Dane Hudson, chief executive of McGuigan Simeon Wines, says the so-called "wine lake" is being reduced dramatically because of the continuing drought in Australia.

He told the Australian Broadcasting Corp. the 2007 vintage was the smallest in seven years with the crop suffering from frost, fires and "worst of all, the drought and reduced water allocations."

Hudson says it is difficult to estimate the current depth of the wine surplus. "I suspect it is no more than a few hundred million liters, which sounds a lot but, in reality, is only a few months' supply," he said.