THE PRESS TUESDAY, JANUARY 28, 1986. Paying off the grape growers

Press, 28 January 1986, Page 16

THE PRESS TUESDAY, JANUARY 28, 1986. Paying off the grape growers

The most curious thing about the Government’s subsidy to grape growers who pull out their vines is not that growers can replant other varieties of grape immediately; nor is it that the greatest beneficiaries of the subsidy will be the country’s four largest wine-making companies. These features of the scheme might be anomalous in the eyes of many people. The most curious thing about the scheme is that it exists at all in the policies of a Government that has shown itself steadfastly opposed to producer subsidies of any sort.

From the time that the Government offered a payment of $6175 for each hectare of vines pulled up, there seemed little doubt that enough growers would take advantage of the subsidy to fulfill the Government’s provision that at least 1200 hectares of vines would have to be uprooted before the subsidy would apply. As it is, more than a quarter of New Zealand’s grape plantings are covered by applications for the subsidy. The cost to the taxpayer will be $9.8 million.

Because the country’s principal winemaking companies account for something like 75 per cent of all the grapes being grown — either in their own vineyards or under contract — they are in a good position to turn the Government’s remedy for overproduction to advantage. The Minister of Trade and Industry, Mr Caygill, says he knows of only one grape grower, in Christchurch, who will use the subsidy to assist with the costs of replacing its present vines with more marketable varieties. It would be surprising, however, if more growers do not consider this option, particularly since Mr Caygill has made it clear that they are quite free to do so.

Warnings of an oversupply of wine and overproduction of grapes have been sounded for many years; but the rapid expansion of vine plantings has continued. Surpluses of grape production have bedevilled the industry for years and there must be some sympathy for the argument that the industry should take the responsibility for the present glut. Part of the problem is the large number

of variables that can play a part in the long period necessary for planning in this industry. Five or six years pass before topclass fruit is obtained from new vines, and in any year, the vagaries of our island climate can turn harvest predictions on their head.

Only a few years ago, a sudden cold snap when the bulk of vines were flowering reduced the expected grape production by 30 per cent, or more than will be achieved by the Government’s vine extraction scheme. Such fortuitous interventions by nature cannot be counted on to mop up surpluses; nor are they desirable, for they are a costly waste of time, money, and effort. In purely economic terms, the proposal to retire land from viticulture by paying growers to tear out vines might be the cheapest solution. Does it mean that the Government will seek to ease overproduction in lamb by paying farmers to kill breeding stock, or seek to reduce dairy surpluses by paying farmers to turn off their milking machines?

Quite obviously, on the evidence of the Government’s other policies, the payment of the vine extraction subsidy will mean no such thing. Growers who elect to replant grapes, albeit different varieties to those they are tearing out under the scheme, can have little illusion that they will have to bear the consequences of their own decision. Neither they nor the Government could expect the taxpayer to accept without demur another extraction scheme in five or six years time.

One difficulty for grape growers is finding a suitable alternative crop. Smaller vineyards that grow only to provide the raw material for their own wines have thrown their lot in with the industry for good or ill, but contract growers might find it hard to break into other horticultural markets, many of which have oversupply problems of their own.

The Government, which has often argued that the removal of subsidies is also the removal of distortions, might well find that the subsidised removal of grape vines will create a distortion in the production of other horticultural crops.