Contract use widespread in wine grape industry

Goodhue, R; Heien, D; Lee, H; Sumner, D

Contract use widespread in wine grape industry

Authors

Rachael E. Goodhue
Dale M. Heien
Hyunok Lee
Daniel A. Sumner

Authors Affiliations

R.E. Goodhue is Assistant Professor; D.M. Heien is Professor; H. Lee is Research Economist; D.A. Sumner is Professor, Department of Agricultural and Resource Economics, UC Davis. Sumner is also Director, UC Agricultural Issues Center. Goodhue, Heien and Sumner are members of the Giannini Foundation of Agricultural Economics. The authors thank Rich Sexton for his useful comments, and the grape growers who participated in the survey for the information they provided.

Publication Information

Hilgardia 56(3):97-102. DOI:10.3733/ca.v056n03p97. May 2002.

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Abstract

The use of agricultural contracts between farmers and processors or other buyers has increased substantially in recent years. Roughly half of all U.S. fruit and vegetable production is under contract. Contract usage varies widely across agricultural products. For example, 95% of poultry is raised under contract while only 13% of corn is. The wine grape industry utilizes contracts, yet little is known about the extent of contract use, or the use of specific terms and objectives. We used a survey to analyze contract use among wine grape producers, determine which users are utilizing contracts, and identify how they differ from nonusers. Ninety percent of the growers who responded to the survey have contracts, the majority of which were multiyear, averaging 3.7 years. Growers with more experience, larger vineyards, more expensive grapes and longer relationships with the buyer were more likely to enter into contracts.

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