—The University of California Cooperative Extension
recently published a report about this year’s sample costs to establish a vineyard and to produce Cabernet Sauvignon grapes in Napa Valley. It’s very comprehensive stuff that most growers would find fascinating, even if their varieties, growing conditions and costs—notably land costs—are different.
The report was prepared by Monica L. Cooper, UC Cooperative Extension farm advisor for Napa County; Karen M. Klonsky, UC Cooperative Extension specialist, Department of Agricultural and Resource Economics, UC Davis; and Richard L. De Moura, staff research associate for the Department of Agricultural and Resource Economics, UC Davis, with the assistance of the Napa Valley Grapegrowers
and its members.
Establishing a vineyard
The study is based on a hypothetical, well-managed farm on land that is owned and operated by the grower and has less than a 5% slope. About 40% of the vineyards in this area are managed by management companies that charge for their services, but vineyards operated by management companies will not have an equipment inventory and many other expenses listed here.
The 35-acre farm contains 30 acres of winegrapes, of which 10 are being replanted, with 5 acres occupied by roads, irrigation systems, fencing and farmstead.
The field-grown dormant benchgraft vines are planted on 7-foot-by-4-foot spacing at 1,555 vines per acre, trained to a bilateral cordon and spur pruned. The grapevines are assumed to begin yielding fruit in three years and produce for an additional 27 years.
A crop of 1 ton per acre is assumed in the third year with yield maturity in the fifth or sixth year. The report assumed that a yield of 4.5 tons per acre is used to calculate returns in production years. The report says the typical yield range for Cabernet Sauvignon in Napa County is 3 to 6 tons per acre. In 2011, it was actually only 2.7 tons per acre, slightly less than the county average of 2.8 tons per acre for all grapevines. In 2010, the county average was 3.3 tons per acre.
A price of $4,455 per ton for Cabernet Sauvignon is assumed in calculating returns, but other prices are also shown for comparison. The actual value in Napa County in 2011 was $4,660.
In summary, the costs to establish a vineyard are $30,000 the first year (about half actually occur in the year before planting), then $3,500 in the next two years. The single biggest cost is $11,000 for installing the trellis. The vines themselves cost $5,500.
That doesn’t include overhead, which adds nearly $2,000 per year, though grape sales in the third year bring in $4,500. Nor does it include the cost of land, which in Napa County can be very high. The assumption was $125,000 per acre.
When all costs, including capital recovery (mostly on the land) are included, the net costs per year for the first three years are $38,700, $11,900 and $7,000. That represents an accumulated cost of $57,500 per acre by the third year.
Once the vineyard is producing, total cash annual operating costs are about $5,600 (less interest), plus $2,000 for overhead and $8,600 in non-cash overhead (particularly recovering land and planting) for total costs of $16,300 per acre.
At $4,455 per ton for grapes and 4.5 tons per acre the gross returns is $20,000, giving $3,700 per acre net profit.
Of course, a different yield or price per acre changes that calculation dramatically. At 3.5 tons per acre and $4,455 per ton, the grower would lose $450 per acre. At $5,805 per ton for grapes and the same yield, the grower would net almost $10,000, but few growers can expect both high prices and high yields.
The report summarizes in details all operations involved in both establishing a vineyard and managing one on an ongoing basis. Get a copy at coststudies.ucdavis.edu
. Reports about earlier years are also available.
For additional information or an explanation of the calculations used in the study, call the Department of Agricultural and Resource Economics at the University of California, Davis, at (530) 752-3589 or your local UC Cooperative Extension office.