Exploration in the Design of an Optimal Weather Hedging Variable for Viticulture

A number of significant annual weather variables are known to be critical to the quantity and quality of vineyard harvest. In rain-fed viticulture regions for example, most quality wines are produced in areas where the annual precipitation is below 700 to 800 mm (Jackson and Shuster, 1987; Galet, 1993). Indeed, barring any moisture stress to the vine, a warm, dry growing season is generally associated with good quality and high prices (Haeger and Storchman, 2006). Ashenfelter et al. (1995) for example, finds that great vintages for Bordeaux wines correspond to the years in which the previous winter has been wet, the growing season is warm and August and September are dry. Figure 1 (adopted from Cyr et al., 2008a) indicates the typical weather related risks associated with grape growing in the northern hemisphere. These include: severe winter temperatures leading to vine injury; frost and/or heavy rainfall in spring; cool wet conditions or conversely excessive heat during the growing season; heavy rainfall in the harvest season and/or early frost in the fall. Indeed excessive rain during the harvest season and the subsequent dilution of grapes can lead to lower brix levels and consequently a reduction in the price per ton obtained by as much as 60% for some varietals (Cyr et al, 2008b). Of course not all viticulture regions around the world experience the same degree of risk with respect to the various weather factors listed in Figure 1. The risk of vine damage due to severe winter conditions is a more serious risk factor for grape growers located in the northern November – March -Heavy Rain -Early Frost April-May Excessive Cold –Winter Damage -Frost -Heavy Rain June August Sept Oct Figure 1: Weather Related Risk Factors -Excessive Heat Or Cool Rainy Conditions