Red wine grape prices rise but Riverland getting low value Not all South Australian regions are benefitting from red wine grape price rises. RED winegrape prices have shot up but the news is not good across all South Australia's wine regions. The good news about wine grape prices for this year's vintage is that increases are in the red. Red wine grapes that is. They experienced substantial price increases across the premium growing areas in South Australia. The bad news is that certain marginal areas continue to struggle, and the prices being paid for grapes in areas such as the Riverland are still significantly lower than for other, higher value regions. Wine Australia on Thursday released its 2013 Australian Winegrape Price Dispersion Report, which shows that the average purchase price for winegrapes in 2013 was the highest recorded in four years, up 9 per cent at $499 per tonne. The real stand-out though, was the strong increase in certain varieties in cool-climate regions in South Australia. The price paid for cabernet sauvignon grapes from the Adelaide Hills jumped 69 per cent from $1181 to $1999 per tonne. Shiraz from the same region jumped 82 per cent to $2295 per tonne and both varieties performed strongly across the premium areas including the Barossa Valley and McLaren Vale. Less mainstream reds also did well, with Barossa Valley malbec and mataro both adding almost 40 per cent to sit above $1600 per tonne. Many white wine grapes experienced flat or negative prices, with sauvignon blanc posting lower prices in many premium regions. The disparity between the high-value, cool-climate regions and the warmer inland regions is shown by the fact that prices for the latter increased by 5 per cent to $351 per tonne, but rose by 19 per cent to $1156 for the cool or temperate regions. Across the Riverland, prices rose 6 per cent on average, albeit to just $354 per tonne. The disparity between the regions tells of the ongoing tale of two sectors in winegrape production, although there is growing consensus that things are incrementally improving. Wine Australia manager wine sector intelligence Peter Bailey said the surge in red prices reflected more demand at the premium end of the market. "In relation to the reds, there's definitely stronger demand for the premium fruit," he said. There's demand for premium wines from China and other parts of Asia, but it's not just China, it's other regions as well. If your look at our exports above $10, they're growing, up 7 per cent in the last year. If you look at the domestic market above $15 a bottle, that's up 7 per cent and if you look into some varieties, shiraz sales in the domestic market are pretty strong. Even in some of the white varieties, it's not quite as strong, but if you look at chardonnay above $20 per bottle it's growing. MR Bailey said the 6 per cent growth in the Riverland was still relatively good for the current environment, but the lack of premium fruit meant it did not perform as well as other areas. While the increase in prices was good news, a comparison with the prices being reached over the past decade or so shows how challenging the market remains. The average price for the decade from 1999 was $788 per tonne, reaching a peak of $933 per tonne in 2001. And while the discussion around the winegrape glut has been going on for years, there has been little decline in the amount of winegrapes crushed. Since 2003 the winegrape crush has fluctuated between 1,399,000 tonnes in 2003, to 1,917,000 the following year, with just above 1,600,000 tonnes in 2010 and 2011. Data for this year's vintage is scheduled to be released today, with predictions that, similar to the previous year, quality will be good but yields will not be high. However, there is still the prevailing belief too much wine is being produced. Among wine grape growers, outside of the Riverland region which has already undergone a large amount of structural adjustment, a third of growers are keen to leave the industry. The results of a survey released this month showed only one in four respondents in the Barossa Valley, Clare Valley, McLaren Vale, Langhorne Creek, Coonawarra and Adelaide Hills say their properties are profitable. Only two in three who responded to the Department of Primary Industries-funded survey say they want to remain in the industry. Issues included a doubling of water prices in some areas and the strong dollar. An Ibisworld report, also released this month, shows the winegrape sector shrank by 11.6 per cent annually from 2008 to 2013, and predicts the industry will shrink by 1.7 per cent per year until 2018. "Prices in some spot markets are still below production costs, resulting in some growers making large losses," the report says. The normalisation of weather conditions (particularly rainfall) and the projected easing in the exchange rate are projected to improve the industry's production capacity and competitiveness. However, the demand in key export markets for Australian wine and dried fruit will remain subdued as economic growth remains sluggish. This will continue to put downward pressure on grape prices paid to local growers. The main issue though, as for years, is oversupply. The massive oversupply ... nterequires investment in establishing export markets.