Revenue, Cost and Profitability of Grape Production in the U. S Revenue, Cost and Profitability of Grape Production in the U.S. Pacific Northwest: Econometric Analysis of Farm-Level Agricultural Census Data John Antle Susan Capalbo Hongliang Zhang Dept. of Applied Economics Oregon State University Presented at AAWE 10th Annual Conference June 22 2016 Bordeaux, France

Study Area Oregon Washington 28 American Viticultural Areas (AVA) 10% of U.S. wine grape acreage in 2014 Wine grape and wine production value over $8 Billion in 2013 with an average growth rate 8% from 2009-2013 Large differences in soils, climate, grape varieties, number and scale of producers in Oregon and Washington

Research Goals Evaluate the factors affecting the revenue, cost and profitability of grape production using disaggregate data Econometric analysis of farm-level agricultural census data on grape revenues, costs, and net returns, by size & type of operation, location Evaluate the usefulness and limitations of the census data

Summary Statistics of Wine Grape Farms for Three AVAs, 2002, 2007, 2012

Summary Statistics of Grape Farms by Three AVAs (cont.)

Results SUR model with Year and AVA Fixed Effects to estimate revenue, cost, and net returns equations with data for 2002, 2007, and 2012 Heterogeneous effects between large and small farms Heterogeneity across AVAs

Coefficient Estimates for Grape Farms in Oregon and Washington Notes: Selected results are presented. *** p<0.01, ** p<0.05, * p<0.1

Coefficient Estimates for Grape Farms in Oregon and Washington (cont’) Notes: Selected results are presented. *** p<0.01, ** p<0.05, * p<0.1

Coefficient Estimates by AVA for Grape Farms in Oregon and Washington Notes: Selected results are presented. *** p<0.01, ** p<0.05, * p<0.1

Coefficient Estimates by AVA for Grape Farms in Oregon and Washington (cont’) Notes: Selected results are presented. *** p<0.01, ** p<0.05, * p<0.1

Discussion Census data useful but has important limitations The most detailed data available on revenues and costs Confirm expected differences between small & large producers (low or negative returns) Other factors (e.g., ownership, climate) do not show consistent effects across AVAs Locations identified by zip code areas, cannot identify precise site characteristics (e.g., soils) Lack grape variety, yields, quality, input quantities Implications for industry structure & dynamics Inefficient scale, high cost, small vs large producers

Conclusions Need more detailed, site-specific data to control for site & management characteristics Precise location Grape variety, yield Detailed management and input data Quantity and timing of inputs, organic, etc. Plan: use AgBizLogic software with cooperating producers