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Measuring The Economic Effect Of Global Warming On Viticulture Using Auction, Retail And Wholesale Prices

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  • Ashenfelter, Orley
  • Storchmann, Karl

Abstract

In this paper we measure the effect of year to year changes in the weather on wine prices and winery revenue in the Mosel Valley in Germany in order to determine the effect that climate change is likely to have on the income of wine growers. A novel aspect of our analysis is that we compare the estimates based on auction, retail, and wholesale prices. Although auction prices are based on actual transactions, they provide a thick market only for high quality, expensive wines and may overestimate climate’s effect on farmer revenues. Wholesale prices, on the other hand, do provide broad coverage of all wines sold and probably come closest to representing the revenues of farmers. Overall, we estimate a 1°C increase in temperature would yield an increase in farmer revenue of about 30 percent.

Suggested Citation

  • Ashenfelter, Orley & Storchmann, Karl, 2010. "Measuring The Economic Effect Of Global Warming On Viticulture Using Auction, Retail And Wholesale Prices," Working Papers 90482, American Association of Wine Economists.
    • Handle: RePEc:ags:aawewp:90482
    DOI: 10.22004/ag.econ.90482
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    1. repec:reg:rpubli:291 is not listed on IDEAS
    2. Orley Ashenfelter & Karl Storchmann, 2010. "Using Hedonic Models of Solar Radiation and Weather to Assess the Economic Effect of Climate Change: The Case of Mosel Valley Vineyards," The Review of Economics and Statistics, MIT Press, vol. 92(2), pages 333-349, May.
    3. Schnabel Hubert & Storchmann Karl, 2010. "Prices as Quality Signals: Evidence from the Wine Market," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 8(1), pages 1-23, February.
    4. Jones, Gregory V. & Storchmann, Karl-Heinz, 2001. "Wine market prices and investment under uncertainty: an econometric model for Bordeaux Crus Classes," Agricultural Economics, Blackwell, vol. 26(2), pages 115-133, November.
    5. Wolfram Schlenker & W. Michael Hanemann & Anthony C. Fisher, 2006. "The Impact of Global Warming on U.S. Agriculture: An Econometric Analysis of Optimal Growing Conditions," The Review of Economics and Statistics, MIT Press, vol. 88(1), pages 113-125, February.
    6. John W. Haeger & Karl Storchmann, 2006. "Prices of American Pinot Noir wines: climate, craftsmanship, critics," Agricultural Economics, International Association of Agricultural Economists, vol. 35(1), pages 67-78, July.
    7. R.P. Byron & O. Ashenfelter, 1995. "Predicting the Quality of an Unborn Grange," The Economic Record, The Economic Society of Australia, vol. 71(1), pages 40-53, March.
    8. Byron, R P & Ashenfelter, Orley, 1995. "Predicting the Quality of an Unborn Grange," The Economic Record, The Economic Society of Australia, vol. 71(212), pages 40-53, March.
    9. Mendelsohn, Robert & Nordhaus, William D & Shaw, Daigee, 1994. "The Impact of Global Warming on Agriculture: A Ricardian Analysis," American Economic Review, American Economic Association, vol. 84(4), pages 753-771, September.
    10. Wolfram Schlenker & W. Michael Hanemann & Anthony C. Fisher, 2005. "Will U.S. Agriculture Really Benefit from Global Warming? Accounting for Irrigation in the Hedonic Approach," American Economic Review, American Economic Association, vol. 95(1), pages 395-406, March.
    11. Olivier Deschênes & Michael Greenstone, 2007. "The Economic Impacts of Climate Change: Evidence from Agricultural Output and Random Fluctuations in Weather," American Economic Review, American Economic Association, vol. 97(1), pages 354-385, March.
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    Cited by:

    1. Maria De Salvo & Roberta Capitello & Diego Begalli, 2014. "The estimation of climate change impacts on the adoption of sustainable production processes in viticulture: a multidisciplinary approach," International Conference on Competitiveness of Agro-food and Environmental Economy Proceedings, The Bucharest University of Economic Studies, vol. 3, pages 10-19.
    2. Ashenfelter, Orley & Storchmann, Karl, 2014. "Wine and Climate Change," Working Papers 164854, American Association of Wine Economists.
    3. Algieri, Bernardina & Iania, Leonardo & Leccadito, Arturo & Meloni, Giulia, 2023. "Message in a Bottle: Forecasting wine prices," LIDAM Discussion Papers LFIN 2023004, Université catholique de Louvain, Louvain Finance (LFIN).
    4. Wienand Kölle & Andrea Martínez Salgueiro & Matthias Buchholz & Oliver Musshoff, 2021. "Can satellite‐based weather index insurance improve the hedging of yield risk of perennial non‐irrigated olive trees in Spain?," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 65(1), pages 66-93, January.
    5. Ashenfelter, Orley, 2017. "The Hedonic Approach to Vineyard Site Selection: Adaptation to Climate Change and Grape Growing in Emerging Markets," Journal of Wine Economics, Cambridge University Press, vol. 12(1), pages 3-15, February.
    6. Jesse Tack & Ardian Harri & Keith Coble, 2012. "More than Mean Effects: Modeling the Effect of Climate on the Higher Order Moments of Crop Yields," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 94(5), pages 1037-1054.
    7. De Salvo, Maria & Begalli, Diego & Capitello, Roberta & Signorello, Giovanni, 2015. "A spatial micro-econometric approach to estimating climate change impacts on wine firm performance: A case study from Moldavia region, Romania," Agricultural Systems, Elsevier, vol. 141(C), pages 48-57.
    8. R. P. Dayani Gunathilaka & James C. R. Smart & Christopher M. Fleming, 2017. "The impact of changing climate on perennial crops: the case of tea production in Sri Lanka," Climatic Change, Springer, vol. 140(3), pages 577-592, February.
    9. Eduardo A. Haddad & Patricio Aroca, Pilar Jano, Ademir Rocha, Bruno Pimenta, 2019. "A Bad Year? Climate Variability and the Wine Industry in Chile," Working Papers, Department of Economics 2019_37, University of São Paulo (FEA-USP).
    10. Kym Anderson, 2010. "The New World in Globalizing Wine Markets: Lessons from Australia," Wine Economics Research Centre Working Papers 2010-09, University of Adelaide, Wine Economics Research Centre.
    11. Diego Begalli & Roberta Capitello & Maria De Salvo, 2013. "Evaluation of Climate Change Effects on the Wine Industry: An Interdisciplinary Approach," International Conference on Competitiveness of Agro-food and Environmental Economy Proceedings, The Bucharest University of Economic Studies, vol. 2, pages 14-26.

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    More about this item

    Keywords

    Demand and Price Analysis; Environmental Economics and Policy;

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco
    • Q1 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects

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