1. Efficiency of Old and New Wine Growing Regions Towards International Comparisons American Association of Wine Economists Annual Conference, Bordeaux, June 2016
Beatrice Conradie University of Cape Town
Jenifer Piesse Bournemouth University& University of Stellenbosch
Colin Thirtle Imperial College London, Pretoria & Stellenbosch
Nick Vink, University of Stellenbosch
DfID-ESRC Joint Scheme, “Factor Endowments, Biased Technological Change, Wages and Poverty Reduction: Can Genetically Modified Crops Bring a Green Revolution to SSA?” Final Report, January, 2009.

2. Groot Constantia

3. Outline Results – for full sample – then old and new regions
Stochastic frontiers and farm level technical efficiencies
Data envelopment analysis (DEA) and farm size (scale)
DEA and total factor productivity index comparisons

4. From the Company Gardens to the Orange River
On 2 February 1659 Commander Jan van Riebeeck wrote in his diary: “Today, praise be to God, wine was made for the first time from Cape grapes.”
So there are really old regions and some very recently started.
Experience and terroir or follower advantage?

5. Literature Review Two papers in particular Both have weak contradictory results on farm size, efficiency and productivity – we hope to get more solid results
Townsend, R; Kirsten, J.F. and N. Vink. (1998). Farm Size, Productivity and Returns to Scale in Agriculture Revisited: A Case of Wine Producers in South Africa, Agricultural Economics, 19,
Conradie B, Cookson G and Thirtle C, Efficiency and Farm Size in Western Cape Grape Production: An Enquiry into Pooling Small Datasets, South African Journal of Economics, 74:2, , June

6. The Data
Panel of 847 observations, with eleven years of data, from 2005 to 2015, for a sample of 77 farms in nine regions of South Africa.
Old are Paarl and Stellenbosch
New are Breedekloof, Klein Karoo, Malmsbury, Olifants River, Orange River and Worcester

7. PRODUCTION FUNCTION
OUTPUT (income) is explained by INPUTS of:
Land – Area planted to wine grapes
Labour (wages) – permanent and temporary
Fertilizer – in constant 2010 Rand
Pesticides – Rand
Machinery – fuel costs (& maintenance &repairs?)
Electricity – cost – for pumping irrigation water
This estimates a frontier formed by the most efficient farms and calculates the efficiency of the other farms relative to this frontier – allowing for random variation due to the weather etc.

8. Production Frontier Results
DEPENDENT
ALL AREAS
OLD AREAS
NEW AREAS
VARIABLE
ELASTICITY
INCOME
LAND
0.55***
0.48***
0.64***
LABOUR
0.11***
0.14**
0.04
FERTILISER
0.04***
0.01
0.03**
PESTICIDES
0.12***
MACHINERY
0.05*
0.19***
0.09***
ELECTRICITY
0.04**
-0.10***
0.03*

9. Explaining the Inefficiencies
ALL AREAS
OLD AREAS
NEW AREAS
EFFICIENCY
COEFF
% SUPERVISION
-0.01**
-0.02**
-0.017***
% PERM LABOUR
-0.002**
-0.01***
0.001
% INORGANIC FERTILISER
0.002**
0.003**
0.001*
MODERN TRELLIS
-0.001
-0.005***
% DRIP IRRIG
-0.003***
0.000
-0.007***
% DRY LAND
% OLD VINES
-0.002
% RED WINE
0.016***
-0.003