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Delhi Wine Club

Posted: Wednesday, January 06 2010. 15:21

Australia’s Biggest Buyer cancels Farmer Contracts

Farmers with grape glut in Nashik and other parts of Maharashtra may find solace that the over-supply is resulting in cancellation of contracts in other countries as well, the latest one being in Australia where Constellation Wines have reportedly terminated the contracts of over 300 farmers in the Murray Valley in South Australia.

Australia's biggest buyer of wine grapes advised farmers just before the New Year that they would see their contracts end after the 2012 vintage. The company had previously given three years' notice to more than 200 other contracted farmers in December 2008.

The decision has come at a time when growers in the region are facing plummeting wine grape prices.

In some cases growers are being reportedly offered up to 50 per cent less for their grapes than in 2008, according to figures released by Constellation and other major wineries in December. 

Constellation had warned growers at a forum in June to expect the company to cut grape-intake by at least one-third, in a move to combat the recession.

Rob Sands, president and CEO of Constellation Brands in New York, stressed the importance of 'stepping back a bit and thinking economically in challenging times' in December.

The farmers who were given notice in 2007 will deliver their last grape shipments this year in February- April.

The situation in Maharashra is expected to turn better with producers like Sula expecting a 35-40% rise in sales. Most producers have made good to excellent sales from August onwards. Many small producers in and around Nashik, did not crush any grapes during 2010. Their stocks are nearing depletion and they will be back for grapes and rework the contracts. The wild card remains Indage who not only cancelled several contracts but has reportedly not paid several farmers, making it a double whammy for them.

It is interesting to note that Constellation appears to have stuck to the legal contracts and has been giving 3 years' notice according to the agreement. Hopefully, Indian vintners will follow  the example. 


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