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 8. Table 8. Projected grape production cost and return estimates associated with vines spaced 7 feet apart in rows 10 feet wide and trained to a bi-lateral cordon, spur-pruned, with canopies vertically shoot positioned (VSP 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 4.00 4.00 4.00 4.00 4.00 4.00

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

Total Revenue^z 3,250 5,200 5,200 5,200 5,200 5,200 5,200 5,200

Operating Expenses^Z

Site Preparation 199

Vineyard Layout 100

Plants/planting 2,293

Trellis Material 1,601

Trellis Construction 497

Dormant Pruning 73 300 253 253 253 253 253 253 253

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

Replanting 44

Fertilization 33 27 23 23 23 23 23 23 23

Canopy Management 166 276 248 248 248 248 248 248 248 248

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

Harvest - Lugs 250 351 0 0 0 0 0 0

Picking Labor (25 lb.lug @ $1.25) 585 400 400 400 400 400 400 400

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

Machinery 465 172 221 235 235 235 235 235 235 235

Operating Interest @ 9.00% 293 46 101 95 80 80 80 80 80 80

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

Hand Tools 618

Total Operating Expenses^Y 6,801 1,064 2,344 2,213 1,847 1,847 1,847 1,847 1,847 1,847

Accrued interest on borrowed
capital @ 9% 0 612 763 750 549 296 21

Total Expenses 6,801 1,676 3,107 2,963 2,396 2,143 1,868 1,847 1,847 1,847

Annual Cash Flow (6,801) (1,676) 143 2,237 2,804 3,057 3,332 3,353 3,353 3,353

Cumulative Cash Flow (6,801) (8,477) (8,334) (6,097) (3,293) (236) 3,096 6,449 9,802 13,155

10-Year Internal Rate of Return 17.90%

							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	4.00	4.00	4.00	4.00	4.00	4.00
Price Per/Ton	0	0	1,300	1,300	1,300	1,300	1,300	1,300	1,300	1,300

Total Revenue^z			3,250	5,200	5,200	5,200	5,200	5,200	5,200	5,200

Operating Expenses^Z

Site Preparation	199
Vineyard Layout	100
Plants/planting	2,293
Trellis Material	1,601
Trellis Construction	497
Dormant Pruning		73	300	253	253	253	253	253	253	253
Weed Control	45	40	45	28	28	28	28	28	28	28
Replanting		44
Fertilization	33		27	23	23	23	23	23	23	23
Canopy Management	166	276	248	248	248	248	248	248	248	248
Disease/insect Control	105	250	384	384	384	384	384	384	384	384
Harvest - Lugs			250	351	0	0	0	0	0	0
Picking Labor (25 lb.lug @ $1.25)			585	400	400	400	400	400	400	400
Labor - Distribute/Remove Lugs			22	34	34	34	34	34	34	34
Machinery	465	172	221	235	235	235	235	235	235	235
Operating Interest @ 9.00%	293	46	101	95	80	80	80	80	80	80
Safety Equipment	386	162	162	162	162	162	162	162	162	162
Hand Tools	618

Total Operating Expenses^Y	6,801	1,064	2,344	2,213	1,847	1,847	1,847	1,847	1,847	1,847

Accrued interest on borrowed capital @ 9%	0	612	763	750	549	296	21

Total Expenses	6,801	1,676	3,107	2,963	2,396	2,143	1,868	1,847	1,847	1,847

Annual Cash Flow	(6,801)	(1,676)	143	2,237	2,804	3,057	3,332	3,353	3,353	3,353
Cumulative Cash Flow	(6,801)	(8,477)	(8,334)	(6,097)	(3,293)	(236)	3,096	6,449	9,802	13,155

10-Year Internal Rate of Return	17.90%

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

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

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