AUSTRALIA’S grape growers have been facing serious financial headwinds the last couple of years, but currently there are paths forward for those willing to adapt.
Jeff McDonald, of Riverland Lending Services, believes that innovation, financial restructuring, and regional co-operation will be key to navigating the current crisis.
He shared important steps growers can take, and why collaboration across the industry is more critical than ever.
As South Australia's Riverland region grapples with falling grape prices, rising input costs, and limited market access, many vineyard operators are facing unprecedented financial strain.
Mr McDonald has seen first hand the mounting pressure on local growers and he discussed the economic realities behind the crisis, the difficult decisions many farmers are being forced to make, and what the future may hold for one of Australia’s most productive wine regions.
“You've got growers that are generational and they are having a hard time, but they are not doing anything wrong,” Mr McDonald said.
“They are passionate about what they do, and they do the best they can, but they are fearful as well.
“Growers are taking a lot of risks, but the current red flags within the industry have created a lot of emotion, especially since everyone is in a different financial position.
“You have all kinds of perspectives, from a financial point of view, different ages, and if I go back to when I grew up, there's literally nothing that an irrigation property in the Riverland did in the 1980s, when I was young, that is still being done now, simply because the world moves.
“The whole area over many, many years has evolved in all these different crop types, at different times, based on world demand and world supply.
“Some of them move slowly, so if I if you take that fullness of time and say, where are we today?”
Mr McDonald said the current financial position of most growers, gives them an opportunity to think back, and also to plan ahead.
“Where are we going to be in another 50 years? Where were we 50 years ago? We're going to keep changing, and in reality, it all comes down to the choices we make about the changing environment around us.
“There's no doubt that if we produce less grapes in the world, there will be a point where supply will meet demand, but the question is how long will that take and how much money will be lost, or how much are they losing now to be able to get there?
“Everyone wants to hang on for another year, but the reality is that we are not the only ones affected, it is happening all around the world, and some industries might be oversupplying, and it can hurt growers and industries as a whole.”
Mr McDonald believes industry needs have to be confronted with honesty, and for many growers, the instinct to persevere, to keep going one more season hoping for a turnaround, is both admirable and, at times, dangerous.
Without structural changes or a clear market correction, he warns, this cycle of oversupply and under-pricing could continue indefinitely. The challenge now is to recognise when persistence turns into vulnerability — and to start exploring viable strategies that offer a path forward, rather than just survival.
“I suppose everyone has some choices, people who aren’t completely all-in financially and still have a bit of room to move — you really hope they start making different decisions, for their own mental health as much as anything” Mr McDonald said.
"That might even mean staying with grapes, just approaching things differently.
“You can change the varieties that aren’t selling, and move them over to varieties that can be pushed onto new markets. I know it can be difficult, takes money and time, but we have done that as a wine industry all the time.
“If someone decides to walk away, another one will go into the market, and while not immediately, they can plant something else. It can work for one industry, but it might fail with another, that is change.
“Just because it didn't work for you, doesn't mean it's not going to work for as someone else.
“I have enormous compassion for the pain that a lot of wine grape growers are taking on, and I would argue that they're not necessarily looking at their other options.
“I’ve shown people, including farmers of anything, that they have different options, which means they don't have to stick to wine if it's not working out.”
Mr McDonald often refers to a simple but powerful framework when talking with growers: being above the line, versus below the line.
Below the line, he explains, is where blame, denial, and excuses live, and are easy places to go when things feel out of control. Above the line is about ownership, accountability, and responsibility.
“It’s a bit like a grieving process,” he said, reflecting on conversations he has had with farmers across different commodities.
“People go through stages — frustration, blame, denial. One day it’s the wineries, the next it’s world markets, even the weather or politics. But at some point, to move forward, you have to stop looking outward and start focusing on what you can control.
“Everyone has done it, we will drop down there, and we come up with excuses to make ourselves feel better that it wasn't our fault.
“That's our natural behaviour when there's fear, anxiety and stress, but the same question comes back, what are you doing about it?”
Mr McDonald said planning to take losses for years to come is, indeed a plan, but keeping still in the same situation would fail to generate successful results.
“Passionate growers may have a tendency of overreacting when someone does things in a different manner, and we understand that, because they are so passionate about their work, but in some cases, that is the actual limitation that prevents change, keeping them from sitting back and saying, what can I do?" he said.
“I’ll often ask, what are you doing about it? What do you want to do? The common reply is the lack of financial resources, but I tend to insist on the fact that if you’re losing money now and you’ve got nothing to work with, chances are you’ll lose money again next year. If you don’t have the resources now, you’re on track to have even less — maybe nothing — down the line.
“If things haven’t changed in the last three years, they’re unlikely to turn around on their own in the next five. That’s why I’ve been encouraging growers to act early — I was having these conversations years ago, even when prices started dropping and many blamed the tariffs, but the real issue runs deeper, and recognising that sooner gives you the chance to plan, adapt, and take control of your future."
Mr McDonald explains one of the key misconceptions was the overemphasis on tariffs as the root cause of collapsing demand. While trade restrictions played a role, the deeper issue was a dramatic shift in consumer behaviour.
“In China, wine is a social drink — and with two years of strict lockdowns, consumption basically stopped,” he said.
“Now, even as restrictions have eased, the economic environment has changed, and that demand just hasn’t returned to previous levels.
The problem, he adds, is that growers continued to produce for a market that no longer exists at the same scale.
"The signs were all there and as prices tumbled — from $700 to $500, then $300, even $100 — I was having these conversations with growers, saying, ‘we can see where this is going.’ It was all unfolding in the middle of Covid, and yet many were still hoping it would turn itself around."
Looking ahead, Mr McDonald’s greatest concern isn’t just low grape prices — it’s also water.
“Some growers have been selling water just to stay afloat,” he said.
“But with things drying out, the price of temporary water has already jumped — from around $50/ML last year to over $200 this year.”
If the region fails to see rain soon, he warns, prices could skyrocket further, pricing wine growers out entirely.
“You’ve got almond growers who can afford to pay $500/ML for water and most vineyard operators simply can’t compete with that.
"As the industry faces rising costs and falling returns, the time for difficult but proactive decisions is now."