breaking years of exports, will face increasing competition, both at home and in third country markets.

Argentina is the largest wine producer in the Southern Hemisphere. Argentina's wine production in 1998 is forecast at 12.5 million hectoliters (hl), down 7 percent from the previous year. Wine production is forecast lower because of adverse weather conditions which delayed the grape harvest.

Argentina continues to invest and improve its wine production. A few years ago, Argentina began an uprooting program to replace low quality vines with premium grape varieties such as, Chardonnay and Malbec. Also, Argentina has introduced new technology to include pest control, fertilization, etc. The Argentine wine industry is starting to promote the application, development and use of genetics for the identification of varieties and the implementation of the official certification of various grape varieties.

During Calendar Year (CY) 1997, Argentina exported 1.1 million hl, down 10 percent from the previous year. Argentine exports were valued at $119.1 million. Paraguay, Chile and South Africa were the top three export markets for Argentine wine. Despite the decrease in total wine exports last year, fine wine exports increased 46 percent from the previous year. Argentina's principal export markets for premium wine were the United Kingdom, the United States and Japan. Argentine exports of sparkling wine also increased; up 14 percent to 2,923 hl. Total wine exports in 1998 are forecast to increase slightly from the 1997 level, especially for fine wines. Argentina is expected to further increase its export potential in the next few years.

With the support of Exportar (Ministry of Foreign Affairs), Promex (Secretariat of Agriculture), and the Government of Mendoza, some wine exporters are traveling two to three times a year internationally to promote their wines. The aforementioned organizations are helping to finance various export promotion activities, such as renting space at wine fairs, etc. In 1998, Argentine wine exporters plan to participate in wine trade shows in the United Kingdom, Hong Kong and Sweden.

Argentine wine imports in 1997 increased 71 percent reaching 75,264 hl. Chile, Italy and Spain were the three largest suppliers of wine to Argentina. The largest increase was recorded in sparkling wines, up 260 percent followed by fine wines up 28 percent.

The Australian wine grape and wine industry has changed significantly in the last decade. It now comprises over 3,000 independent wine grape growers and approximately 900 wineries. While the majority of wineries are small several large companies account for around 75 percent of production. Wine grape production is projected to reach 1.0 million MT by 1999/2000, up 15 percent from 1997/98. Most of the increase in grape production will be comprised of premium wine grape varieties. Production of premium white wine varieties is forecast to increase by approximately 26 percent between 1997/98 and 1999/2000, while production of premium red wine grape varieties are forecast to increase by 35 percent during the same period. Wine grapes enjoyed favorable weather conditions during the growth and harvest phases of 1997/98. Wine production is forecast to reach a record 6.4 million hl; industry sources indicate that grape production for the 1997/98 harvest could be as high as 950,000 MT.

The increased wine production has resulted in spectacular increase in exports, up more than 50 percent since the early 1980's. Exports are forecast to reach1.9 million hl in 1997/98, up 26 percent from the previous year. Export sales are being driven largely by sales of premium dry table wines. Dry table wines have consistently represented approximately 90 percent of Australia's wine export sales. Australia's major export markets for wine in recent years have been the United Kingdom, the United States, New Zealand, Canada, Sweden and Ireland.

The Government of Australia does not provide export subsidies for Australian wine exports; however, it does provide some assistance for export promotion. During 1996/97, the Australian Wine and Brandy Corporation spent $1.8 million on promotional activities. The majority of the promotional activity is directed through the Australian Wine Export Council (AWEC). In addition, the Australian wine industry has received grants and concessional loans. In 1997/98, grants and loans to the Australian wine industry will end. Thus, the Australian wine industry has instituted a levy on wine exports to cover future promotional expenditures by AWEC.

In terms of imports, Australia imports usually comprise less than 5 percent of total volume of domestic wine sales. Imports are forecast to reach 2.6 million hl in 1997/98. Italy, New Zealand and France are the three largest suppliers of wine to Australia. Sources indicate that sharp increases in Australian wine exports in recent years has resulted in a shortage of wine available for the less than $5.90 market segment Exports are expected to continue to increase sharply in the medium term, thus U.S. suppliers have an opportunity to supply product to this market segment. The limiting factor will be the rapid increase in Australia's planting, and future production of premium variety wine grapes.

In 1998, Chile's wine production is forecast at 6.4 million hl, up 20 percent from 1997. See following table for production, supply and distribution data. This year's larger wine grape harvest and increased wine production reflects a significant increase in planted area now coming into production and the end of Chile's three year drought. In addition, increased amounts of table grapes unsuitable for fresh export were used for wine production due to excellent prices.

Currently, Chile exports both bottled and bulk wine to over 100 countries. Exports are forecast to reach 2.9 million hl in 1998, up 30 percent from 1997. The Wine Exporters Association predict export sales to reach $500 million in 1998, up 20 percent from 1997. The United States and the United Kingdom are Chile's largest export markets for bottled wine. Canada is the largest bulk wine market. In 1998, wine exports to Japan have increased dramatically up over 700 percent from the previous year for the period January through April. As a result, Japan will probably be among the top three export markets for Chilean wine in 1998.

In 1998, Chile's wine imports are at 7,500 hl of wine in 1998, down 94 percent from 1997. In 1997, Chile imported 134,033 hl of wine because of a shortage due to the three year drought. The wine imported was primarily low quality and low-priced to meet the domestic table wine market. Most of the imports were in tetrapacks from Argentina. This trade is not expected to continue, especially since wine production is forecast up slightly because the drought ended last spring, and adverse weather in Argentina for the 1998 has resulted in a very short crop and higher prices.

South Africa's wine production in 1998 is forecast at 10 million hectoliters, down less than 1 percent from the previous year. White wine production accounts for almost 90 percent of production, and red wine about 10 percent. As a result of this low level being produced, sources report a shortage of red wine in South Africa.

In terms of trade, South Africa is aggressively marketing and promoting its wines to ensure that it regains market share lost during the isolation years. South Africa's exports are forecast at 1.6 million hl in 1998, up 4 percent from 1997. The European Union is the largest export market; however, South African trade sources indicate that the EU market is shrinking. To counteract this, market development efforts are being put into non-traditional markets, such as the United States, the Far East, Africa, and some Asian countries. At the moment, the Asian Financial Crisis is putting a damper on market development efforts in Asia. Another factor which is expected to slow wine exports during 1998 is that the Government of South Africa has decided to phase out its export subsidy program.

In 1998, wine imports are forecast at 180,321 hl, up slightly from 1997. Imports are not expected to increase significantly this year because of two factors. First, the Government of South Africa has recently increased its import tariff on wine; and secondly, the South African currency, the rand, is depreciating against other international currencies.

For further information on supply, distribution and trade, contact Yvette Wedderburn Bomersheim at 202-720-9903. For information on U.S. marketing opportunities, contact Steve Shnitzler at 202-720-8495.