The Economics of Wine Production in Virginia

Authors: Eric R. Capps, Viticulture Extension Assistant, Alson H. Smith Agricultural Research and Extension Center, Virginia Tech. Currently Graduate Research Assistant, Virginia Tech; Tony K. Wolf, Viticulture Extension Specialist, Alson H. Smith Agricultural Research and Extension Center, Virginia Tech, Winchester, VA; B. Jerry Walker, Financing Specialist, Agricultural Development Services, Virginia Department of Agriculture and Consumer Services, Richmond, VA.

Publication Number 463-008, posted June, 1998

Table 10. Projected grape production cost and return estimates associated with vines spaced 7 feet apart in rows 10 feet wide and trained to a divided canopy (Smart-Dyson) system (Smart-Dyson 10' x 7').

Anticipated results if costs remain constant

YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR

1 2 3 4 5 6 7 8 9 10

Revenue

Production Tons Per/Acre 0.00 0.00 2.50 4.00 6.00 6.00 6.00 6.00 6.00 6.00

Price Per/Ton 0 0 1,300 1,300 1,300 1,300 1,300 1,300 1,300 1,300

Operating Expenses^Z

Site Preparation 199

Vineyard Layout 100

Plants/planting 2,293

Trellis Material 1,751

Trellis Construction 531

Dormant Pruning 73 450 402 402 402 402 402 402 402

Weed Control 45 40 45 28 28 28 28 28 28 28

Replanting 44

Fertilization 33 29 23 23 23 23 23 23 23

Canopy Management 166 316 423 423 423 423 423 423 423 423

Disease/insect Control 105 250 384 384 384 384 384 384 384 384

Harvest - Lugs 585 351 468 0 0 0 0 0

Picking Labor (25lb lug @ $1.25) 250 400 600 600 600 600 600 600

Labor - Distribute/Remove Lugs 22 34 52 52 52 52 52 52

Machinery 465 172 221 235 235 235 235 235 235 235

Operating Interest @ 9.00% 301 48 116 110 125 104 104 104 104 104

Safety Equipment 386 162 162 162 162 162 162 162 162 162

Hand Tools 618

Total Operating Expenses^Y 6,994 1,106 2,686 2,553 2,902 2,413 2,413 2,413 2,413 2,413

Accrued interest on borrowed capital @ 9.0% 0 629 786 806 640 257

Total Expenses 6,994 1,735 3,472 3,358 3,542 2,670 2,413 2,413 2,413 2,413

Annual Cash Flow (6,994) (1,735) (222) 1,842 4,258 5,130 5,387 5,387 5,387 5,387

Cumulative Cash Flow (6,994) (8,729) (8,951) (7,109) (2,851) 2,279 7,666 13,053 18,440 23,827

10 Year Internal Rate of Return 25.03%

							Anticipated results if costs remain constant
	YEAR	YEAR	YEAR	YEAR	YEAR	YEAR	YEAR	YEAR	YEAR	YEAR
	1	2	3	4	5	6	7	8	9	10
Revenue

Production Tons Per/Acre	0.00	0.00	2.50	4.00	6.00	6.00	6.00	6.00	6.00	6.00
Price Per/Ton	0	0	1,300	1,300	1,300	1,300	1,300	1,300	1,300	1,300

Operating Expenses^Z

Site Preparation	199
Vineyard Layout	100
Plants/planting	2,293
Trellis Material	1,751
Trellis Construction	531
Dormant Pruning		73	450	402	402	402	402	402	402	402
Weed Control	45	40	45	28	28	28	28	28	28	28
Replanting		44
Fertilization	33		29	23	23	23	23	23	23	23
Canopy Management	166	316	423	423	423	423	423	423	423	423
Disease/insect Control	105	250	384	384	384	384	384	384	384	384
Harvest - Lugs			585	351	468	0	0	0	0	0
Picking Labor (25lb lug @ $1.25)			250	400	600	600	600	600	600	600
Labor - Distribute/Remove Lugs			22	34	52	52	52	52	52	52
Machinery	465	172	221	235	235	235	235	235	235	235
Operating Interest @ 9.00%	301	48	116	110	125	104	104	104	104	104
Safety Equipment	386	162	162	162	162	162	162	162	162	162
Hand Tools	618

Total Operating Expenses^Y	6,994	1,106	2,686	2,553	2,902	2,413	2,413	2,413	2,413	2,413

Accrued interest on borrowed capital @ 9.0%	0	629	786	806	640	257

Total Expenses	6,994	1,735	3,472	3,358	3,542	2,670	2,413	2,413	2,413	2,413

Annual Cash Flow	(6,994)	(1,735)	(222)	1,842	4,258	5,130	5,387	5,387	5,387	5,387
Cumulative Cash Flow	(6,994)	(8,729)	(8,951)	(7,109)	(2,851)	2,279	7,666	13,053	18,440	23,827

10 Year Internal Rate of Return	25.03%

^ZExpenses do not include purchase cost of land or equipment, nor are the costs associated with irrigation, deer fencing, or other capital improvements included.

^YDue to rounding, total operating expenses may vary slightly from the sum of operating expenses.

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