Standard output versus standard gross margin, a new paradigm in the EU farm economic typology: what are the implications for wine-grape growers?

Abstract

A new farm economic typology has recently been introduced in the EU. This study compares the economic performance of wine-grape growers in four important quality wine areas of Sicily taking into account the different EU economic typology standards of standard gross margin (the old method) and standard output (the new method). The objective of this study is to identify the differences between the two methods and to ascertain the potential implications for small wine-grape growers’ profitability and their access to public support. We seek to determine whether restrictions can be identified that limit the potential benefits from rural development policies.

For this purpose, we applied the economic criteria of the EU to a representative sample of Sicilian wine-grape growers in order to compare the economic profitability of wine-grape farms in protected designation of origin areas. This comparative approach has allowed us to categorize the economic size of the sample in accordance with recent EU modifications and discuss the possible impacts that the adoption of the new economic criteria would have on access to the Rural Development Programme measures for wine-grape growers.

Keywords:

• access to RDP measures
• economic size of farms
• standard gross margin
• standard output

Notes

1. DOCG means ‘controlled and guaranteed designation of origin'. According to this classification, DOCG wines are considered to be the highest quality wines in the Italian market.

2. Since 1984 ‘the economic size of the farm is defined according to the total standard gross margin of the farm itself and is expressed in European Size Unit (ESU)'; the ESU corresponds to 1.200 ECU/euros (Decision 85/377/CE). Regulation (EC) no. 1242/2008 states that ‘the economic size of the farm is defined according to its total standard output'.

3. The index number indicates the relative change occurring in values with reference to a previous base value (average sample), conventionally given the number 100.