Rural Insight -
Sauvignon Blanc will remain the main cash cow
With yields being down this season it has meant one of the best vintages in sometime with the fruit picked reported to be exceptionally good. Supply has finally caught up demand, putting pressure on price and recent inflated cost has seen margins reduce. Sauvignon Blanc is expected to remain the main cash cow as global markets recalibrate their stock levels.
Contracted supply is an influencing factor
Vineyards with contracted supply agreements remain favourable for vendors as it provides security of offtake given reduced demand for grapes in the market. Previously, uncontracted vineyards were preferred as parties needed certainty of production to meet market demand. Strength of counterparty, contract tenure and terms are all important considerations.
Vine replacement a focus
Many vineyards are now approaching 30 years and where production is becoming uneconomic, growers have a preference to redevelop or ‘refurbish the asset’ with new plantings. Replacement vines are relatively accessible for the time being. CapEx and/or operational advantages are key considerations, particularly where vines have tighter spacing and there are productivity gains.
Rebalancing of export markets to occur
Export orders are starting to show signs of a lift in volume following a period where a shortage in supply to meet global demand eventually resulted in overordering and stockpiling occurring. Consumer demand is expected to stabilise and balance out the supply chain.
Hands off investment will remain attractive
Given the relatively scalable and systemised nature of vineyards, it provides opportunity for a wider investor pool. Contract management remains competitive and provides opportunity for smaller through to corporate buyers. The adjustment in fruit prices has seen investors make price adjustments in the immediate term. Scarcity of available land remains a key driver underpinning investment in the longer-term presenting opportunity for buyers in the shorter term.
Lifestyle purchasers will remain persistent
Activity from lifestyle purchasers is expected to remain, particularly in the $2.5M to $5.0M price range. The opportunity to generate passive income alongside the lifestyle amongst the vines will continue to appeal to those searching for a home and supplementary income.