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.4bn BILL Relief for Aussies Vine-pull plan for Europe
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$3.4bn BILL Relief for Aussies Vine-pull plan for Europe CONSTANT BRAND BRUSSELS ANTHONY KEANE A PLAN by Europe to rip 400,000 ha of vineyards out of production would benefit Australia, Agriculture Minister Peter McGauran said yesterday. "The world oversupply problem would be considerably eased," Mr McGauran said. However, vine-pulling was not a policy he supported for Australian grape growers. "The Australian industry as a whole does not believe a vine-pull is the best solution to our problems, and instead favours action to increase consumption of wine," he said. He was commenting after EU Agriculture Commissioner Mariann Fischer Boel said growers should be paid A$3.4 billion to take low-quality vineyards out of production. The five-year subsidy plan is among several measures drafted by Ms Fischer Boel which aim to encourage unproductive farmers to get out of the business. The Winemakers Federation of Australia said it doubted the French move would persuade the Federal Government to reconsider its rejection of a $60 million bailout plan at a wine summit in Melbourne this month. "The EU has a long history of agricultural subsidies and government intervention in the wine industry," federation director of stakeholder relations Simon Birmingham said. "I don't think a mass EU-type sponsored vine-pull is something we expect to see in the future." Ms Fischer Boel said Europe had to act because it was being hit hard by growing competition from Australia, Chile, the U.S. and South Africa. "Exports from our main competitors have simply exploded," she said, adding that European wineries failed to attract young drinkers. The reforms are "urgently needed" to win back consumers and to preserve centuries-old traditions and Europe's reputation in the world's largest and oldest wine producing region, she said. She also said billions of euros in new aid would be available to salvage the wine sector. The plan needs approval from EU governments and the European Parliament with officials hoping to have reforms in place for the 2008 season. "We spend too much disposing of surpluses and not building quality and competitiveness," Ms Fischer Boel said.
It has been a year since Duloc acquired Farquaad wines, so Zoë and Matthew have recently reviewed progress over the past year. The labels were removed from the entire inventory of Farquaad wines and they were sold as clean skins, but not thorough Duloc’s usual distributor for fear of brand dilution. They were sold as a job lot to a large Sydney based discount wine warehouse that does a thriving trade in clean skins aimed at the basic end of the market. Zoë and Matthew think that the people who bought these wines will be pleasantly surprised. They sold the wine for $2.00 per bottle, but it was going to cost them about $3.00 per bottle to destroy the wine. The plant and wine making equipment was a little more difficult to dispose of, but thanks to the continued growth in the number of small wineries Zoë and Matthew eventually found a buyer, somebody who wanted to establish a small winery in the Clare Valley. However, there is still the problem of what to do with all the buildings at Farquaad. Zoë has renovated the previous owner’s house and her family has moved in, but no other decisions have been made. More importantly, Zoë and Matthew have re-visited the question about having a presence in the basic market segment. They were surprised at how easy it was to dispose of the Farquaad wines, so they have decided to re-enter the basic market segment with a two pronged strategy. First, they have decided to launch a new brand that is specifically aimed at price sensitive young people. Their marketing consultant recommended the name “Bitch”, which is an “in the now”, youth culture term of endearment for women, or at least that is what the market research consultant said. However, Zoë and Matthew have rejected this proposal, found a new marketing company and opted for the name “Peregrine”, keeping with the raptor theme introduced with Sea Eagle. Second, following on from the success of selling the inventory of Farquaad wine, they have decided to produce a second range of clean skins, containing basic quality wines to be sold thorough bulk liquor warehouses. Zoë is also concerned about the export market because it is not as lucrative as it used to be. The domestic market is dominated by Coles and Woolworths who use their massive buying power to force wineries to drop their prices. These trends are also being seen in the UK where the two large supermarket chains, Tesco and Sainsbury, are also using their market power to force down prices. Consequently, Zoë is thinking about setting up a wine import and distribution company in the UK, in conjunction with a number of similar wineries, in order to provide better market access for small to medium wineries in the UK market. After many years of painful negotiation, it has been decided that the water from the Christies Beach Sewerage Treatment Plant is no longer to be discharged into the sea. A pipeline is to be built to the Southern Vales and the water is to be reticulated and made available for irrigation and other non-domestic uses. Proponents of the scheme argue that the price of water to grape growers will be low and that the increased volume of water will improve yields and hence be good for the district. However, opponents to the scheme argue that it is doomed to fail as it will need on-going subsidies from the government or the SAWater would need to charge prices that are too high to be profitable. However, Zoë is of the view that this scheme could be profitable without government subsidies and the prices charged to grape growers could be as low as if the market for recycled water behaved as if it was a perfectly competitive market, rather than behaving like a single price natural monopoly. Topic 10 Week 11 Factor markets
Topic 11 Week 12 Externalities Southcorp pleads guilty over river pollution. ADELAIDE, Dec 14, AAP - One of Australia's largest wine producers today pleaded guilty to charges relating to the pollution of the North Para River in South Australia's Barossa Valley. Southcorp Wines pleaded guilty in the SA Environment, Resources and Development Court to the charges, brought by the Environment Protection Authority. The company faced three charges under the Environment Protection Act - causing serious environmental harm, breaching a condition of licence and failing to report an environmental incident. Lawyers representing the company pleaded guilty to the charges, which carry maximum penalties of $120,000 each. The charges relate to the spillage of winery effluent into the North Para River in late March and early April this year. The company said the discharge originated from its Nuriootpa Winery as a result of a malfunction with effluent management processes. "The fault was identified and immediately repaired to prevent any repeat incidents," the company said in a statement. "Southcorp Wines has taken full responsibility for the incident and deeply regrets its impact on the local area." Nuriootpa Winery general manager operations Brian Falkenberg said Southcorp Wines undertook a voluntary clean-up in May this year, restoring the North Para River to its previous condition. "Further, we are implementing improved engineering standards and environmental protection procedures to ensure there is no repeat of this unfortunate situation," Mr Falkenberg said. Judge Christine Trenorden will deliver her decision on penalties next Monday.
It is now late-2006 and many grape growers and smaller wineries in the Southern Vales are doing it tough. The grape glut is forcing down prices and the slow increase in demand is doing little to stimulate prices. More immediately is the knock on effects of a recent court case. Even though Southcorp’s wine making operations are centred on the Barossa Valley, the outcomes of the court case are reverberating around the South Australian industry n general and the Southern Vales in particular. The Southern Vales has responded to the current low prices for both wine and grapes in two ways. First, it has recently embraced the State Government’s view that South Australian agriculture can generate a competitive advantage if it is seen to be a clean and green producer of top quality agricultural and horticultural produce. Secondly, the Southern Vales has undertaken a range of successful wine tourism ventures. Consequently, the Southern Vales is no longer the Australian wine industry’s best kept secret. Rather, it is emerging as a growing tourist destination, developing holiday options for both short getaways targeted at Adelaide residents and longer stays for interstate and overseas tourists. That is, many wineries in the Southern Vales are exiting the wine industry and entering the wine tourism industry. They still grow grapes and produce high quality wine. But these activities are no longer their sole focus nor are they the source of the competitive advantage of these firms. In order to support this strategic re-structuring of the wine industry in the Southern Vales, the Southern Vales Wine and Tourism Association added an environmental award to its annual awards in 2005. This award, along with a substantial cash prize, is intended to recognise and reward commitment to excellence in environmental sustainability through innovative and continuous improvement in wine making operations and vineyard management. Things are not as bad at Duloc as they are for other wine makers and grape growers in the Southern Vales. The relative size of Duloc and the wide range of markets that it is now operating in have insulated it from many of the vagaries of the Australian wine industry, but that is not to say that it is unaffected. The decision by buy Farquaad and to consolidate wine making operations at Duloc has increased profitability through a combination of economies of scale, economies of scope and further opportunities to pursue price discrimination. Zoë is even thinking about ways to develop two part tariffs. For example, she thinks she can develop a wine club that operates like and “virtual cellar door”. She feels that people would be prepared to pay a modest annual membership fee for an on-line wine club if it gave members “exclusive access” to wine offers that not available to other customers. The typical response at Duloc to tough times has been to increase the scale of operations and to engage in price discrimination. However, Zoë and Matthew feel that this strategy will soon be exhausted. In particular, they do not have the resources to develop and promote an icon brand. So, they have decided to pursue a new strategy, increased product differentiation. They have decided to fully embrace wine tourism. So, they have converted the surplus buildings at Farquaad to a five star restaurant (that surprisingly sells wines produce by other local wineries). They have also developed a bed and breakfast, with conference and convention facilities built around the rehabilitated creek and associated wetlands. In conjunction with the wetlands, Zoë and Matthew have established a Yabby farm as part of the process by which the polluted waters of the creek are cleaned up. Indeed, Zoë is thinking that aquaculture more generally might be a viable side line. This was a big step for Zoë and Matthew, but before they could develop the tourist facilities at Farquaad they had to rehabilitate that section of Everard Creek the runs through both properties. The banks of the creek had been seriously eroded as a result of the over clearing of trees upstream from Duloc/Farquaad, and the creek itself had been used as dump on and off for the past 150 years. Moreover, the water quality of the creek itself has deteriorated over the last 20 to 30 years due to a rising saline water table and effluent leaking into the creek as a result of poorly maintained pipes, drains and effluent storage facilities. In conjunction with the local Landcare and Trees for Life groups Zoë and Matthew have planted over 5,000 tress. The banks of the creek have been graded and planted, while wetlands have been developed to remove pollutants from the water in creek. Indeed, the water quality has improved to the point that native frogs have returned to Duloc for the first time in a generation. Consequently, Duloc won the 2007 Southern Vales Wine and Tourism environmental award, which comprised a trophy and a cheque for $10,000. Probably the biggest environmental problem associated with the wine industry in the Southern Vales are the increasingly large mounds of grapes seeds that are growing, indeed mushrooming, around wineries and in out of the way parts of vineyards. These mounds of grape seeds initially contain large amounts of organic material, such as grape skins, leaves and other debris left over from the crushing process. Overtime most of this organic material decays, other than the actual grape seeds themselves, as the mounds are exposed to the weather. This organic material decays into rather nasty organic compounds, which leach into the ground water and then they find their ways into streams and creeks. On the hand, grape seed oil is a really useful substance. It has numerous applications is cooking, as the basis of cosmetics, soap and candle manufacturing and arrange of other industrial applications, such as jet engine lubrication. Interestingly, despite the amount of grape seed that is produced in Australia there are no grape seed oil processing facilities in Australia. Zoë is thinking that it might be time to put these ever growing mounds of waste material to good use. Alcohol producers target young female drinkers with high alcohol, sweet drinks, commonly called Alcopops, which are bottles or cans of pre-mixed spirits and soft drink, for example Bacardi Breezers, and Wine Coolers, which are sweet wine based drinks with grape spirit (i.e. pure ethanol) added in order to increase their strength, for example West Coast Cooler. Alcopops tend to be made by large multinational companies and are imported into Australia, but some are produced locally, for example Budaberg Rum and Cola. Wine coolers tend to be made in Australia, with some imported brands. Wine coolers are a bit unfashionable these days, nevertheless they are close substitutes for alcopops. In an attempt to reduce binge drinking among young women, the Australian Government recently introduced a 30 per cent tax on alcopops. However, although wine coolers are primarily consumed by young women they have escaped this tax hike.
Topic 11 Week 12 Externalities
Topic 12 Epilogue Buyback dilemma for winegrape growers Asa Wahlquist, Rural writer The Australian 22 September 2008 FOR winegrape grower Glen Arnold, an offer of $150,000 to quit the industry, on the condition he sells his water to the Commonwealth is a devil of a choice. ``I am interested in the package (announced at the weekend), but they have not mentioned a price for the water they are going to buy,'' he said yesterday. ``I have to consider it.'' Mr Arnold, who grows grapes and citrus at Loxton on the South Australian stretch of the Murray, is also deputy chairman of the Riverland Winegrape Growers Group, which put the buyback proposal to Kevin Rudd. Mr Arnold welcomed the package, which also includes $10,000 to grub out vines and trees and a further $10,000 for retraining. While traditional farm exit packages require farmers to leave their land, under this model farmers can stop irrigating but stay on their farms and remain in their communities. ``All the young people are tending to leave,'' Mr Arnold said yesterday. ``Us older blokes are still here and if we took this package we would be able to provide labour for some of the bigger entities.'' Executive director of Winegrape Growers Australia Mark McKenzie estimates that last year, when South Australian growers had only 32 per cent of their water allocation, growers spent $76 million to buy in water, ``most of which was borrowed money''. This year, allocations are just 11per cent, but many farmers have no more ability to borrow to buy in water. The Rudd Government has allocated $57.1 million to the irrigator exit program, which is expected to deliver up to 48 gigalitres back into the Murray-Darling system. Mr Arnold estimated it would provide for about 360 farmers to leave the land. But he said the question many would be asking was: ``If I hang in here, what is my water going to be worth in three to five years' time when I want to retire?'' He pointed out that with the Government buying up so much water, the price of the remaining entitlements will rise. ``That is why it is a terrible dilemma. You are damned if you do, and you are damned if you don't.'' Meanwhile, the amount of water being purchased in the Government's first water buyback has fallen by 18 per cent, while the amount available for the environment has fallen by 27per cent, according to figures published by the Department of the Environment. According to the report, the amount of water being purchased has fallen from 34.3GL, which was announced in May, to 28GL. The amount available to the environment on average has fallen from 23.8GL to 17.4GL. The Government's spending on the buyback has fallen from $47.2 million to $40.27 million. Opposition spokesman on water security John Cobb said many irrigators and water companies had contacted him about problems with the buyback. ``Either the Government hasn't got back to them, or people have walked away because there has been a lot of mucking around,'' he said. ``I would like to know how much has been signed, sealed and delivered.'' 
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