The report, Australian wine grape production projections to 2010-11, was released today.

ABARE's acting executive director, Dr Terry Sheales, said that production was forecast to fall in 2008-09 because of difficult growing conditions in many regions.

"Wine grape growers, particularly in south-eastern Australia, faced shortages of water for irrigation throughout the growing season, and were also hit by a heatwave in late January and early February 2009 which further reduced yields," Dr Sheales said.

"Yields in many regions of Victoria were also reduced by the bushfires in that state, as smoke taint damaged grapes and some vineyards were destroyed."

ABARE expects Shiraz to remain the highest-volume wine grape variety produced in Australia in the coming years.

Chardonnay is expected to be the next highest volume variety, followed by cabernet sauvignon.

Collectively, these three varieties are forecast to account for around 60pc of total Australian wine grape production in 2008-09.

In 2009-10, assuming water availability for irrigation improves and there are no extreme weather events, production is projected to increase to 1.8mt as yields are assumed to return to historical averages.

This trend is projected to continue in 2010-11, ABARE says.

Wine stocks to sales ratios are expected to increase in the next few years as production growth is expected to outstrip sales growth.

Deteriorating economic conditions and strong competition in key export markets are the main factors behind the expected slowdown in wine sales in the coming years.

"As a result, the increasing stocks to sales ratio is expected to maintain downward pressure on wine grape prices in the next few years," Dr Sheales said.

The research was undertaken by ABARE and commissioned by the Grape and Wine Research and Development Corporation.