1.1 Viticulture Sector Trends in Marlborough
- Nationally 445,000 tonne of grapes were harvested in the 2014 vintage with 77% or 329,572 tonnes coming out of Marlborough. The increase over 2013 is 30% or nearly 80,000 tonne. The record 2014 harvest has caused some uncertainty in the viticulture market in the past months due to the effect this level of supply may have on the sector and how this can be managed better than the position the industry found itself in post 2008 harvest. It is expected wineries will be at or near capacity which may drive the contract grape price down slightly for the 2015 vintage.
- The New Zealand viticulture industry has experienced significant change over the last five years. Over the last decade the rapid growth in the supply of grapes resulted in an oversupply of product and challenged the capacity of wineries to process the crop. These trends resulted in a significant fall in the price paid for grapes and impacted on the viability of viticulture sector with the number of grape growers falling by around 27% and growth in the area planted in grapes stalling. Over the past two years we have seen confidence in the wine industry return on the back of increased processing capacity within wineries, stronger demand from export markets and a lift in the contract price paid to growers. This has resulted in land values increasing slightly with an active property market.
- Vineyard profit before tax has increased 15% over 2012/13 to $11,277 per hectare and 78% compared to the 2008-13 average of $6,348 per hectare. This is still below the 2008 high of $14,970 per hectare.
1.2 Land & Vineyard Values
- There is currently good activity within the Marlborough vineyard property market on the back of a shift in the supply/demand balance for grapes. Properties with scale are seen as attractive propositions to well resourced companies within the industry. Currently we are seeing the majority of market activity focusing on the traditionally well-located central and lower Wairau Plain areas, with less interest in fringe locations.
- During 2012 equilibrium between buyers and sellers vineyard price expectations was reached with an active market. Vendors price expectations have since risen during 2013 and 2014 as banks have eased lending pressure and on the back of renewed confidence in the viticulture industry. Buyers however are remaining more cautious and basing their purchasing decisions around the earning potential of the vineyard. This has seen both the number of listings on the market reduce and slightly fewer sales occurring as price expectation have lifted.
- The current price paid for Marlborough Sauvignon Blanc grapes is currently sitting around $1,600 – $1,850 per tonne, which is considered a sustainable level within the industry. The contract price has risen around $300 – $400 per tonne since the 2012 vintage, however it is anticipated that there maybe downward pressure on the contract price for the 2015 vintage as the larger than average 2014 crop has eased demand with wineries at near capacity.