Drought and ballooning water prices force wine growers to leave vineyards behind

Australia Broadcast Center

5 days ago

Ballooning water prices in Australia's largest wine grape growing region are pushing farmers to the brink, with many unable to break even.
Growers fear the soaring price on the water market will be the "nail in the coffin" for the industry.
The low returns have been caused by a mixture of environmental and market conditions, including tariffs, a decline in wine drinkers and frost.
A worldwide oversupply of red wine has also seen prices offered for shiraz, cabernet and merlot plummet to record lows.
As drought continues to plague parts of southern Australia, growers are now faced with the increasingly tough reality of supply and demand on the water market.
Growers are finding themselves needing more water to keep their crops viable during dry conditions as well as paying more to lease the finite resource.
Some have told the ABC they have had to use 30 per cent more water, with prices as high as $350 a megalitre, and fear further rises could be on the horizon.
Data by water consultancy Ricardo Group showed temporary water prices reached up to $350 per megalitre in the past year.
Ricardo Group Market leads associate director Ben Williams said water trade prices fluctuated between $280 to $330 per megalitre between May and June.
Prices were higher than the average water price in the lower Murray over the past decade, which sat around $200 per megalitre.
Loveday grower Jim Giahgias is among growers feeling the impact of rising water prices, despite owning some permanent water rights.
He has been forced to rely on the temporary water market — where water can be bought, sold and traded based on demand — which has seen prices increase partly due to the drought.
It has left Mr Giahgias contemplating to pull out some of his red grape vines to cut costs, as he battles with the perception that grape growers are "millionaires".
He said he wanted consumers to know while they might pay $50 a bottle at a restaurant, the grower does not see the profits.
He explained the 20-cent gross amount did not account for farmers expenses, including water, leaving them "$150 a tonne out of pocket".
While he said he found it difficult having to buy more water the situation was "a lot more dire" for those who leased every drop.
Farmers in the Murray-Darling without permanent water rights, or those who do not own enough, rely on buying water from the temporary market.
The longer it does not rain, the more water people need to buy, causing a spike in both demand and temporary water prices.
In 2019-2021 the Australian Competition and Consumer Commission (ACCC) conducted a water markets inquiry, following irrigators' claims that non-farming investors have driven up the price they pay for water.
Since then, a Water Markets Intermediaries Code has been developed, and has partially come into effect from this month, regulating how eligible intermediaries water markets conduct themselves with current and proposed clients.
Riverland Winegrape Growers Association board member Jack Papageorgiou said the situation on the ground was "serious" for those totally reliant on the market.
He said some growers had inadvertently used more water than they were allowed, due to the dry conditions, and had no funds to balance their accounts.
There are significant penalties for water overuse in South Australia, which has forced water suppliers to clamp down on growers who cannot pay their bills.
Suppliers to Riverland growers include the Renmark and Central Irrigation Trusts, which are collectives of irrigators and farmers who share water supply infrastructure.
CIT chief executive officer Greg McCarron said water supplies were only locked as a "last resort" to avoid exposing the collective to large fines.
"Non-compliance from farmers … can result in us not being able to balance our water accounts with the state government and face significant overuse fines," he said.
A Department for Environment and Water spokesperson said no water overuse penalties had been issued in the 2024-25 financial year.
The spokesperson said penalties were "at least three times higher than the price of purchasing water on the water market" and could be higher in the River Murray.
For growers like Amanda Dimas, who has already replaced vines in favour of more profitable varieties, the uncertainty of the water market remained troubling.
"Growers are really struggling, their mental health isn't good."
She called for government support to assist growers wanting to transition to other crops or exit the industry completely.
"Vines are one of the hardest things to remove, they are so costly," Ms Dimas said.
It costs about $7,000 per hectare to remove vines, partly because the treated pine posts are difficult to dispose of.
Mr Giahgias said the only way for the industry to "survive and move forward" was to pull grape varieties which were no longer profitable.
"We can't take anymore, we're at breaking point now," he said.
"If the decision is to remove vineyards, to help the industry, I believe it has to be legislated … one grower can't be pulling while the other is planting."
State Primary Industries Minister Clare Scriven said the state government was investing in ongoing work examining wine grape growers' transition.
"Some of the funded work has been around what alternative crops might look like or what alternative varieties may look like," Ms Scriven said.
As a member of the National Wine Working Group, she said some of the group's recommendations were a need for "structural changes" within the industry.
"It's not necessarily a matter of government intervention, it's a matter of industry continuing to work through the issues."
Ms Scriven said exit packages were not receiving "a great deal of support" at a state or federal government level, referencing the 1980s vine pull scheme as an example.
"That sort of government intervention can have absolutely unintended consequences, which could make it worse for growers rather than better."
Riverland Wine general manager Alexandra Cannon said financial support for growers to leave the industry was essential.
The International Organisation of Vine and Wine's latest data showed the global vineyard area reduced for a fourth consecutive year.
Spain and France are some of the world's largest wine grape growing countries and are among those ripping out vines.
In France, the government launched a 120 million euro ($215.6 million) scheme to remove up to 30,000 acres of vineyards last year.
Growers were offered a financial incentive of 4,000 euros ($7,190) per hectare.
Mr Giahgias said similar subsidies were needed in Australia but felt growers were unheard, describing the situation at 'stalemate'.