Epsilon Archive for Student Projects

Abstract

In the last years, the organic wine production sector has experienced a constant growth but there still several challenges to face. In Italy, in spite of the leading role worldwide for this activity, wine producers still have difficulties when integrating organic production in their operations. This is due to the confusion among consumers about different wine qualities and organic labels that brought them to refuse to pay a higher price for a bottle of organic wine. Consequently, wineries do not recognize a premium price to organic grapes. At the bottom of the supply chain, grapes growers are in front of a decision: adopting organic farming or continuing with conventional practices. Those ones who opt for the first option are entitled to receive governmental subsidies from the European Union.
Based on historical observations, this study aims to understand the profitability of growing organic grapes in the absence of market incentives. The study focuses on Chianti grapes’ growers of the province of Arezzo, central Italy. Theoretically, the study is based on the use of a net present value analysis, complemented by a sensitivity analysis of the results. Empirically, the data used relate to grapes’ production in the period 2004-2013. These have been elaborated in order to obtain insights about the impact over the profitability of organic farming of the following elements: farm size, quality schemes, subsidies and risk.
The conclusions pointed out that organic farming is generally more lucrative and less risky than conventional farming. The only exception is observed when considering the group of Chianti grapes’ growers, who do not own an estate large enough to entitle themselves as professional. My findings also highlighted the complete dependency of the farmers on governmental subsidies. Without a support scheme organic farming would be both riskier and less profitable and then, not a practice to be chosen.