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Economic Impact of 2012 Frost and Freeze Events in the Lake Erie Region

EXTENSION FOCUS

By Kevin Martin and Tim Weigle

Primary bud injury in Concord and Niagara vineyards
Primary bud injury in Concord and Niagara vineyards in the Lake Erie region of New York and Pennsylvania and estimates of economic impact from potential crop loss. Total farm gate loss is estimated at $13 million. Grape acreage shown in purple.

This article was adapted from the May 10 Lake Erie Regional Grape Program Crop Update.

A perfect storm of conditions which hit the Lake Erie Region maximized the economic impact of weather related events this spring. Historically high bulk juice prices, high crop potential and 11 frost or freeze events have substantially reduced the expected value of the 2012 crop. Crop insurance, potential disaster payments and modified production practices can lessen the negative impact

This region has nearly 29,000 acres of Concord production. With 2011 weather conditions contributing to above average fruiting potential for 2012, production was predicted to reach 175,000 tons. Such production would yield nearly 10 million gallons of 68 brix concentrate, conservatively valued at 150 million dollars and more aggressively valued at 200 million dollars.

Freeze Events

Because of an unseasonably warm March, many vineyards in the Lake Erie grape belt had reached the bud swell stage or further when the first freeze event occurred on March 27. Of the 11 total freeze events, two events caused the majority of primary and secondary bud damage. The first freeze event on March 27, where lows ranged from 18°F  to 26°F, caused significant primary bud damage along the lake plain and vineyards on the escarpment located well beyond the moderating effects of Lake Erie. Initial damage ratings of primary bud loss ranged from 0% along the lakeshore to 14.2% on the escarpment. The second critical freeze event occurred over the weekend of April 28 and 29, resulting in a collective primary bud loss ranging from 4.5 to 100%. Many vineyards with delayed development which escaped major damage during the March 27 freeze event incurred major damage over the April 28 and 29 event. Ratings at this point in time do not account for secondary bud damage (See map).

Bud Loss and Impact on Crop

For a scenario of 40% primary bud loss, we would expect a 30% reduction in crop size assuming an average performance of secondaries. Local climate variation and multiple frost events have made an accurate assessment slightly more challenging. Despite some very cold temperatures, damage varies from less than 5% primary loss to 100% damage. Secondary bud damage is also severe in localized areas.

Assuming a 30% overall reduction in crop size, the total direct economic loss for the industry would range between $45 and $60 million. Gross farmer loss would be approximately $13 million. That total loss is reduced by the potential for crop insurance claims.  It will take some more research to get a handle on the potential value of these claims, which will depend significantly on block identification and volatility. With total average estimated crop loss at 50%, the average grower with catastrophic (CAT) coverage would not have a claim. However, we know the losses are acute in certain blocks and growers have the ability to separate blocks and insure for higher levels of coverage with buy-up plans.

Regional Economic Impact

The entire region should be aware of the impact this direct loss may have. The multiplier effect of these losses will change spending patterns for farmers, processor employees and farm workers. Changes in spending patterns can impact small business revenue and sales tax. A small county in New York State actually uses the milk price as a factor in budgeting sales tax revenue. Keep in mind that business expenses do not result in sales tax. Any impact on sales tax that a county sees from lower milk prices or grape crop loss would be due to a multiplier. A multiplier effect in this scenario is a community effect1.

Another factor in this economic loss is the global nature of the business. This loss is not shouldered entirely by the region. Using bulk juice as a valuation, rather than retail price does focus on what value this region adds. Even so, shareholders, distributors and others will feel some of this economic loss.

[1] Riggs, William, et al. Importance of Economic Multipliers, Fact Sheet-04-59. University of Nevada Cooperative Extension. http://www.unce.unr.edu/publications/files/cd/2004/fs0459.pdf

Kevin Martin is the farm business management specialist with the Lake Erie Regional Grape Extension Program and Pennsylvania State Extension.
Tim Weigle is the statewide integrated pest management (IPM) specialist with the Lake Erie Regional Grape Program and the New York State IPM Program.