A Bad Year? Climate Variability and the Wine Industry in Chile

Eduardo Haddad, Department of Economics, University of São Paulo (USP)

Patricio Aroca, Business School, Adolfo Ibáñez University (UAI)

Pilar Jano, Business School, Adolfo Ibáñez University (UAI)

Ademir Rocha, Department of Economics, University of São Paulo (USP)

Bruno Pimenta, Department of Economics, University of São Paulo (USP)

Viticulture is particularly sensitive to climatic conditions. Climate is a factor that influences both the suitability of a region to ripen a specific variety of grapes and the resulting wine style (Jones, 2006). Short-term climate conditions may affect crop yields and vintage quality. As a consequence, the latter conditions affect wine prices (Oczkowski, 2016) and vineyards’ earnings (Ashenfelter and Storchmann, 2010), also compromising the reputation of a wine region. Climatic conditions and their effects on the quantity (yields) and quality of grapes produced will likely have important economic implications to the wine industry (Jones et al., 2005; Webb et al., 2008; Hannah et al., 2013; Mozell and Thach, 2014; van Leeuwen and Darriet, 2016; Ashenfelter and Storchmann, 2016).

While average climate conditions determine wine styles and varieties planted across the globe, different studies have shown that weather (short-term climatic conditions) define the characteristics of the vintages in the wine regions, with implications for wine prices and vineyard profitability (Jones and Storchmann, 2001; Schamel and Anderson, 2003; Haeger and Storchmann, 2006; Ramirez, 2008; Webb et al., 2008; Ashenfelter, 2010; Ashenfelter and Storchmann, 2010; Nunes and Loureiro, 2016; Oczkowski, 2016).

Climate variability is one of the main environmental causes of losses to the agricultural sector, with lower crop yields or failure due mainly to drought, frost, hail, severe storms, and floods. Some of such driving climatic factors on the yield of wine grapes include temperature, solar radiation, and CO2 concentration (Bindi et al., 1996). Weather conditions that directly affect the cultivated and harvested area of wine grapes also affect the quality of the associated wine vintages (Nemani et al., 2001; Jones, 2004; Ramirez, 2008; Ashenfelter, 2010; Oczkowski, 2016). From a wider perspective, climate is part of the notion of “terroir”, with which viticulture and the production of fine wines have a very close association (Jones et al., 2005).

This concept involves matching wine grape varieties to particular combinations of climate, landscape and soils, within specific cultural contexts, to produce unique wines of particular styles (Seguin, 1986). On the one hand, climate change will alter these terroirs and potentially affect the quality of wine grapes pro-duced (de Cortazar and Seguin, 2004) and, on the other hand, wine production and quality are chiefly influenced by site-specific factors, husbandry decisions, and short-term climate variability (Jones and Hellman, 2003).The aforementioned empirical literature on the impact of climate on yield variability and quality of wine grape relies mainly on partial equilibrium reduced-form econometric estimations. There is a plethora of studies that successfully isolate the effects of climate events on a variety of outcomes related to the wine sector in different parts of the world. However, there are not many studies exploring the systemic economic impacts of cli-mate shocks on the grape and the wine sectors.

This wider view is essential in a context of an integrated approach of the production value chain of the wine sec-tor. Backward and forward linkages affect, to different extents, local and external demand by the various economic agents. It is not different for the wine industry, in which sectoral linkages play an important role (Gillespie and Clarke, 2015).In this paper, we will examine the wider impacts of the unfavorable weather conditions that prevailed in the 2015–2016 season in Chile, reducing the volume and the quality of the wine grapes.

DOI: https://doi.org/10.36253/web-7665

Read Full Text: https://oaj.fupress.net/index.php/wep/article/view/7665

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