Factors Affecting The Size Of The North Carolina Grape Industry

The North Carolina Grape industry has undergone dramatic changes in the past two decades. Production and acreage expanded rapidly in the late 1960s and early 1970s in reaction to favorable prices from a boom in the wine market. However, producers experienced severe adjustment problems in the late 1970s and early 1980s as the wine boom turned to a bust and as grape prices plummeted. In recent years, both production and real (inflation-adjusted) prices have been low by historical S·tandards. Questions; facing the industry are: What are the future prospects for North Carolina grape producers? Have, current adjustment problems been worked out? Does a potential exist for future expansion of the industry? The intent of the present study is to isolate and to quantify economic factors affecting the equilibrium size of the North Carolina grape industry in order to provide a basis for assessing future prospects for North Carolina producers. The specific objectives are: a. to determine and quantify the factors affecting demand for North Carolina. grapes; b. to develop conditional forecasts of future demand fat North Carolina. grapes, given estimates of. break-even prices for grapes and projections of income and prices for substitute grapes. The report is organized as follows. The next section presents background information on the· industry and patterns of change_in prices and qμantities. In the third section, factors affecting demand for North Carolina grapes are identified and quantified. The fourth section utilizes the demand estimates together with projections on income and prices for substitute grapes to develop conditional projections of the size of the North Carolina grape industry for different break-even prices for North Carolina grapes. Finally, conclusions are presented in the last section.