U.S. wine makers get help from Australian weather woes

January 14, 2013
U.S. wine makers could receive an unexpected boon from an unfortunate source, namely fires sweeping across much of the southeastern Australia in recent weeks due to unusually hot weather.

In addition to at least one death, the fires have taken an economic toll including a hit to some of the country's best-known producing regions, such as those in South Australia state.

Analysts are currently trying to gauge the effect on the country's wine production quantity and quality.

"The general consensus is that [2013] quality will be okay, but yields will be down," Deutsche Bank analyst Michael Omera said, citing contacts in South Australia.

Omera said yields had already looked modest due to dry flowering conditions in November, and those from the well-known Australian wine region of Barossa could come in 10%-20% below average due to sunburn, which can cause grapes to shrivel and fall from their vines.

While the full picture won't be clear until the harvest starts sometime around in early March, Omera said the likely lower yields would not only cut the amount of wine Australian producers have to sell, but also an increase to the cost for producing a quality vintage.

Such factors could boost revenue for the U.S. wineries, especially given the importance of the U.S. market to Australian wine exporters.

In 2008, for instance, Australian wine producers earned 887 million Australian dollars ($931 million) in the U.S., second only to A$962 million in the U.K. Still, the problem for Australia's wine sector could be worse. Omera notes that current canopy cover has been good, which "has somewhat mitigated the issue" of severe heat, and some key coastal wine regions, such as McLaren Vale, have suffered little, thanks to ocean cooling.