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 9. 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 (Lyre) system (Lyre 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 4.50 6.80 6.80 6.80 6.80 6.80 6.80

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

Total Revenue 3,250 5,850 8,840 8,840 8,840 8,840 8,840 8,840

Operating Expenses^Z

Site Preparation 199

Vineyard Layout 100

Plants/planting 2,293

Trellis Material 3,746

Trellis Construction 741

Dormant Pruning 147 451 506 506 506 506 506 506 506

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 222 551 637 637 637 637 637 637 637 637

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

Harvest - Lugs 585 468 538 0 0 0 0 0

Picking Labor (25 lb lug (@ $1.25) 250 450 680 680 680 680 680 680

Labor - Distribute/Remove Lugs 22 39 59 59 59 59 59 59

Machinery 465 172 221 235 235 235 235 235 235 235

Operating Interest @ 9.00% 403 62 125 132 146 122 122 122 122 122

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

Hand Tools 618

Total Operating Expenses^Y 9,356 1,429 2,909 3,063 3,397 2,835 2,835 2,835 2,835 2,835

Accrued interest on borrowed capital @ 9.0% 0 842 1,046 1,110 959 555 66

Total Expenses 9,356 2,271 3,955 4,173 4,356 3,390 2,900 2,835 2,835 2,835

Annual Cash Flow (9,356) (2,271) (705) 1,677 4,484 5,450 5,940 6,005 6,005 6,005

Cumulative Cash Flow (9,356) (11,627) (12,332) (10,655) (6,172) (722) 5,218 11,223 17,228 23,233

10 Year Internal Rate of Return 19.65%

							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	4.50	6.80	6.80	6.80	6.80	6.80	6.80
Price Per/Ton	0	0	1,300	1,300	1,300	1,300	1,300	1,300	1,300	1,300

Total Revenue			3,250	5,850	8,840	8,840	8,840	8,840	8,840	8,840

Operating Expenses^Z

Site Preparation	199
Vineyard Layout	100
Plants/planting	2,293
Trellis Material	3,746
Trellis Construction	741
Dormant Pruning		147	451	506	506	506	506	506	506	506
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	222	551	637	637	637	637	637	637	637	637
Disease/insect Control	105	250	384	384	384	384	384	384	384	384
Harvest - Lugs			585	468	538	0	0	0	0	0
Picking Labor (25 lb lug (@ $1.25)			250	450	680	680	680	680	680	680
Labor - Distribute/Remove Lugs			22	39	59	59	59	59	59	59
Machinery	465	172	221	235	235	235	235	235	235	235
Operating Interest @ 9.00%	403	62	125	132	146	122	122	122	122	122
Safety Equipment	386	162	162	162	162	162	162	162	162	162
Hand Tools	618

Total Operating Expenses^Y	9,356	1,429	2,909	3,063	3,397	2,835	2,835	2,835	2,835	2,835

Accrued interest on borrowed capital @ 9.0%	0	842	1,046	1,110	959	555	66

Total Expenses	9,356	2,271	3,955	4,173	4,356	3,390	2,900	2,835	2,835	2,835

Annual Cash Flow	(9,356)	(2,271)	(705)	1,677	4,484	5,450	5,940	6,005	6,005	6,005
Cumulative Cash Flow	(9,356)	(11,627)	(12,332)	(10,655)	(6,172)	(722)	5,218	11,223	17,228	23,233

10 Year Internal Rate of Return	19.65%

^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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