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Microeconometric analysis of wine grape supply contracts in Australia

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  • Fraser, Iain

Abstract

This paper examines wine grape supply contracts used in the main grape growing regions of Australia. An empirical analysis provides insight into specific aspects of contract design and implementation. Statistical analyses of sample data reveal differences between regions in contract specifications. Lower quality grape growing regions place a greater reliance on grape quality assessment to determine bonus/penalty payments compared to higher quality regions. Contracts in higher quality regions place greater emphasis on explicit winery involvement and direction in vineyard management.Results indicate that longer duration contracts are more inclusive in terms of the number of clauses included. Evidence of risk shifting (i.e., winery to grower) for high quality grapes is reported,where the price received by growers is determined by the bottle price of the wine produced.

Suggested Citation

  • Fraser, Iain, 2005. "Microeconometric analysis of wine grape supply contracts in Australia," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 49(1), pages 1-24.
  • Handle: RePEc:ags:aareaj:118435
    DOI: 10.22004/ag.econ.118435
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    Cited by:

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    2. Bruno V. Miranda & Brent Ross & Jason Franken & Miguel Gómez, 2022. "Plural forms and differentiation strategies in the agri‐food sector: Evidence from the U.S. wine industry," Agribusiness, John Wiley & Sons, Ltd., vol. 38(3), pages 486-504, July.
    3. Tina L. Saitone & Richard J. Sexton, 2017. "Agri-food supply chain: evolution and performance with conflicting consumer and societal demands," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 44(4), pages 634-657.
    4. Luigi Cembalo & Francesco Caracciolo & Eugenio Pomarici, 2014. "Drinking cheaply: the demand for basic wine in Italy," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 58(3), pages 374-391, July.
    5. Rachael Goodhue & Leo Simon, 2016. "Agricultural contracts, adverse selection, and multiple inputs," Agricultural and Food Economics, Springer;Italian Society of Agricultural Economics (SIDEA), vol. 4(1), pages 1-33, December.
    6. Isaac Maina Kariuki & Jens‐Peter Loy, 2016. "Contractual Farming Arrangements, Quality Control, Incentives, and Distribution Failure in Kenya's Smallholder Horticulture: A Multivariate Probit Analysis," Agribusiness, John Wiley & Sons, Ltd., vol. 32(4), pages 547-562, November.
    7. Davis, Timothy R. & Ahmadi-Esfahani, Fredoun Z. & Iranzo, Susana, 2008. "Demand under product differentiation: an empirical analysis of the US wine market," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 54(4), pages 1-17, December.
    8. Paulson Nicholas D & Katchova Ani L & Lence Sergio H, 2010. "An Empirical Analysis of the Determinants of Marketing Contract Structures for Corn and Soybeans," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 8(1), pages 1-25, May.
    9. López-Bayón, Susana & González-Díaz, Manuel & Solís-Rodríguez, Vanesa & Fernández-Barcala, Marta, 2018. "Governance decisions in the supply chain and quality performance: The synergistic effect of geographical indications and ownership structure," International Journal of Production Economics, Elsevier, vol. 197(C), pages 1-12.
    10. Bardos, Krisztina & Ferto, Imre, 2006. "The Contract Choice of Retailers in Hungarian Beef Sector," 99th Seminar, February 8-10, 2006, Bonn, Germany 7746, European Association of Agricultural Economists.
    11. Steiner, Bodo E., 2009. "The Extent and Nature of Contracting in the Wine Supply-Chain When Moral Hazard is Present," Staff Paper Series 154127, University of Alberta, Department of Resource Economics and Environmental Sociology.
    12. Oczkowski, Eddie & Bandara, Yapa, 2013. "CGE modelling, regional economies, water buybacks," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 57(3).
    13. Franken, Jason R. V. & Bacon, Kevin J., 2014. "Organizational Structure and Operation of the Illinois Wine Industry," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 43(1), pages 1-21, April.
    14. Timothy R. Davis & Fredoun Z. Ahmadi-Esfahani & Susana Iranzo, 2008. "Demand under product differentiation: an empirical analysis of the US wine market ," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 52(4), pages 401-417, December.
    15. Zoltán Bakucs, Lajos & Fertő, Imre & Szabó, Gábor G., 2010. "Contractual relationships in the Hungarian milk sector," IAMO Forum 2010: Institutions in Transition – Challenges for New Modes of Governance 52700, Leibniz Institute of Agricultural Development in Central and Eastern Europe (IAMO).
    16. Fares, M'hand & Orozco, Luis, 2014. "Tournament Mechanism in Wine-Grape Contracts: Evidence from a French Wine Cooperative," Journal of Wine Economics, Cambridge University Press, vol. 9(3), pages 320-345, December.
    17. Kumar, Shiv & Devender & Chakarvarty, Kavita & Chand, Puran & Dabas, J.P.S., 2007. "Mode of Operation and Performance of Contract Farming of Cottonseed in Haryana," Agricultural Economics Research Review, Agricultural Economics Research Association (India), vol. 20(1).
    18. Miranda, Bruno & Chaddad, Fabio, 2016. "Transaction Costs, Capabilities, and Grape Procurement Strategies in U.S. Emerging Wine Regions," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235363, Agricultural and Applied Economics Association.
    19. Yuya Aikawa & Tomoko Hashino & Keijiro Otsuka, 2023. "Agglomeration with the Declining Marshallian Agglomeration Economies:An inquiry into the postwar development of the Nada sake brewing district in Japan," Discussion Papers 2308, Graduate School of Economics, Kobe University.
    20. Paulson Nicholas D & Katchova Ani L & Lence Sergio H, 2010. "An Empirical Analysis of the Determinants of Marketing Contract Structures for Corn and Soybeans," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 8(1), pages 1-25, May.
    21. Fabio R. Chaddad & Jason R.V. Franken & Miguel I. Gómez & R. Brent Ross, 2017. "Coordination of Winegrape Supply Chains in Emerging Markets," Agribusiness, John Wiley & Sons, Ltd., vol. 33(3), pages 289-301, June.
    22. Hervé Lanotte & Aurélie Ringeval-Deluze & Erick Pruchnicki, 2022. "The stabilising effects on GVCs of multi-annual supply contracts between leading and subordinate firms: The example of champagne [Les effets stabilisateurs sur la CGV des contrats pluriannuels d’ap," Post-Print hal-04021392, HAL.
    23. Imre Ferto & Bakucs Lajos Zoltan & Sándor Elek & Csaba Forgacs, 2011. "Contracts in Hungarian Food Chains," MIC 2011: Managing Sustainability? Proceedings of the 12th International Conference, Portorož, 23–26 November 2011 [Selected Papers],, University of Primorska, Faculty of Management Koper.

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