While Australia’s woes have attracted most media attention, all the wine-producing countries of the Southern Hemisphere face challenges in the year ahead. According to a recent report, wine production in Australia, New Zealand, South Africa, Argentina and Chile in a marked state of flux.

Epitomising the “feast or famine” nature which sometimes besets agricultural commodities, 2008 sees Australia move from its much-publicised grape glut to a state of balance. However, that balance will not last long, the report warns. Having seen the last harvest hit by the country’s severe drought, further small harvests in 2008, 2009 and possibly beyond will leave the industry facing a serious shortage of grapes and struggling to meet global demand for its wines.

Meanwhile, New Zealand faces a supply challenge of a different kind. While it is on course to hit its 2010 export target of NZ$1bn in sales, the objective of $2bn by 2015 is “in some doubt”, according to the report. South Africa faces problems too, with the country’s over-enthusiastic planting of red varieties during the 1990s resulting in a red wine glut and insufficient volumes of white wine.

In South America, the story is again different. A victim of its own success, there are signs that Argentina will not have sufficient volume to meet global demand over the next few years. Chile to a degree is also suffering as a result of its own success. Having once been by far the most attractive target for inward investment by wine investors, by dint of cheap land, labour and a perfect climate, the strength of the peso has latterly squeezed margins and deterred investment in the wine industry.

While all five countries are facing challenges in 2008, the report suggests that none is greater or more pervasive in terms of its impact on the wider market than the situation in Australia. “Five different wine-producing countries - and five different sets of challenges for the years ahead, but all are subject to the same consumer trends and the same global market in grapes and wine,” the report states. “And, in early 2008, nothing is having a greater effect on that market than the Australian drought. There are signs that that effect could be felt around the world for some years to come.”

Related Research: Southern Hemisphere Grape Supply and Wine Production