The Ministry for Primary Industries said grape growers suffered a significant erosion in profits over the last season, with unfavourable weather in both Marlborough and Hawke's Bay leading to a 20 per cent drop in average yields.
In addition, in Hawke's Bay the cool summer and the added challenge of rain at harvest meant growers there struggled to meet contract requirements for quality and ripeness, and prices suffered as a result, the ministry said.
"On the positive side the lower yield helped bring the market more into balance," the ministry's Nelson-based senior policy analyst Nick Dalgety said in a statement.
As a result the final price that growers expect for the 2012 crop of Marlborough sauvignon blanc increased for the first time in four years to $1315 per tonne, up 11 per cent from $1190 last year.
But overall, before-tax profit dropped 42 per cent to $3230 per hectare, due mainly to below-average yields per hectare.
Hawke's Bay grape growers in particular continue to rely heavily on off-vineyard income for on-going sustainability.
The outlook for 2013 is positive, with the benchmark model vineyards forecasting an appreciable rise in prices achieved per tonne in both regions, the ministry said.
However, future profitability for individual grape-growing businesses was largely dependent on having desirable grape varieties, a good business structure and a healthy equity.
"Growers believe that changes made to vineyard practices in recent years to reduce costs will be able to be maintained longer term," Dalgety said.
- APNZBy Jamie Gray Email Jamie