January 31, 2008

Australian wine prices are set to rise this year as the nation's worst drought in a century dries up excess stock, an official said.

Government statistics showed that wine production for the fiscal year ending June 30, 2007, fell by almost one third from the previous year to 978 million litres (258 million gallons).

A drop in production, due mainly to drought, coupled with increasing sales have drained Australia's surplus glut of wine by 15% to 1.8 billion litres (480 million gallons) last year from 2.1 billion litres (550 million gallons) the year before.

Lawrie Stanford, manager of information and analysis at the government-run industry body Australian Wine and Brandy Corp, said that excess wine would dry up this year with an even lower grape harvest forecast in 2008. This would lead to less supply and higher prices this year, he said.

"The market knows that they can bargain us down on price when there is oversupply, so prices have been suffering," Stanford said.

"We expect the price impact will be coming through out of the 2008 harvest," he added, referring to wine released later this year. "There will be a general trend up in price."

Stanford could not predict how much more prices would rise.

Australia is the world's fourth-largest wine exporter, but a decade-long drought is biting into the grape harvest in some areas.

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