Australian wine industry battling oversupply of grapes

SYDNEY, June 11, 2006 (AFP) - The Australian wine industry is drowning in a glut of grapes, as it struggles to sell up to one billion litres of wine sloshing around in storage tanks across the country. Record output in 2004 and 2005, and a near-record crush this year, have led to a massive oversupply of wine that is forcing down prices and pushing producers and growers into the red.

Shares in one of the country's leading winemakers, McGuigan Simeon, have tumbled after it was forced to slash the price of its inventory.

And growers last week appealed to the government for a multimillion-dollar bailout package.

McGuigan's chief finance officer Mike Nowak told AFP that around 1.0 billion litres of wine in Australia remained unsold, putting downward pressure on prices.

"We are seeing a situation where margins are being eroded as wine companies try to offload their excess stock," he said.

"The industry requires significant rationalisation in order to correct the imbalance.

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Australia has more than 2,000 wineries and is the world's fourth largest wine exporter behind France, Italy and Spain, according to the Department of Foreign Affairs and Trade.

Throughout the 1990s, the industry w