Australia has been growing wine grapes and making wine almost since the first settlers arrived in 1788. Until 1960, the country consumed most of its annual production of a million cases of dry table wine (it made more sweet, fortified wines and sparklers). In the 1970s and 1980s, the country underwent a wine boom, vastly enlarging vineyard plantings and introducing modern winery technology that resulted in greatly increased quantity and quality. Australia went from being a wine-importing country in 1985 to exporting 600 million liters, worth $2.74 billion, 20 years later. Today it is the world's fourth-largest wine exporter after Italy, France and Spain.

The majority of vineyards are clustered in the southeast corner of the continent near Sydney, Melbourne and Adelaide. There is smaller production in Western Australia near Perth, the island of Tasmania and Queensland. Chardonnay and riesling are the leading white grapes and syrah (called shiraz locally) and cabernet sauvignon dominate the reds.

Expansion has continued at breakneck speed. From 2000 to 2008, the number of wineries ballooned from 990 to more than 2,200. The number of hectares planted with wine grapes jumped from 98,000 to 164,000 and the total production more than doubled from 737 million liters to 1,500 million liters.

Exports began to fall in 2007. Last year there was a 9-percent decline by volume. It was a wake-up call that the industry was in crisis, a crisis caused by a perfect storm of international influences. First was the growth of supply combined with falling demand. Second was the increased market share going to other new world wine regions that were also expanding, especially Chile and Argentina. And finally was the rise in the exchange rate for the Australian dollar, which is now at near parity with the U.S. dollar, that cut winery profits by about 30 percent.

The Winemaker's Federation of Australia has suggested that wineries would have to reduce production by 20 percent to remain profitable. Today's 100-million-case surplus could double in the next two years if the current trends continue. Surplus wine is being discounted to unsustainable levels. According to an article in The West Australian daily newspaper on Dec. 3, 2009, a 750-milliliter bottle of Whisper's shiraz at a local wine shop sells for $2.95. A 600-milliliter bottle of Coca Cola at the same store costs $3.50.

Our state wine stores haven't gotten to that price level yet but there are many attractive bargains there none the less. I think it's safe to say that there will be many more to come, this year and next, as Australia goes about stabilizing over-production.