How are vineyards management strategies and climate-related conditions affecting economic performance? A case study of Chilean wine grape growers

In wine grape production, growers decide between alternative management strategies of the vineyard that have direct consequences on competitiveness. Since on-farm competitiveness allows growers to remain in the industry, it has become a highly relevant issue for the viticultural sector and a better understanding is required of the factors affecting vineyards’ economic performance. The aim of this study is to evaluate the impact on the economic performance of four management strategies. The vineyards management strategies analyzed in this study were: a) training system (tendone vs. vertical structures), b) wine grape destination (reserve vs. varietal wines), c) irrigation method (pressurized vs. gravity irrigation), and d) mechanization in harvesting (mechanized vs. hand-picked). These vineyards’ strategies are of different scope and nature, some of them represent structural (fixed) decisions while others are more related to flexible (alternative) decisions. This study uses the case of Chile, a country that has experienced rapid development of its export-oriented wine industry in recent decades; between 1990 and 2015, vineyard plantations doubled, wine production increased fivefold, and wine export volume grew from 22 to 1,445 million liters. The data used in the study come from face-to-face interviews administered to 336 Chilean wine grape growers, which was complemented with climatic variables retrieved from Geographic Information Systems. The study area covers the O’Higgins and Maule regions in Central-South Chile (33° 50’ and 36° 33’ S, WGS84 datum), located in central Chile in the heart of the fruit and vineyard production (Figure 1). Combined, both regions comprise 73% of the national planted area of vineyards, distributed among three important valleys, from north to south: Rapel, Curicó, and Maule. The area under study has a temperate Mediterranean climate, characterized by a six-month dry season (Sept- Mar) and a rainy winter, with precipitation between 600 and 700 mm annually. The primary data used in this study was generated at the vineyard level, administering a georeferenced survey on-site to 436 wine grape growers between October 2014 and March 2015. This survey was restricted to vineyards from irrigated lands, growing at least one hectare. The sampling procedure consisted of a stratified random sample across 16 municipalities, where the number of surveys administered was determined depending on the relative number of vineyards in each municipality. The questionnaire administered to wine grape growers collected detailed economic and agronomic information for the main variety grown in the vineyard, such as planted area, yield, grape price, and (per hectare) intensity of use of inputs and labor. Growers were asked about the number of applications, doses, and unitary prices in the case of agrochemicals (i.e., fertilizers, herbicides, insecticides, fungicides, and acaricides) and the number of working days or agricultural machines/equipment in the case of labor (i.e., harvest, pruning/mooring, tipping of shoots, de-sprouting, canopy defoliation, physical weed control, and other labor), which were valued at fixed market prices. Regarding growers’ performance, the yield obtained by each grower was multiplied by the average grape price of the variety in the sample. A log-log regression model of total value product (TVP) for the main variety grown in the vineyard was estimated, using production factors, vineyards’ attributes, management strategies, and climate-related conditions as explanatory variables. An interesting contribution of this study is the identification of TVP functions for land, fertilizers, fungicides, other agrochemicals, labor, and the age of vines. Our results show that the training system has the most impact on TVP, where tendone-trained vineyards demonstrated 50% higher TVP than those vertically trained. Reserve quality production also has a positive effect on TVP, increasing it by 22% compared to vineyards producing varietal quality grapes. In contrast, the use of pressurized irrigation systems and mechanization in harvesting do not present a significant effect on TVP. The findings of this paper represent an advance in the understanding of the economic performance factors associated with wine grape growing and could serve to guide on-farm decisions and sectoral policies in pursuing the competitive development of wine grape growers.