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The Brexit effect on Australian wine


Philip White marvels at the wine industry’s sudden surprise at the Brexit referendum and its implications.

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Jeez. Everyone’s shocked. But over the weekend, Marc Soccio of the wine and agriculture industry finance house, Rabobank, worked out a statement.

He thought a lower pound would send whatever was left of the United Kingdom out looking for suppliers of cheaper meat and wine.

“All of a sudden those products start to look a hell of a lot more expensive and there would be a demand impact from that if it lasts long enough … We all expected if they did choose to leave the EU that the pound would be negatively impacted and the pound will be lower for longer as a consequence and it means the value of our key agri exports will be impacted,” he told The Weekly Times.

Duh. While this came as not much of a shock to some, it coincided with whispers from a growing number of small wine producers. “Well, Whitey,” is the mantra, “that sure explains why my Brit agent hasn’t called back to confirm that order they placed a month back.”

Put simply, as far as the ethanol business goes, Brexit looked like it could bring a good-sized drop in whisky prices – it there’s any good whisky left in the mountains of barrel stacks in Scotland – and an expectation that if we are to hold our tenuous acres of the UK discount shelves, our wine would have to be considerably cheaper.

Of course there’s nothing new in this line. They’ve been throwing that at their prison-camp/colony for 200 years, Land of Hope and Glory playing while the church bells chime.

But it’s still not quite what the entire communities of technically bankrupt growers along our big rivers hoped to hear.

Soccio’s explanation of the shenanigans in Britain and the EU were remarkable only in their solitude: if anybody else had anything to say in consolation or warning they certainly didn’t manage to raise their bleat above all that shocked-and-disgusted white noise that filled the media.

Not to use my name too lightly.

There’d been little in the way of sage advice from big exporters who you’d think probably understood the implications of the British mischief, like Pernod Ricard (Jacob’s Creek) or Accolade (Hardy’s). Or, for that matter, all those confounding wine industry councils – bodies may be the better word for them – which seemed just as shocked and bedazzled by Brexit as the half of Great Britain that voted against it.

So while we wait for a better explanation, let’s go back a bit.

First, the Brexit referendum was predictable.

Second, its results are not compulsory: government can ignore the people’s will if it chooses. That referendum was really not much more than a very extravagant market research poll like our promised equal marriage rights plebiscite. Politicians can ignore its result.

Third, it always pays to read the treaty: the formal mechanics of a UK secession from the EU cannot commence until the Prime Minister of the United Kingdom signs the Lisbon Treaty’s Article 50. This will not be happening soon.

Whether he meant to or not, David Cameron has left his successor to fry as the lobbyists for everything stable in finance, banking, politics, international economics and the EU itself mount impossible pressure on whoever ends up being PM, probably Boris Johnson, to do something else. Anything else.

Of course a person as stable and predictable in their conservatism as BoJo can be expected to do pretty much exactly that. Whatever it is. In the meantime, it’s astonishing to hear hardened Brit political hacks marvelling that Nicola Sturgeon is the only leader in the British Isles with a plan. Those whisky prices may hold.

Fourth, in this world, all the money flows to where it’s easiest for it to be. So in the long term, like the real long term, if Brexit really does become an exit and the burghers of The City are smart, they can by deregulation make London an easier place to traffic, and an alternative to the anal retention across the Channel. The finance world will follow.

Even the finance world drinks wine. They’ll be very thirsty after this fiasco.

Which may be what Mr Soccio meant by his “flight to safety: … I think a lot of commodity markets are going to be really shaken by this result until we can fully digest it”, he said. “The same goes for currency. These sorts of currency shifts are going to take a while for commodity markets and financial and general equity markets to recalibrate.”

So. It’s a matter of wait and see. As I suggested earlier. Duh.

In the meantime, the exporters of Australia’s biggest discount wines to the traditional United Kingdom market are in very deep trouble. Whether they can continue to screw our embattled growers by convincing them to stay in their current unprofitable horror remains to be seen.

Cruelly, Brexit may simply finally force the closure of a huge part of the big irrigation, high-volume, minimal-profit market, when no amount of political wrangling over water and global warming and whatnot will ever achieve the same harsh result.

No federal politician has been game to face this.

As for that premium end where the profits reside? Those little strugglers with the unconfirmed orders?

Right now, they’re not much better off.

So what has our Prime Minister got to say about all this, with an election staring us down?

“I remind Australians that, given that we are living in a world of great opportunities, but also great challenges and uncertainties, now more than ever Australia needs a stable majority Coalition government,” he said.

I reckon that’s worth another “Duh!”

Hang both houses, I say.

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