AAWE, Economics Dept, New York University, 19 W 4th St, 6Fl., New York NY 10012aawe@wine-economics.org

AAWE Working Paper No. 219 – Business

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AAWE Working Paper No. 219 – Business

Insurance for Growers of Wine Grapes

Edward J. O’Boyle

Introduction

The glass of wine that you are having with your dinner, whether in your own home, at a friend’s or a restaurant, is subsidized by the federal taxpayer whenever the growers who produced the grapes that went into the wine protected themselves from a financial loss due to crop failure by purchasing crop insurance. The subsidy has the effect of lowering the price of that glass of wine by reducing the full cost of growing the grapes provided the resulting economic gain is passed along at least in part to the winery and in turn to the vintner, retailer, and finally the consumer.

It follows that crop insurance is a blend of private and social insurance because the cost to the grower of insuring against a crop failure, which is included in the cost of production, no longer is entirely privatized. It is shared with the public through a taxpayer-supported subsidy.

Our objective in the following is to describe the need for crop insurance and its origins, the specific details of the protection for U.S. growers, the private and social costs of producing grapes, and the role of the Agriculture Department. In the following, we do not address table grapes, raisins, damaged vines, or federal area-wide crop insurance. That type of insurance protects the individual producer, not on the basis of his own personal loss, but on the average losses across the area where his vineyard is located. (ProAg nd, np).1 Much more research is needed for a more detailed account of insurance that focuses on wine grapes than is provided herein. To help facilitate that research we provide links to articles and books that examine in greater detail reinsurance, the history of wine grapes, licensing agents and brokers, the history of crop insurance prior to the New Deal, and written agreements between growers and insurers.

Our primary emphasis in the following is not on the grapes or the wine but on the human agents involved: the grower, the insurer, and the taxpayer.

This article was written by Karl Storchmann

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