Diversification Beats Poor Wine Grape Prices - Part 1

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Net income generated from wine grape production in the Olifants River Valley region has deteriorated significantly over the past 12 years. According to Willem van Zyl, a third- generation farmer in the region, farm gate prices have virtually stagnated, whereas the cost of inputs, such as labour, fuel, electricity and fertiliser, have more than doubled.

“Five to six years ago, farmers did not pay that much attention to their energy and labour costs. These days, you have to count every cent to survive,” he says.

This situation has resulted in a number of wine cellars in the region falling on hard times. According to Willem, they were unable to meet their financial obligations to producers in full in December, with some monies still outstanding at the time of going to print. This payment shortfall has had a knock-on effect on suppliers’ cash flow.

“There are farmers who have stopped fertilising and irrigating some of their vineyards. Since there’s no indication that market conditions will improve soon, these farmers feel that the cost of production is no longer justifiable,” he says.

Thanks to the good quality of the soil in the region, yields are high: an average of 25/t/ ha, with some farmers achieving up to 35t/ ha, depending on the cultivar. Unfortunately,  high yields do not make up for the poor prices received, explains Willem.

Statistics from VinPro indicate that average income in the region ranges between R32 000/ ha and R50 000/ha for red grape varieties, and between R32 000/ ha and R37 000/ ha for white varieties. The exception is Sauvignon Blanc, which generates up to R60 000/ ha depending on the quality. However, this cultivar is not suitable for production everywhere in the region.