Pricing Irrigation

The past year or so has seen a lot of chatter about the importance of nudging up the prices of Cape wines.
By

Mostly this means raising the floor prices of cheap wine. Those who engage in the debate may not drink much of what goes on sale at below R50, but this should not, in itself, diminish the validity of their views: it is not only those who buy free range eggs who are entitled to comment on the conditions afflicting battery chickens.  

But, to stick to the analogy, what if the free-range poultry industry actually depended on the battery chicken business for its existence? What if battery chicken provides an affordable entry point for consumers trying to migrate from a cheaper, carbohydrate diet to one with affordable protein? It's easy to take a principled stand and say that some standards are not negotiable, that an entire industry simply cannot be built on the suffering of others.

You go with the ethics-above-everything argument until you need a cheap protein source yourself. After that, it's really about moral hair-splitting. You could, for example, look to the most “civilised” of the battery chicken producers, the ones who don't savagely remove the birds' beaks and claws. In exchange for a cheaper meal, you would probably compromise on the question of a chicken's freedom to roam. Beyond our own direct experience, very few of us are utterly black-and-white on moral issues: we don't hold the current shareholders of BMW liable for the company's use of forced labour during the war. There are very few companies which have been in existence for a century or more whose past ethical standards in the field of employment (with or without the question of slave labour) would pass muster today.

But what about the need to raise the floor price of cheap wine: who suffers from the R5 per bulk litre pricing which keeps the discount offerings under the R40/R50 mark? There are very few victimless crimes. If what is required to produce cheap wine is ethically unsavoury, there needs to be a corpse, as well as a perp. It can't only be about “disruption” and economic efficiency.

So here's the conundrum: what if someone proved that many of the suppliers selling to the wholesalers at that R5 per litre price point were making more profit than the estates whose average cellar door prices are double this amount? That would be at least as disconcerting as the argument that free-range chickens choose not to roam from the warm and comfortable space they're sheltered in.

We need to ask why, if wine prices have remained resolutely low, the volumes produced in normal (ie not drought) years have been increasing steadily? The answer is in plain sight: bulk supply has migrated northwards, to the Orange River irrigation areas, where yields are comfortably 8 – 12 times greater than in Stellenbosch. Sub-R50 wines which are sold without any real claim to origin derive much, if not all, their fruit from these industrial growers.

It's the dinosaurs of the old industry, the growers farming unviable vineyards in the Coastal Region, who are struggling, and even a 20% improvement in their fruit prices won't achieve more than an extension to their agony. It’s unlikely that a Stellenbosch area of origin wine retailing for R80 or less can provide adequate remuneration for the grower and vineyard workers. Average yields in the appellation hover around 6 tons per hectare. Annual farming costs (including provision for renewal) come to almost R60k per hectare. Few, if any, are receiving R10k per ton.

Prices go up when there's no cheap fruit to be bought – but as long as the irrigation areas to the north meet the demand by increasing plantings and bumping up yields, the insatiable appetite of the market for cheap wine will be met, and the growers further south will find themselves caught in the deadly vice-like grip of falling revenues and not enough cash to upgrade or adapt. 

Does it matter? This depends on your timeline and your vision. It's like climate change, or the next, inevitable mass extinction. The earth will go on without us. Whether Stellenbosch will be reduced to a few estates selling high-priced wines to the well-heeled while the rest of what lands up on wine merchants' shelves is amorphous juice from vineyards designed to optimise yields over fruit quality is a consumer decision – like free range versus battery. 

It's not going to be solved by talking up prices or hosting high profile auctions where tiny parcels of specially curated wines fetch suspiciously elevated amounts. If the Orange River vineyards didn't exist, there would be no wine selling for less than R100 per bottle. If there were no chicken batteries, basic protein would cost twice as much. You can't say we don't get what we deserve.