Vineyard development: what’s the cost?

Vineyard development: what’s the cost? – includes related articles

Larry Walker

Because of the ravages of phylloxera and the development of new growing areas, California is in the midst of a major vineyard development period. In other parts of the country, such as New York State and Washington State, new vineyards also are being developed as regional wine recognition grows.

While there is no way to develop a formula for the cost of these new plantings, in the following article Wines & Vines has attempted to break out the costs of planting a new vineyard under a number of different situations.

First, let’s look at vineyard development costs on California’s North Coast. In December, the wine industry consulting firm of Motto, Kryla & Fisher, developed a Vineyard Cost study (see Resources) which covers five common vineyard configurations: two split canopy systems, a Geneva Double Curtain and Lyre system both with 11[feet] by 6[feet] spacing, and two vertical systems, one with 8[feet] by 6[feet] spacing and another at 6[feet] by 4[feet] and a traditional 11[feet] by 7[feet] spacing.

The study, according to Mike Fisher, was based on a composite of estimated costs to establish and operate a 30-acre vineyard. Fisher says the costs are “typical, but actual costs can vary considerably by vineyard and by grower.” Annual operating costs do not include any land debt service or expected return on investment related to land.

There are a number of factors that influence the costs incurred to develop a vineyard. The MKF Vineyard Cost Study lists several:

* Site specifics: these are costs related to soils, exposures, microclimate, slope, etc. Such factors influence trellis and spacing decisions as well as drainage systems, frost protection, water supply development, erosion control and a host of other specific cost decisions;

* Management style: operating efficiency and general management style can have an impact on costs;

* Economics: Shortage of funds may force a grower to resort to less elaborate systems or to such alternative methods as interplanting or in-arch grafting;

* Organic farming: The use of organic farming or sustainable agriculture methods will influence development costs based on such things as choosing to fumigate or not before planting;

* Politics: In Napa County, the Napa County Hillside Ordinance has affected costs and may have created a trend on the North Coast. Implementation of required soil conservation plans vary, but could cost several thousand dollars per acre.

In the MKF study, basic development costs do include land prep, planting, trellis and drip irrigation, as well as site-specific costs such as drain tile, water supply and frost protection. Overhead costs includes property taxes, insurance, office and management.

The cost-per-acre through the third year (not including original land costs) ranged from $23,607 for a traditional 7[feet] by 11[feet] vineyard up to $39,984 for a vertical trellis 6[feet] by 4[feet] spaced vineyard. Chart A (page 24) gives a breakdown of the costs for each of the five types of vineyard over the first three years.

But just knowing the typical costs isn’t enough to make a replanting decision. There are two chief variables that must be entered into the equation: grape price and crop yield. As the MKF study points out, grape price is not only a function of the current grape market, but also reflects the ability of the grower to market the grapes. Such factors as vineyard location, appellation and microclimate can enhance the price of the grapes, as well as vineyard design and farming practices.

Yield is, of course site specific and is based on soils, microclimate, farming practices and vineyard design. Based on these and other factors, yield could range from four to over eight tons per acre. Chart B shows the price per ton required to cover annual costs. These costs do not include any debt service or expected return on investment related to land.

Another variable is the investment return or the rate of return based on the expected return for alternative investments of similar risk, minus expected appreciation of the undeveloped land. As Fisher points out in the report, the concept is fairly simple but it is difficult to quantify and if debt on the land is factored into the equation, it becomes even more complicated, so debt free land is assumed:

Rate of Return on Alternative Investment:

“The costs do not include any provisions for spring frost control – no fans, heaters or reservoirs,” Wolfe said.

Wolfe added that no deer fences are needed in Washington. “We might get an occasional rabbit or coyote chewing on the irrigation lines.”

Resources: Copies of the Motto, Kryla & Fisher Vineyard Cost Study may be ordered for $75 per copy from MKF, 999 Adams Street, St. Helena, Calif. 94574. Call (707) 963-9222 for further information. The publication is filled with specific site information and specific cost information on establishing a vineyard.

Copies of the Lodi vineyard cost report can be obtained through the Department of Agriculture Economics, University of California at Davis, (916) 752-3589 or through local county Cooperative Extension offices.

RELATED ARTICLE: FINGER LAKES COSTS

The following estimates of the cost of establishing and producing vinifera grapes in the Finger Lakes Region of New York state are based on “reasonable” recommended management and cultural practices. The prices of machinery and other supplies were obtained by telephone survey and labor estimates were provided by a panel of growers. The specified training system was the low-arch cane with catch wires. Roundup was used for weed control in the middle of rows. The study was done in 1993.

Investment Per Acre of Vinifera Grapes, Finger Lakes Region

COPYRIGHT 1995 Hiaring Company

COPYRIGHT 2004 Gale Group