Wine farmers in the Western Cape are going through a rough patch.

Since Covid struck in March 2020, wine farmers in the Western Cape have been going through a very rough time financially. After the welcome hike in wine prices in 2018 and 2019, the ban on the sale of alcohol and the financial struggles faced by consumers due to Covid-related losses caused wine prices to come under pressure once more. For a few months no wine could be sold or transported, putting immense cash flow pressure on wine cellars and producers alike.

Moreover, input costs have continued rising far above normal inflation with the big drivers of escalating input costs being minimum wages, electricity, fertilisers, pesticides and fungicides, fuel and interest rates.

Adding to their woes, the Western Cape had major floods in the last few years which caused significant financial losses. Furthermore, some farmers also lost a huge portion of their harvest due to some of the worst incidents of frost in decades.

As a result of these factors and general climate changes, the 2023 and 2024 wine grape harvests were far below the norm for most wine farmers in the province. Luckily wine prices are on the rise again, but the cellars’ fixed costs are also much higher due to the decline in the volume of grapes handled which erodes a large portion of the increase in wine prices, leaving the producers with an insufficient increase to cancel out the effect of the smaller harvests.

The negative effect of ongoing loadshedding during this period added extra costs for buying generators, supplying fuel for the generators and the installation of solar panels, inverters and battery systems. This, together with the problems at our harbours, causing wine exports to lag, just made everything worse for the farmers.

Many of the wine producers in the province also have canning peaches and citrus orchards to diversify their farming activities. In 2022 and 2023 the citrus industry in the Western Cape also came under pressure due to declining prices and smaller harvests, but luckily 2024 is looking better with good harvests and better prices being realised. The canning peach harvest however was a total disaster in 2024 with very low yields as never seen before. The future of one of the biggest canning factories in the province is also still unknown, leaving producers with a lot of uncertainty.

As a result of all the negative influences mentioned above many wine farmers had to postpone the replacement of old vineyards and thus their vineyards are getting older than the norm in the industry to stay financially viable, which creates a big problem going forward. Many farmers also cashed in on their life savings, such as share portfolios, property and other assets to support the farms financially, something that does not bode well for the coming generations that will now have to support their parents with farming income in the future.

Even more disheartening is the fact that some farmers are now left with no other option than to sell the farms they and their predecessors worked so hard on for many years, in many instances for less than the actual value because there are too many farms up for sale and not enough willing buyers.

Hopefully, 2025 will greet us with record wine grape harvests, and wine prices will continue to rise. It will also help a lot if the canning industry can normalize again and the rosy outlook for the Western Cape citrus industry can keep on going.

All of this may be sweetened some more with a few drops in interest rates, as expected for a while now, and if we are lucky and the cycle of input costs rising far above normal inflation can come to an end, it will give the farmers a chance to claw back the losses they incurred the last five years and the Western Cape wine industry can once again become the thriving heartbeat of the province.

Article written by: Arnand Stofberg, B. Agri (Admin), B. Compt – BVSA Director (Worcester)

Email: arnands@bvsa.ltd