VICTORIAN growers have called for a rise in grape prices when the leading wine companies announce their indicative prices this week.
MVW chief executive Mark McKenzie said while the 2012 vintage had seen increases in Murray Valley wine grape prices across the board, a number of key varieties were still below the cost of production.
"To truly consolidate this year's initial recovery in prices we really need to see Chardonnay, Sauvignon Blanc and Shiraz prices move to above cost of production,'' Mr McKenzie said.
Those three varieties represent more than half of the wine grapes grown in the Murray Valley.
"Vineyard businesses will remain at very significant financial threat until all of our major varieties are back at well above the average cost of production of $357 a tonne,'' Mr McKenzie said.
He said benchmarking data made it clear growers cannot cut their costs any further and have sacrificed vital vineyard inputs like fertiliser to remain in production while still labouring under a high debt load.
"The data for 2010/11 showed an average business return of $1945 per hectare - meaning many vineyards are still nowhere near sustainable business levels and cannot repay capital or renew aging farm equipment - even with this year's improvement in prices,'' Mr McKenzie said.
"Our message to wineries is that growers are still in very real danger of financial failure if prices do not improve significantly over 2012 levels and begin to move back well beyond break-even.
"The economic sustainability of the wine grape suppliers the wineries rely on in the Murray Valley to feed their wine production remains on a knife-edge, and their grape supply base will continue to erode unless they move to more sustainable grape price levels now.
"After the impact of low crops during the drought, large crop losses in 2011, and increased cost of production pressures, just getting prices back above the line is not enough to sustain growers or allow them to reduce debt levels from a string of losses over the past five years.''
Mr McKenzie said there were signs of improvement in the international wine sector, with world oversupply reduced to far more manageable levels, mid-term wine grape shortages likely in California, a rapidly emerging Chinese wine market, an improving outlook for wine sales in North America, and a stabilising UK market.
Australian wine inventory levels were very well balanced and are now at levels not seen since 1995.