Some wine companies are exporting the nation's premier Marlborough sauvignon blanc in bulk to clear large wine stocks, the Ministry of Agriculture and Forestry says.
"Continuing down this path may affect the longterm future of the industry," said MAF economists.
Vines may have to be mothballed or pulled in the next couple of years, they predicted.
The success of the flagship "brand" of Marlborough sauvignon blanc has triggered a dramatic rise in vineyard development.
The marked increase in the proportion of wine exported in bulk is lowering overall demand for New Zealand's bottled wine, they warned in the annual Situation and Outlook for New Zealand Agriculture and Forestry (Sonzaf).
The report released in Wellington showed some agricultural sectors -- meat and forestry -- will see steady increases in returns over the coming few years to 2013, but that dairy earnings will level out for a while then improve without returning to the record levels of 2008.
MAF warned that while a relatively weak NZ dollar exchange rate had helped prop up export prices -- an average of $9/litre in 2009 and the previous couple of years -- it will slump to $7.90 in 2010, creeping up to $8/litre (2011) $8.20 (2012) and $8.50 (2013) according to the ministry's projections.
MAF said Marlborough sauvignon blanc continued to dominate, with the recent growth in plantings of new sauvignon blanc vines described as "the most sustained and significant horticultural land development in New Zealand history".
But the volume of wine exported in bulk, rather than bottled locally, was a "concerning feature" of the 2008 vintage, jumping from 4 percent in recent years to a record 30 percent in May this year.
"This risks damaging the value of the premium Marlborough sauvignon blanc brand," said MAF director-general Murray Sherwin. It was lowering overall demand for New Zealand bottled wine as consumers chose the cheaper wine option.
New Zealand exported a total 105 million litres worth $845m in the year to March 31, and this was projected to rise to 120m litres for $948m in 2010, and 125m litres worth $1 billion in 2012, rising to 140m litres worth $1.19b in 2013.
"Although export value is trending upwards to $1 billion, free on board returns per litre on a month-by-month basis are declining," said the MAF analysts.
The present productive vineyard area of 30,000 hectares would theoretically rise to 35,000ha by 2012 -- based on vines already in the ground -- but "given recent deterioration in market conditions, a mothballing or removal of some plantings is likely over the next two to three years".
Most of the recent growth in plantings and production was due mainly to Marlborough sauvignon blanc -- the cultivar makes up more than 80 percent of wine exported, and total exports of the variety are up 35 percent on last year.
"Remarkable" growth meant the Australian market now accounts for 35 percent of total NZ wine exports, compared with just 14 percent of exports 10 years ago.
This article is tagged with the following keywords. Find out more about MyNBR Tags
Most listened to
- Former BNZ chairman Kerry McDonald on why changes to banking regulation are needed
- Veriphi's Greg Shanahan explains the startup's progress and setbacks
- NZSA CEO Michael Midgley on NZX’s exoneration of Fletcher’s board
- Trade Me's Nigel Jeffries and Property Investors' Federation's Andrew King on the housing rental shortage and rent rises
- SME Leap convenor Tenby Powell on what he hopes the forum will achieve
- NBR Radio: A year in review, with Grant Walker