South Africa’s grape growers are facing a sharp fall in profits, prompting many to exit the wine industry.
Commentators blame an unstable exchange rate, global oversupply, dropping prices, and agricultural subsidies in rival producer countries.
Now, with international prices dropping sharply due to oversupply, local co-operatives, distillers and cellars unable to sell existing stock are paying farmers not to harvest because they have no storage space.
The going rate is less than a third of what the growers had expected to earn per tonne of grapes.
Other wine-making countries are also feeling the pinch, but the South African industry is said to have compounded its own troubles by underestimating demand for premium quality brands and neglecting marketing to a dormant local market.
“The world has enough cheap wines, and with the market already well-owned by bulk producers like Australia and Chile, premium wine is the way to go,” said Giuam de Korte, marketing manager for internet wine retailer Cybercellar.
Wine exports from South Africa, the world’s eighth largest producer, fell four percent last year - the first drop in 13 years.
They projected that exports would grow 2.8 percent this year, assuming the local currency depreciated by 10 percent.
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