The 2.1-billion litres of unsold Australian wine sitting in storage is wreaking havoc on Victoria's grape harvest this season, as a storage shortage forces growers to leave grapes on vines.
Last year the nation's wine exports plummeted $860 million, or 30 per cent, due to China's crippling tariffs on bottled Australian wine.
China's anti-dumping duty introduced the last march of up to 218pc for containers of two litres or less, and is set to remain in place for five years.
It has been a blow for the industry with Australia's wine exports the lowest in nearly two decades, as the volume of wine sent overseas dropped 17pc to 619-million litres in 2021.
Exports to China have fallen from $1.2 billion to just $20 million, according to Australian Grape & Wine chief executive Tony Battaglene, to place it 14th on the list of Australian export destinations, sitting behind Taiwan and just ahead of Thailand.
"Bulk wine exports are still technically possible into China but we are seeing order delays at the moment so essentially the market is closed to us and that has been reflected in prices of grapes within Australia with much lower prices this vintage," Mr Battaglene said.
Sales to neighbouring Hong Kong, which is not subject to the tariffs from China, were up 45pc to $192 million, while wine shipments to Singapore more than doubled to $166 million.
The drop off in sales coincided with a bumper 2021 vintage, which has triggered a storage crisis of available tank space this vintage and the price for red wine rape varieties to plummet.
"Tanks are essentially full in many areas and if a grower doesn't have a contract and relies on the spot market, they probably won't be able to sell their grapes," Mr Battaglene said.
"There will be grapes left on the vine this year - it is hard to assess the amount but it will be considerable.
"We are moving to an oversupply situation with too much wine in the tank for all those grapes to be picked."
While this season's vintage was forecast to be back 15pc on last year's boom harvest, he said reduced grape prices reflected the lower demand.
"The pain will be widespread, not just the heartland areas of the Murray Valley, Riverina and Riverland, it will go to the traditionally higher value grape regions too," he said.
Meanwhile many Victorian wineries have doubled down on the domestic market while looking elsewhere for new export opportunities.
This includes father-daughter winemaker duo Adrian and India Munari, Munari Wines, Heathcote, who lost 30pc of their export market when the China tariffs were introduced.
"All producers who were exporting their product are now in the same position, which is why there is so much surplus wine around at the moment," Mr Munari said.
Our domestic market has picked up because we have focused on building up our own database, with more functions and events to encourage people to come to our cellar door.
- Adrian Munari, Munari Wines, Heathcote
"Once the dispute between the two governments started, it was obvious we needed to find a back-up market.
"It is an acute situation - we have always had great relationship with our distributors in China but since the tariff has been introduced we've really lost contact.
"It doesn't look like we will come out the other side any time soon either."
The Munaris are attending the USA Trade Tasting wine expo in Chicago later this year, on a mission to re-establish a customer base in the US.
"Our domestic market has picked up because we have focused on building up our own database, with more functions and events to encourage people to come to our cellar door," he said.
"We've got out of it okay but there are some businesses that have been far more burdened with these challenges."
For many Victorian grape growers, the cloud of uncertainty continues to hang over this harvest as they enter the second year effectively shut out from Chinese distribution.
Some growers in the Murray Valley are choosing not to pick this harvest as winegrape prices slump by 40pc.
Australia is challenging China's tariffs in the World Trade Organization but Mr Battaglene said the process was lengthy, with the first attempt already blocked by China.
"It will take time to offset the loss in trade to mainland China," he said.
"This is not something that will happen overnight, nor within a year.
"But the Australian wine sector is resilient and there are early signs that hard work in expanding and diversifying markets is paying off."