Benefit Cost Analysis of Wine Australia R&D Investments 2017-18
Abstract
To evaluate the value of Wine Australia’s R&D investments, AgEconPlus was commissioned to undertake an ex-post benefit-cost analysis of six randomly selected projects. The resulting areas of analysis were market access, enhanced yeast and bacterial performance, grape growing for excellence, enhancing grapevine and rootstock performance, wine provenance and measures of quality, and climate adaptability, through the following projects:
- AWRI 2.2.1 Collecting and disseminating information regarding agrochemicals registered for use and maximum residue limits in Australian viticulture
- AWR 1304 Ensuring the continued efficacy of Brettanomyces control strategies for avoidance of spoilage
- CSP 1401 Understanding and manipulating small signalling molecules to affect the yield/flavour (‘quality’) nexus
- CSP 1402 Evaluating and demonstrating new disease resistant varieties for warm irrigated regions
- NWG 1401 Metal ion speciation: Understanding its role in wine development and generating a tool to minimise wine spoilage
- DPI 1202 Impact of elevated CO2 and its interaction with elevated temperature on production and physiology of Shiraz
Overall, the estimated benefits and costs of the projects show that the returns on the grower, Commonwealth Government and co-investor monies have been significant. The six investment analyses yielded positive results at the 5% discount rate, with B/C Ratios ranging from 1.6 to 5.3. The results show a positive result in terms of those benefits valued and also in terms of the range of benefits identified.
Summary
Economic analyses of six research and development (R&D) projects funded by Wine Australia have been undertaken by AgEconPlus. The main purpose was to demonstrate the outcomes and benefits that have emerged or are likely to emerge from investment. This forms part of the process for the Council of Rural Research & Development Corporations (CRRDC) that aims to demonstrate the impact, effectiveness and return on investment from the Rural Research and Development Corporations.
Each of the six analyses provides a description of the constituent projects including objectives, outputs, activities, costs, outcomes, and benefits. Benefits are described qualitatively according to their contribution to the triple bottom line of economic, environmental and social benefits. While a range of potential benefits of each project are identified, the analysis focused on the most likely and most significant benefit stream. A number of potential benefits therefore remained unquantified and hence the estimated net benefits of some projects may be considered conservative. The analyses were undertaken for total benefits and Wine Australia benefits, including those expected in the future as a result of the investment.
Investments in all six projects yielded positive results at a 5% discount rate and a 30 year analysis period, with benefit cost ratios ranging from 1.6 to 5.3. When core analysis assumptions were subject to sensitivity testing, three projects (data for MRLs, disease resistant varieties, and elevated temperature/CO2 effects on Shiraz) produced negative benefit-cost ratios for ‘lower end’ assumptions.
Comparisons between project results should be made with caution due to uncertainties involved with assumptions and differing frameworks for each of the six analyses.