The farmers of Maharashtra have never had it so good- except during the current harvest, that is. They have been the pampered a lot. Despite contracts which were not worth their weight on paper, they had gotten into the habit of selling whatever they could to the highest bidder on the day of harvest. Suddenly the rates are crashing and many fear that over a quarter of the crop may not be sold, even at lower prices.
What is happening has not been new to the entire wine world for decades. There is shortage and there is oversupply in the cyclical industry. During the last 3-5 years, the price of grapes shot up due to increased demand and not enough grapes, despite farmers shifting from table grapes to the more lucrative wine grape market, with expansion at steady 30% plus growth. The farmers kept on jacking up the price of the produce from Rs. 20-22 a kg about 5-6 years ago till it went up to Rs. 38 and even Rs. 40 from some of the red varieties commanding premium prices.
Signs that there was trouble in paradise were evident when Rajiv Samant, CEO of Sula Wines disclosed to delWine last September that the recession was setting in and they would be lowering their crushing estimates in 2009. In fact, Rajiv went to the extent of sharing with delWine that he had had already warned his suppliers to start planning right away.
This was at a time when Indage etc. had said things were well under control and they did not expect any fall in production. DelWine has learnt from reliable sources that their payments have become scarce and they are taking a period of up to one year to pay for the grapes. Some payments from the previous vintage are still pending.
Is the fall in prices due to recession alone? Abhay Kewadkar, chief wine maker of UB does not think so. ‘There are several other factors besides recession and the Mumbai attack, he says. Maharashtra policy followed by Karnataka government has resulted in a crash in demand in Karnataka which has grown at 25% market share. The demand of arrears for excise duty for the last 6-7 years by the Maharashtra government under the High Court order has raised uncertainty levels for higher production..’ The wineries have become very cautious of production levels and are stocking to the minimum levels of purchases, he adds.
‘Being a significant buyer, it must have benefitted them a lot,’ I ask. ‘Not really. UB group believes that we must give a reasonable price to the farmer, even though they have extra supplies. In the long run, the industry must demonstrate to them that they look out for the farmers’ interests. We have contracts at Rs. 30 a kg. Last year we were forced to pay even Rs. 35 a kg. But we shall continue to pay the same amount of Rs. 30 provided the quality is acceptable according to our standard.’
The farmers who have been growing at higher yields and overproducing will be in trouble, he feels. Abhay suspects that out of a total demand of 10 000 tonnes, 2500 tonnes may not be sellable and may have to be sold to distilleries where the price of Rs.9.50 kilo is the prevalent price.
Vikash Gupta, Director of Vintners Wines has had the production of a few tonnes at their farm in Nashik. He does not know if any price reduction has taken place. They have already sold their entire production (of a few tonnes)- at Rs. 28 a kg.
It is obvious to most that the wine industry is undergoing tough times. The excess of grapes has come as a dampener to the farmers who must storm the weather. Going back to the table grape variety may not be the answer, assuming that the present crisis is temporary. |