Global glut could help U.S. consumers

Careful shopping should be netting U.S. consumers some very good buys in Australian and South African wines, courtesy of the worldwide grape and wine glut that is forcing price reductions.

South Africa's wine companies, in the midst of what they say is "economic disaster," are offering farmers up to US$124 a ton not to harvest contracted grapes next year. In addition, many wine grape farms are up for sales, particularly in the famed Stellenbosch area where more than 50 are on the block because of dwindling profits. And, they're often being purchased for non-agricultural use.

Australian wine producers have been suffering from a glut of product for several years, forcing price cuts and even drastic moves such as destroying grapes to cut down on supply.

Curiously, however, in the midst of this problem period Australia is importing more wine than ever from neighboring New Zealand. According to the latest New Zealand reports, export wine sales for the past year topped US$411.3 million, doubling earnings of 2004. Overall volume of wine exported in 2006 was up 13% over the previous year. While exports to both the U.S. and UK were up more than 20% over the previous year, sales in Australia increased by almost 50%.

In South Africa, farmers are seeing prices of red grapes falling from $1,300 a ton to as little as $206.

Unlike in other areas where strong domestic consumption helps the native wine industries, South Africans historically have a comparatively small consumption rate.

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