Texas Vineyard Budgetsagrilifecdn.tamu.edu/winegrapes/files/2016/03/west-tx-budget.pdf · to fruit characteristics. Fruit quality is a function of site characteristics, vineyard management,

College of Agricultural Sciences & Natural Resources Technical Report T-1-602, Texas Tech University

Texas Vineyard Budgets

WWeesstt TTeexxaass RReeggiioonn

Daniel K. Pate Research Assistant, Department of Agricultural & Applied Economics Research Assistant, Department of Plant & Soil Sciences Texas Tech University

Dr. Edward Hellman Professor of Viticulture and Extension Specialist Texas AgriLife Extension and Texas Tech University

Dr. Jeff Johnson Assistant Professor, Director of Farm Operations,

Associate Director, CASNR Water Institute Texas Tech University

Texas Vineyard Budgets | West Texas Region 13

Table of Contents West Texas Region Synopsis .................................................................................14 West Texas Region Assumptions ..........................................................................17

Multiple Chemical Combination Applications .............................................................. 17 Establishment Year 0: Land Preparation (Table 1) ........................................................ 18 Investment Cost per Acre to Establish (Table 2) ........................................................... 19 Establishment Year 1 (Table 3) ...................................................................................... 19 Establishment Year 2 (Table 4) ...................................................................................... 21 Establishment Year 3 (Table 5) ...................................................................................... 24 Pre-Productive Cost Summary (Table 5.A) ................................................................... 28 Establishment Summary (Table 6) ................................................................................. 28 Development Year 4 (Table 7) ....................................................................................... 29 Full Production Years 5 - 25 (Table 8) .......................................................................... 33 Cash & Labor Activity Breakdown (Table 9) ................................................................ 36 Chemical Costs & Application Schedule (Table 10) ..................................................... 37 Hourly Machinery & Equipment Costs (Table 11) ........................................................ 37 Annual Equipment Costs (Table 12) .............................................................................. 37 Annual Investment Costs (Table 12.A) .......................................................................... 38 Annual Business Overhead Costs (Table 12.B) ............................................................. 38 Financial Interest Rates (Table 12.C) ............................................................................. 38 Machinery & Equipment Price Derivation (Table 13) ................................................... 39 Cost per Acre at Varying Yields (Table 14) .................................................................. 39 Returns per Acre at Varying Yields, Price, and Varietals (Table 15) ............................ 40 Returns per-acre Above Total Costs with Cabernet Sauvignon (Table 15.A) ............... 40 Returns per Acre Above Total Costs with Merlot (Table 15.B) .................................... 40 Returns per Acre Above Total Costs with Tempranillo (Table 15.C) ........................... 40 Returns per Acre Above Total Costs with Viognier (Table 15.D)................................. 41 Monthly Cash Flow Budget for Production Years (Table 16) ....................................... 41 West Texas Region Summary and Outlook ................................................................... 43 References ...................................................................................................................... 44


Table of Figures Figure 3: West Texas Viticulture Region Map ............................................................. 16

Figure 4: Total Cost Proportions for Establishment Years 0-3 .................................. 29

Figure 5: Total Cost Proportions for Full Production Years 5-25.............................. 36

Figure 6: Proportions of Major Annual Business Overhead Costs (Table 12.B) ...... 38

Figure 7: Bar Graph showing Monthly Cash Available for Production Years 5-25

from Table 16 ................................................................................................................... 42


Table of Budgets Table 1: Establishment Year 0 ..............................................................................45

Table 2: Investment Cost per acre to Establish ..................................................46

Table 3: Establishment Year 1 ..............................................................................47



Table 5.A: Pre-Productive Cost Summary ..........................................................50

Table 6: Establishment Years Summary .............................................................51

Table 7: Development Year 4................................................................................53

Table 8: Full Production Year 5 - 25 ....................................................................55

Table 9: Cash & Labor Activity Breakdown for Production Year 5 ...............57

Table 10: Chemical Costs & Application Schedule ............................................59

Table 11: Hourly Machinery & Equipment Costs ..............................................60

Table 12: Annual Equipment Costs .....................................................................61

Table 12.A: Annual Investment Costs .................................................................61

Table 12.B: Annual Business Overhead Costs ....................................................61

Table 12.C: Financing Interest Rates ..................................................................61

Table 13: Machinery & Equipment Price Derivation ........................................62

Table 14: Cost & Returns Sensitivity Analysis ...................................................63

Table 15: Returns per acre at Varying Yields, Prices, and Varietals ...............64

Table 15.A: Returns per acre with Cabernet Sauvignon ...................................64

Table 15.B: Returns per acre with Merlot ..........................................................64

Table 15.C: Returns per acre with Tempranillo .................................................64

Table 15.D: Returns per acre with Viognier .......................................................64

Table 16: Monthly Cash Flow Budget for Production Years ............................65


West Texas Region Synopsis The West Texas Region is comprised of 80 counties. With nearly 2,000 acres in wine grape production, this region boasts the largest acreage of the four regions. This region experiences hot, dry, and long summers with cool evenings, which are ideal for wine grape production. Many of the producers in this region operate multiple crop systems where wine grape production is an integral part of the whole farming operation. A large portion of the production takes place in and around a few select counties such as Brewster, Hockley, Lubbock, Pecos, Terry, and Yoakum.

Figure 3: West Texas Viticulture Region Map


West Texas Region Assumptions The representative vineyard in the West Texas Region was a 25-acre site, of which 20

acres of vineyard were planted. The remaining 5 acres were designated for roads, buildings, access areas, and other infrastructure. The land value was estimated at $2,000 per acre of irrigated cropland with good water, for a total of $50,000 (American Society of Farm Managers and Rural Appraisers, 2008, p. 7). The land was assumed to be owned and in annual cultivated agricultural production prior to Establishment Year 0 and therefore required minimal preparation. This study also included a non-cash capital expense of $150.00 for land opportunity cost. Opportunity cost is, “The income that could be received by employing a resource in its most profitable alternative use” (Kay, Edwards, & Duffy, 2004, p. 435). In this region the opportunity cost (or the value of the next best alternative use for the land) was considered to be the median value ($150 per acre) the land owner could lease the irrigated cropland with good water for per acre (American Society of Farm Managers and Rural Appraisers, 2008, p. 7). The water well and pump were assumed to be included in the land value. Soil type was assumed to be fine sandy loam and activities listed were typical for this soil type.

This study assumed the vineyard produced Cabernet Sauvignon variety grapes. Market price was estimated at $1,800 per ton and a yield of 5 tons per acre based on current grower information. Price received varies with supply, demand, the buyer, and is particularly sensitive to fruit characteristics. Fruit quality is a function of site characteristics, vineyard management, and weather. The yield assumptions used in this analysis were based on yields for Cabernet Sauvignon in the West Texas Region. These data was used for establishment and production budgets. In Table 15, expected returns for Cabernet Sauvignon were compared with Merlot, Tempranillo, and Viognier varieties holding all costs constant except harvest. Harvest was not held constant because harvest cost is directly correlated with yield and yield was varied in the analyses.

This region participates heavily in mechanized operations and many of the vineyard systems are designed with this in mind. West Texas also requires the planting and removal of an annual cover crop, which is not typical of most Texas viticulture regions.

Multiple Chemical Combination Applications

There are many options for tank mixing multiple chemicals. To account for this, the labor and equipment operation time was reduced by 50% for 6 fungicide applications and 1 insecticide application. This method reflects the possibility of combining multiple chemicals into a single spray. In the West Texas Region, approximately 4 “sprays” are performed annually and fungicides and insecticides are considered tank mixable. Since the insecticide imidacloprid may be applied through the drip irrigation system, it was not considered in any possible chemical combination. Thus, 7 chemical applications were selected to reduce labor and equipment cost. If the individual situation warrants, further combining of chemical applications may be another way to reduce operating expenses in the enterprise. It is recommended that individuals consult with AgriLife Extension in their respective region concerning combination of chemicals.

Due to rounding, some table values presented in this study may be slightly different than the sum of the components.


Establishment Year 0: Land Preparation (Table 1, Pg. 45)

Operating Expenses

Land Preparation

Year 0 was when site acquisition and preparation took place. Land in the West Texas Region was assumed to be in annual cultivated agricultural production prior to the year of wine grape establishment. This lead to the assumption that road, utility, and well/pump infrastructures were already developed and included in land value. No vines were planted during this period. Soil was planed once, plowed once, and disked twice, at cost of $15.00, $40.00, and $15.00 per acre, respectively. Total land preparation expenses totaled $85.00 per acre.

Individual sites may require less or additional preparation. All custom activities could be performed by the operator but may then require greater machinery investment. It is also recommended that soil analysis be performed to determine specific needs. Beginning with land that has previously been in agricultural production, one can reduce site preparation expenses substantially.

Total variable costs for Establishment Year 0 summed to $85.00 per acre.

Ownership Expenses

Cash Capital Expense

Vineyard Management and/or Consultation were not given a value in this study because none was required during Year 0 in this scenario but should be included if warranted.

Non-Cash Land Expense

Land opportunity cost was $150.00 per acre. Opportunity cost is, “The income that could be received by employing a resource in its most profitable alternative use” (Kay, Edwards, & Duffy, 2004, p. 435). In this region the opportunity cost (or the value of the next best alternative use for the land) was considered to be the value the land owner could lease the irrigated cropland with good water per acre (American Society of Farm Managers and Rural Appraisers, 2008, p. 7). This value may differ if an individual is converting the land from production of another cultivated agricultural enterprise. In this event, the opportunity cost would be the value of the preceding enterprise. Total non-cash land expense was $150.00.

Total fixed costs for Establishment Year 0 were $150.00 per acre.

Total projected cost for establishment in Year 0 was $235.00 per acre.

The Total Cash Cost for Pre-Production Net Cost of $85.00, was included in Total Pre-Production Net Cost Years 0 – 3 (Table 5.A) and Total Amortized Establishment Cost per Acre

Beginning in Year 4 and Beyond (Table 5.A) calculation.


Investment Cost per Acre to Establish (Table 2, Pg. 46)

Drip Irrigation

Above ground drip irrigation was the assumed method of vineyard irrigation. Total cost for purchase and installation of the drip irrigation system was $2,344.35 per acre. Irrigation water was applied from June through August at a frequency of once per week.

Total establishment activity costs per-acre was $2,344.35.

Establishment Year 1 (Table 3, Pg. 47)

This study assumed that the equipment complement required for the enterprise was purchased in Establishment Year 1. The cost associated with the equipment was included under capital expenses beginning in this year and persisted throughout the life of the enterprise.

Operating Expenses

Vine Planting

Table 2 details the investment required per acre to establish a commercial vineyard in the West Texas. Vineyard spacing was as follows: 4 ft. vine spacing, 10 ft. row spacing and 435 ft. row length. One square acre (43,560 sq. ft.) with this vineyard spacing (4ft. x 10ft. = 40 sq. ft. per vine) would accommodate approximately 1,089 vines (43,560 sq. ft. ÷ 40 sq. ft. = 1,089 vines). There were 10 vine rows per acre (10 vine rows = 43,560 sq. ft. ÷ 4,350 ft. = 435 ft x 10 rows). Vines have an expected useful life of 25 years; 5 of which are establishment and 20 are full production. Year 1 was considered first leaf.

Vineyard survey and layout were performed with laser leveling technology at a rate of $15 per acre. Planting was a custom operation costing $170 per acre. An in-house operation would require 2 skilled and 2 unskilled laborers at a rate of 2 labor hours each and cost of $15 and $10 per labor hour, respectively. The grape variety planted was grafted Cabernet Sauvignon at a cost of $4.00 per vine. Planting of the vines was suggested to take place between February and March of Year 1. Total costs for planting was $4,541.00 per acre.

Trellis System

The assumed trellis system was a modified vertical shoot positioning (VSP) consisting of one cordon wire, a pair or moveable catch wires, and one permanent wire at the top of the system. This totaled to four wires and does not include the drip irrigation support wire. Some consider the drip irrigation support wire as part of the trellis system, but for the purposes of this study it was included in the cost of the drip irrigation system because it performs no other uses besides structural support of the drip system. VSP posts were placed every fourth vine for trellis system support totaling 270 per acre. Rebar was placed at all other vines for support and are considered “vine stakes” totaling 810 per acre. Two steel end posts were used per vine row totaling 20 per acre. The total cost of the modified VSP trellis system was $4,987.50 per acre.


Vine Training

It was assumed that grow tubes were used on all vines during the initial planting as well as all replants thereafter. The cost of purchasing the grow tubes as well as labor to install and remove fell under Year 1 Operating Expenses because they do not remain in the vineyard system for the duration of its life, but were installed and removed in the year of planting. Therefore, they could not be included in the establishment investment. Vine Training/Tying took approximately 150 hours of unskilled labor for a total cost of $1,500. Tie tape was projected at approximately $15.00 per acre for use with vine training/tying.

Fertilizer/Pest Control

Soluble nitrogen was applied through the drip system three times annually at a rate of 5 lbs. per application per acre for a total of 15 lbs. This study assumed that actual nitrogen applied, regardless of mix, totaled 15 lbs. This was one-half of the full production rate given in Year 5. The total cost of nitrogen application was $30.90 at $10.30 per application. Sulfur was applied four times to mitigate powdery mildew (Uncinula necator), at a rate of 3 lbs. per application per acre. The total cost of sulfur spray application was $48.71 at $12.18 per application. A carbaryl insecticide was applied once to control foliage feeding insects at a cost of $17.08. An imidacloprid insecticide was applied once to combat glassy wing sharpshooters, which are a vector for Pierce’s Disease. During Establishment Year 1 and 2, imidacloprid was only applied once as opposed to twice following years. This equated to one-half the rate of full production, with a cost of $32.00.

Strip Spray

A trifluralin herbicide was sprayed once for pre-emergence control of annual grasses and broadleaf weeds. Cost of the application was $19.63. A post-emergent herbicide glyphosate spot spray was applied once at a cost of $20.83. The glyphosate spot spray was one-half the chemical application rate of a full recommended glyphosate application.

Total Pre-Growth costs for Establishment Year 1 amounted to $2,659.14 per acre.

Cover Crop Maintenance

The West Texas Region differs from the other three regions because it typically requires the planting and removal of a winter cover crop. The soil was disked once prior to seeding and cost $16.15 per acre. This study assumed the cover crop to be winter rye, planted once in September with a seeding rate of 100 lbs. per acre at a cost of $36.23. Total cover crop maintenance costs in Establishment Year 1 were $52.38 per acre.

Miscellaneous

Removal of grow tubes required approximately 10 hours of unskilled labor for a total cost of $100.00 per acre. Building maintenance and repair, vineyard system maintenance and repair, and irrigation utilities were 20% of Year 5 full production costs, and were $4.40, $33.14, and $10.00 per acre, respectively. The total post-growth miscellaneous costs were $147.54 per acre.


Total variable costs for Establishment Year 1 summed to $12,387.56 per acre.

Ownership Expenses


Operating interest was calculated by multiplying one-half of the total variable costs for Establishment Year 1 by the annual interest rate of 7.56% (Federal Reserve Bank of Dallas, 2008). Total operating interest in Year 1 was $468.25. Liability insurance, property insurance, and property taxes (Table 12.B) were $20.00, $190.66, and $47.66, respectively. Vineyard Management and/or Consultation were not given a value in this study because none was required during Year 1 in this scenario but should be included if warranted. Total cash capital expense in Year 1 was $726.57.

Non-Cash Capital Expense

Annual capital recovery for farm equipment was $666.41, for farm buildings, land, and tools were $129.74, and the drip irrigation system was $198.82. All three expenses are shown in Table 12.B. The total non-cash capital expense was $994.97.


Land opportunity cost was $150.00 per acre. This expense is explained in detail in the section West Texas Region Assumptions on page 17 and Non-Cash Land Expense on page 18. Total non-cash land expense was $150.00.

Total fixed costs were $1,871.54 per acre in Establishment Year 1.

Total projected cost for Establishment Year 1 was $14,259.11 per acre.

The Total Cash Cost for Pre-Production Net Cost of $13,114.14, was included in Total Pre-Production Net Cost Years 0 – 3 (Table 5.A) and Total Amortized Establishment Cost per Acre



Operating Expenses

Removal of Cover Crop

Beginning in Establishment Year 2 and continuing through the life of the enterprise, this study assumed that the winter cover crop was removed by applying glyphosate once at a rate of $30.63 per application.

Replant Vines

The assumed replant rate was 2.5% of total vines planted in Year 1. This means that approximately 27 new vines were required per acre. The cost per vine remained at $4.00 which


brought the total cost to $108.00. This value may vary due to individual weather risks, plant materials used, or any other number of variables. Any expected deviation from these calculations should be included in individual costs. It took approximately 0.5 hour of unskilled labor to install the grow tubes on replanted vines for a total cost of $5.00 per acre.

Vine Training

Grow tubes were used on all replanted vines. An adequate number of grow tubes were purchased in Establishment Year 1 to fulfill the amount needed for replanted vines in Establishment Year 2. Labor to install and remove replanted vine grow tubes fell under Year 2 Operating Expenses because they did not remain in the vineyard system for the duration of its life, but were installed and removed in the first year. Labor to install grow tubes on the replanted vines cost $5.00. Pruning began in Establishment Year 2 and persisted through the life of the enterprise. Pruning required 25 hours of unskilled labor for a total cost of $250.00. Vine Training/Tying took approximately 45 hours of unskilled labor for a total cost of $450. Tie tape was projected at approximately $15.00 per acre for use with vine training/tying. The vines began to produce fruit in Establishment Year 2 and movement of the catch wires up and down was required to accommodate this. Fruit load was still minimal compared with full production so it only required approximately 4 hours of unskilled labor per acre to move them up as well as down. Each activity had a total cost of $40.00.

Fertilizer/ Pest Control

Soluble nitrogen was applied through the drip system three times annually, but was increased to a rate of 6 lbs. per application per acre for a total of 18 lbs annually. This study assumed that actual nitrogen applied, regardless of mix, totaled 15 lbs. This rate was 60% of the full production rate. The total cost of nitrogen application was $32.58 at $10.86 per application. Sulfur was applied four times to mitigate powdery mildew (Uncinula necator), at a rate of 3 lbs. per application per acre. The total cost of sulfur spray application totaled $48.71 at $12.18 per application. A carbaryl insecticide was applied once to control foliage feeding insects at a cost of $17.08 per acre. An imidacloprid insecticide was applied once to combat glassy wing sharpshooters, which are a vector for Pierce’s Disease. During Establishment Year 2 as in Year 1, imidacloprid was only applied once as opposed to twice in following years. This equated to one-half the rate of full production, at a cost of $32.00.

Strip Spray

Strip spray activities remained the same as in Establishment Year 1 except for one additional glyphosate spot spray, which brought this to the full recommended rate of material. A trifluralin herbicide was sprayed once for pre-emergence control of annual grasses and broadleaf weeds, at a cost per application at $19.63 per acre. A post-emergent herbicide glyphosate spot spray was applied twice at a cost of $25.73 per application for a total cost of $51.46 per acre.

Total Pre-Growth costs for Establishment Year 2 amounted to $1,145.08.



Cover crop maintenance activities and cost remain the same as in Establishment Year 1. The soil was disked once prior to seeding and costs $16.15. This study assumes the cover crop was winter rye, planted once in September with a seeding rate of 100 lbs. per acre and an application cost of $36.23. Total cover crop maintenance costs in Establishment Year 2 were $52.38.

Miscellaneous

Removal of grow tubes for replanted vines required approximately 0.25 hours of unskilled labor for a total cost of $2.50 per acre. Building maintenance and repair, vineyard system maintenance and repair, and irrigation utilities were one-third of Year 5 full production costs. The costs were $7.26, $54.67, and $16.50 per acre, respectively. Total post-growth miscellaneous costs were $80.93.


Ownership Expenses


Cash capital expenses remained the same as in Establishment Year 1 except for operating interest. Operating interest was calculated by multiplying one-half of the total variable costs for Establishment Year 2 by the annual operating interest rate of 7.56% (Federal Reserve Bank of Dallas, 2008). Total operating interest in Year 2 was $48.32. Liability insurance, property insurance, and property taxes are shown in Table 12.B. Their per-acre costs were $20.00, $190.66, and $47.66, respectively. Vineyard Management and/or Consultation were not given a value in this study because none was required during Year 2 in this scenario but should be included if warranted. The total cash capital expense in Year 1 was $306.65.


Non-cash capital expenses remain the same as in Establishment Year 1. Annual capital recovery for farm equipment was $666.41; farm buildings, land, and tools were $129.74; and the drip irrigation system was $198.82. All three expenses are shown in Table 12.B. The total non-cash capital expense was $994.97.


Land opportunity cost remained $150.00 per acre as it did in Establishment Year 1. This expense is explained in detail in the section West Texas Region Assumptions on page 17 and Non-Cash Land Expense on page 18. Total non-cash land expense was $150.00.


Total projected cost for Establishment Year 2 was $2,730.01 per acre.


The Total Cash Cost for Pre-Production Net Cost of $1,585.04, was included in Total Pre-Production Net Cost Years 0 – 3 (Table 5.A) and Total Amortized Establishment Cost per-acre



During Establishment Year 3, several new issues arose. First, there was a marketable harvest of approximately 50% of full production. Therefore, references to the timeline categories were classified as either pre-harvest, harvest, or post-harvest rather than the pre-growth or post-growth groups previously used. Second, again as with Establishment Year 2, there was an increase of chemical application to meet the needs of the maturing vines. Third, mechanical harvest took place in August. Lastly, Establishment Year 3 was the final year total projected costs are included in the total pre-production net returns and annual amortized establishment cost. This is because beyond Establishment Year 3 harvest was projected to be greater than 70% of full production (Agricultural & Applied Economics Association Task Force on Commodity Costs and Returns, 1998).

Primary Revenue

Establishment Year 3 was the first year a marketable wine grape harvest was produced and was projected to be 50% of full production, which came to approximately 2.5 tons of the Cabernet Sauvignon variety per acre. The estimated market value for Cabernet Sauvignon was $1,800 per ton. This was determined by surveying current growers and industry experts.

Total revenue for Establishment Year 3 was $4,500 per acre.

Operating Expenses


As in Establishment Year 2, the winter cover crop was removed by applying glyphosate once at a rate of $30.63 per application.

Pruning

Beginning in Establishment Year 3, custom mechanical pre-pruning took place at a rate of $100.00 per acre. This was done to improve pruning efficiency, which is integral in a large size vineyard. Finish pruning took place and was considered equivalent to pruning practices in previous years. A total of 40 hours of unskilled labor was required for finish pruning, which totaled to $400.00. Prunings were then placed in alternate rows either to be mowed with the flail shredder or pulled/raked past the end of the vine row. This study assumed that the prunings were pulled/raked requiring 5 hours of skilled labor costing $15.00 per hour for a total of $75.00 per acre. The alternative method of flail mowing, which was not assumed in this study but is perfectly permissible, requires an application cost of $24.78. The activity which bests suits the individual operation should be included in their costs.


Vine Training

Vine Training/Tying took approximately 25 hours of unskilled labor for a total cost of $250. Tie tape was projected at approximately $15.00 per acre for use with vine training/tying. Fruit load was still minimal in Establishment Year 3 compared with full production so it only required approximately 4 hours of unskilled labor per acre to move catch wires up as well as down. Each activity had a total cost of $40.00.


Establishment Year 3 began the buildup of full production chemical practices by including one additional fertilizer and two disease management activities. Soluble nitrogen was applied through the drip system three times annually, at an increased rate of 6.67 lbs. per application per acre for a total of 20 lbs annually. This study assumed that actual nitrogen applied, regardless of mix the variation, totaled 20 lbs. This rate was 67% of the full production rate. The total cost of nitrogen application was $33.71 at $11.24 per application. Zinc was applied three times, beginning in Establishment Year 3, and persisted through the life of the enterprise. This was performed to correct zinc deficiencies typically experienced in the West Texas Region. Cost per application of zinc was $27.88 for a total cost of $83.63. Sulfur, as in Establishment Year 2, was applied four times to mitigate powdery mildew (Uncinula necator). The rate was 3 lbs. per application per acre. The total cost of sulfur spray application was $48.71 at $12.18 per application. During Establishment Year 3, grape clusters increased in density, thus summer bunch rot became a concern. A boscalid and pyraclostrobin is also effective in combating powdery mildew and phomopsis. To diminish these risks, a boscalid and pyraclostrobin was applied twice at a total cost of $65.24 or $32.62 per application. Promotion of good air circulation within the grapevine canopy is also encouraged to reduce the risk of summer bunch rot. A carbaryl insecticide was applied once to control leafhoppers. Application cost was $17.08. Imidacloprid insecticide was then applied twice to combat glassy wing sharpshooters, which brings the application rate to the full 14 ounces per acre annually recommended. The cost of the application was $32.00 and total cost was $64.00.

Strip Spray

Strip spray activities remained the same as in Establishment Year 2, except for one additional full glyphosate spray. A trifluralin herbicide was sprayed once for pre-emergence control of annual grasses and broadleaf weeds. Cost of the application was $19.63. This study assumed one application of glyphosate was then applied along the vine rows as a general treatment for weed control at a cost of $30.63. Some producers choose to perform weed control by hoeing/hand pulling, which is projected to require 2 hours of unskilled labor per acre totaling $20.00 but was not included in this study’s total cost. Several producers stated that by choosing to manually remove weeds, they could examine the vines closely as they progressed through the vineyard. A post-emergent herbicide glyphosate spot spray was applied twice at a cost of $25.73 per application for a total cost of $51.46.


Sucker Control

Also beginning in Establishment Year 3, was the necessity to control suckers that begin to grow extensively below the fruiting zone. Two options are available to producers; a glufosinate herbicide application or manual removal, which this study assumed. The glufosinate application costs $24.63 per application while the practice of manual removal requires 8 hours of unskilled labor costing a total of $80.00. Again, as with the option of hoeing/hand pulling weeds, some producers prefer to manually remove suckers for the same reasons as manual weed removal.

Total Pre-Harvest costs for Establishment Year 3 amounted to $1,444.70.

Harvest

In the West Texas Region, mechanical harvest is to norm due to the large size of acreage as well as availability of required equipment. All activities which this study lists pertain to mechanical harvest only. Producers who do not have the beneficial economies of scale to offset the large capital investment required to possess mechanical harvesting equipment, typically pay a custom rate to larger producers who have the necessary equipment. The typical custom rate for a mechanical harvester seen in the West Texas Region was $300.00 per acre.

In addition to the mechanical harvester, an extra tractor and forklift was needed. The tractor cost approximately $25.00 per acre to rent and assisted in transferring wine grapes from the field to the refrigerated truck. The forklift cost approximately $40.00 per acre and was used to load the large harvest bins into the refrigerated truck. Harvest also required the use of several owned equipment assets. The harvest machinery cost of $30.02 was 50% of full production because this study assumed the wine grape harvest to be the same reduced portion of maximum yield. This expense included the use of the tractor, all-terrain vehicle (ATV), bin trailers, truck, and scale.

Harvest required two skilled and 3 unskilled laborers for one hour each per acre or a total of five man hours per acre. This was 50% of the man hours required for full production harvest. Total cost for skilled labor was $30.00 and unskilled was $30.00 as well. The two other harvest expenses incurred were a drop-off fee and transportation to the winery. The drop-off fee cost a flat $30.00 per acre.

This study calculated transportation to the winery as the cost of a ton of grapes per mile. The typical rate is approximately $3.00 per mile for a round-trip 20 ton capacity refrigerated truck. Dividing cost per mile by capacity estimates a cost of $0.15 per mile for one ton. This study then multiplied the $0.15 by the anticipated yield per acre, which for Establishment Year 3 was 2.75 tons, giving the enterprise a per mile cost of $0.375 per acre. Many of the West Texas Region producers transport their grapes to a winery in the Texas Hill Country Region. This distance was estimated to be a 700 mile round-trip, translating to a transportation to winery expense of $262.50 per acre.

The total harvest cost for Establishment Year 3 was $747.52 per acre.


There are scenarios where a one-way trip can be arranged at a cheaper cost, but this is typically difficult to arrange and therefore is not considered standard practice. Individuals should also take into account the number of drop points and ability to fill truck capacity when transporting harvest. Both factors can dramatically alter the transportation cost per mile.


Cover crop maintenance activities and costs remained the same as in Establishment Year 2. The soil was disked once prior to seeding and costs $16.15. This study assumed the cover crop to be winter rye, planted once with a seeding rate of 100 lbs. per acre and an application cost of $36.23. Total cover crop maintenance costs in Year Establishment 3 were $52.38.

Miscellaneous

Building maintenance and repair, vineyard system maintenance and repair, and irrigation utilities were one-half of Year 5 full production costs. The costs were $11.00, $82.84, and $25.00 per acre, respectively. Total post-harvest miscellaneous costs were $118.84.


Ownership Expenses


Cash capital expenses remained the same as in Establishment Year 2 except for an increase in operating interest. Operating interest was calculated by multiplying one-half of the total variable costs for Establishment Year 3 by the annual interest rate of 7.56% (Federal Reserve Bank of Dallas, 2008). Total operating interest in Year 3 was $89.34. Liability insurance, property insurance, and property taxes are shown in Table 12.B. Their per-acre costs were $20.00, $190.66, and $47.66 respectively. Vineyard Management and/or Consultation were not given a value in this study because none was required during Year 3 in this scenario but should be included if warranted. This brought the total cash capital expense in Establishment Year 3 to $347.66.


Non-cash capital expenses remained the same as in Establishment Year 2. Annual capital recovery for farm equipment was $666.41, for farm buildings, land, and tools was $129.74, and for the drip irrigation system was $198.82. Both expenses are shown in Table 12.B and brought the total non-cash capital expense to $994.97.





Total projected cost of production in Establishment Year 3 was $3,856.08 per acre.

Residual returns to management, unpaid labor, and risk for Establishment Year 3 totaled to $643.92.

The Total Cash Cost for Pre-Production Net Cost of $2,711.11, was included in Total Pre-Production Net Cost Years 0 – 3 (Table 5.A) and the Total Amortized Establishment Cost per

Acre Beginning in Year 4 and Beyond (Table 5.A) calculation.

Pre-Productive Cost Summary (Table 5.A, Pg. 50)

Total Pre-Production Net Cost Establishment Years 0 - 3

Total pre-production net cost for Establishment Years 0, 1, 2, and 3 was $12,995.29. This value comprised investment cost to establish and pre-production costs less any positive net returns realized in Establishment Year 3.

Total Amortized Establishment Cost per-acre Beginning in Year 4 and Beyond

Total amortized establishment cost was $1,162.21. This value is the annualized real pre-productive cost and was calculated as the periodic payment for an annuity (Agricultural & Applied Economics Association Task Force on Commodity Costs and Returns, 1998). This takes the interest rate for the loan (6.87% annually), total number of payments for the loan (22 years), present value of principal $12,995.29), and cash future value after the last payment ($0), and then determines the annual payment required to pay off the principal and interest of the loan. The annual amortized establishment cost was then included in Establishment Year 4 and beyond as a non-cash capital expense.

Establishment Summary (Table 6, Pg. 51)

This table was compiled to visually see how the costs during establishment fluctuate from year to year. This table is also an excellent way to make sure expenses were entered correctly, as the values in this table should correspond exactly with their respective year of occurrence. Any discrepancies will alert where the error has been made with relative ease. One can also evaluate the costs in this table to see where cost reducing decisions might have the most effective impact.


Figure 4: Total Cost Proportions for Establishment Years 0-3

This table provides insight into the nature of commercial wine grape production as opposed to a single year enterprise. Total cost per acre from Years 0 to 3 is $21,080.20. Expanded to account for the entire 20-acre vineyard, this value swells to $421,604.00. This value reiterates that individuals considering establishing a new vineyard must have access to a substantial amount of capital.

Development Year 4 (Table 7, Pg. 53)

Development Year 4 was the final year prior to full production. During Development Year 4, only a few new issues emerged. First, there was a marketable harvest of approximately 75% of full production and an increase of harvest cost, which is associated with the rise in harvest tonnage. Again, timeline categories were referred to as either pre-harvest, harvest, or post-harvest. Second, as with Establishment Year 3, there was an escalation of chemical application to meet the needs of the maturing vines. Third, this study assumed that crop insurance as a cash capital expense was now purchased due to the increased risk for major revenue loss in the occurrence of natural events. Lastly, Development Year 4 included the annual amortized establishment cost found in Table 5.A as a non-cash capital expense, because Development Year 4 harvest and beyond was projected to be greater than 70% of full production (Agricultural & Applied Economics Association Task Force on Commodity Costs and Returns, 1998).

Primary Revenue

Marketable wine grape harvest for Development Year 4 in the month of August was projected to be 75% of full production, which was approximately 3.75 tons of the Cabernet Sauvignon variety per acre. The estimated market value for Cabernet Sauvignon was $1,800 per ton. This was determined by surveying current growers and industry experts.

Total revenue for Development Year 4 was $6,750 per acre.

TOTAL LAND PREPARATION

COSTS0%

TOTAL INVESTMENT

ACTIVITY COSTS10%

TOTAL PLANTING & INFRASTRUCTURE

COSTS41%

TOTAL CULTURAL COSTS28%

TOTAL CASH OVERHEAD COSTS

6%

TOTAL NON-CASH OVERHEAD COSTS

15%


Operating Expenses


As in Establishment Year 3, this study removed the winter cover crop by applying glyphosate once at a fee of $30.63.

Pruning

As with Establishment Year 3, custom mechanical pre-pruning took place at a rate of $100.00 per acre. Finish pruning again took place and a total of 40 hours of unskilled labor was required, which totaled to $400.00. In this study, it was assumed that the prunings are pulled/raked and required 5 hours of skilled labor costing $15.00 per hour for a total of $75.00 per acre. The alternative method of flail mowing would require an application cost of $24.78. The activity which bests suits the individual operation should be included. During Development Year 4, hedging to facilitate mechanical harvesting was assumed to not be necessary. In individual situations, this activity may be required and should therefore be included in expenses.

Vine Training

Vine Training/Tying required approximately 25 hours of unskilled labor for a total cost of $250. Tie tape was projected at approximately $15.00 per acre for use with vine training/tying. Fruit load was still reduced in Development Year 4 compared with full production so it only required approximately 4 hours of unskilled labor per acre to move catch wires up as well as down. Each activity had a total cost of $40.00.


Fertilizer and pest control in Development Year 4 remained the same as Establishment Year 3 in all aspects. Soluble Nitrogen was applied through the drip system three times annually at a rate of 6.67 lbs. per application per acre for a total of 20 lbs annually. This study assumed that actual nitrogen applied, regardless of mix the variation, totaled 20 lbs. This rate was 67% of the full production rate. This study assumed the nitrogen was 100% active ingredient so that 20 lbs. of nitrogen was applied regardless of mix percentage. The total cost of nitrogen application was $33.71 at $11.24 per application. A zinc spray was applied three times. Cost per application of zinc was $27.88 for a total cost of $83.63. Sulfur spray, as in Establishment Year 3, was applied four times to mitigate powdery mildew (Uncinula necator). The rate was 3 lbs. per acre for each application. The total cost of sulfur spray application was $48.71 at $12.18 per application. Summer bunch rot was an ongoing concern as well as powdery mildew and phomopsis. A boscalid and pyraclostrobin fungicide was applied twice at a total cost of $65.24 or a per application expense of $32.62. Promotion of good air circulation within the grapevine canopy is also encouraged to reduce the risk of summer bunch rot. A carbaryl insecticide was applied once to control leafhoppers at a cost of $17.08. Imidacloprid insecticide was again applied twice to combat glassy wing sharpshooters, bringing the application rate to the full 14 ounces per acre annually recommended. The cost per application was $32.00 and total cost was $64.00.


Strip Spray

Strip spray activities remained the same as in Establishment Year 3. A trifluralin herbicide was sprayed once for pre-emergence control of annual grasses and broadleaf weeds. Cost per application was $19.63. This study assumed one application of glyphosate should be applied along the vine rows general treatment for weed control at a cost of $30.63. Some producers choose to perform weed control by hoeing/hand pulling, which was projected to require 2 hours of unskilled labor per acre totaling $20.00 but was not included in this study’s total cost. Several producers stated that by choosing to manually remove weeds, they could examine the vines closely as they progressed through the vineyard. A post-emergent herbicide glyphosate spot spray was applied twice at a cost of $25.73 per application for a total cost of $51.46.

Sucker Control

In Development Year 4 it was necessary to control suckers that begin to grow extensively below the fruiting zone. Two options are available to producers; a glufosinate herbicide application or manual removal. The glufosinate application costs $24.63 per application while this study’s assumption of manual removal required 8 hours of unskilled labor costing a total of $80.00. Again, as with the option of hoeing/hand pulling weeds, some producers may prefer to manually remove suckers for the same reasons as manual weed removal.

Total Pre-Harvest costs for Development Year 4 amounted to $1,444.70.

Harvest

During harvest in Development Year 4, the vineyard produced an increase in yield. Labor hours required and machinery costs reflect the larger fruit yield. The typical custom rate for a mechanical harvester seen in the West Texas Region was $300.00 per acre.

The additional tractor cost approximately $25.00 per acre to rent. The forklift cost approximately $40.00 per acre. The harvest machinery cost of $45.04 was 75% of full production because this study assumed the wine grape harvest to be the same reduced portion of maximum yield. This expense included the use of the tractor, all-terrain vehicle (ATV), bin trailers, truck, and scale.

Harvest required 2 skilled and 3 unskilled laborers for 1.5 hours each per acre or a total of 7.5 man hours per acre. This was 75% of the man hours required for full production harvest. Total cost for skilled labor was $45.00 and unskilled was $45.00 as well. The two other harvest expenses incurred were a drop-off fee and transportation to the winery. The drop-off fee cost a flat $30.00 per acre. Transportation to the winery, as detailed in Establishment Year 3 on pages 32 and 33, cost $393.75.

The total harvest cost for Development Year 4 was $923.79.



Cover crop maintenance activities and cost remained the same as in Establishment Year 3. The soil was disked once prior to seeding and costs $16.15. This study assumed the cover crop to be winter rye, planted once with a seeding rate of 100 lbs. per acre and an application cost of $36.23. Total cover crop maintenance costs in Development Year 4 were $52.38.

Miscellaneous

Building maintenance and repair, vineyard system maintenance and repair, and irrigation utilities were 75% of Year 5 full production costs. The costs were $16.50, $124.26, and $37.50 per acre, respectively. Total post-harvest miscellaneous costs were $178.26.

Total variable costs for Development Year 4 summed to $2,599.13 per acre.

Ownership Expenses


Cash capital expenses remained the same as in Establishment Year 3 with the exception of operating interest and the addition of crop insurance. Operating interest was calculated by multiplying one-half of the total variable costs for Development Year 4 by the annual interest rate of 7.56% (Federal Reserve Bank of Dallas, 2008). Total operating interest in Year 4 was $98.25. Liability insurance, property insurance, and property taxes are shown in Table 12.B. Their costs per acre were $20.00, $190.66, and $47.66, respectively. Beginning in Development Year 4 and continuing throughout the life of the enterprise was the purchase of crop insurance. The charge per acre for crop insurance was $60.00 and can be found in Table 12.B. Vineyard Management and/or Consultation were not given a value in this study because none was required during Year 4 in this scenario but should be included if warranted. This brought the total cash capital expense in Development Year 4 to $416.57.


Non-cash capital expenses remain the same as in Establishment Year 3 except for the incurred amortized establishment cost and an increase in operating interest. The amortized establishment cost can be found in Table 5.A and amounted to $1,162.21. The calculation for this value is explained in detail in section Total Amortized Establishment Cost per-acre Beginning in Year 4 and Beyond on page 28. Annual capital recovery for farm equipment was $666.41, for farm buildings, land and tools was $129.74, and for the drip irrigation system was $198.92. All three expenses are shown in Table 12.B and brought the total non-cash capital expense to $2,157.18.




Total fixed costs were $2,723.76 per acre in Development Year 4.

Total projected cost of production in Development Year 4 was $5,322.89 per acre.

Residual returns to management, unpaid labor, and risk for Development Year 4 were $1,427.11.

Full Production Years 5 - 25 (Table 8, Pg. 55)

Table 8 shows the final enterprise budget for this study. The production year budget characterizes the typical annual costs and returns one would expect to see from a mature 20-acre vineyard in the West Texas Region. During Production Year 5, there were a few key modifications. First, Cabernet Sauvignon yield was anticipated to be at 100% of full production. This yield was projected to be approximately 5 tons per acre. Second, soluble nitrogen was now applied at its’ full rate, which was 10 lbs. per application for a total of 30 lbs. per acre annually. Third, maintenance, repair, and utilities were also at their full values. Last, there was an increase in harvest cost accounting for the increase in yield. This budget may be used to forecast for enterprise years 5 through 25.

Primary Revenue

Marketable wine grape harvest for Production Year 5 in the month of August was projected to be 100% of full production, which comes to approximately 5.0 tons of the Cabernet Sauvignon variety per acre. The estimated market value for Cabernet Sauvignon was $1,800 per ton. This was determined by surveying current growers and industry experts.

Total revenue for Production Year 5 was $9,000 per acre.

Operating Expenses


As in Development Year 4, this study removed the winter cover crop by applying glyphosate once at a fee of $30.63.

Pruning

As with Development Year 4, custom mechanical pre-pruning took place at a rate of $100.00 per acre. Finish pruning again took place and a total of 40 hours of unskilled labor was required, which totaled to $400.00. This study assumed that the prunings were pulled/raked and required 5 hours of skilled labor costing $15.00 per hour for a total of $75.00 per acre. The alternative method of flail mowing would require an application cost of $24.78. During Production Year 5, hedging to facilitate mechanical harvesting was essential and took 1 hour of unskilled for a total cost of $10.00 per acre.


Vine Training

Vine Training/Tying required approximately 25 hours of unskilled labor for a total cost of $250. Tie tape was projected at approximately $15.00 per acre. Fruit load was at full production and therefore required approximately 4 hours of unskilled labor per acre to move catch wires up as well as down, each costing $40.00.


Production Year 5 fertilizer and pest control activities remained the same as previous years with the exception of nitrogen. Soluble nitrogen was applied through the drip system three times annually at the full rate of 10 lbs. per application per acre for a total of 30 lbs annually. This study assumed that actual nitrogen applied, regardless of mix the variation, totaled 30 lbs. The total cost of nitrogen application was $39.30 at $13.10 per application. A zinc spray was applied once at a per application cost of $27.88 and a total cost of $83.63. Sulfur, as in Development Year 4, was applied four times to mitigate powdery mildew (Uncinula necator). The rate was 3 lbs. per acre for each application. The total cost of sulfur spray application was $48.71 at $12.18 per application. Summer bunch rot was an ongoing concern and remained so throughout the vineyard life. A boscalid and pyraclostrobin fungicide was applied once at a cost of $32.62 to combat summer bunch rot, powdery mildew, and phomopsis. Promotion of good air circulation within the grapevine canopy is also encouraged to reduce the risk of summer bunch rot. A carbaryl insecticide was applied once to control leafhoppers at a cost of $17.08. Imidacloprid insecticide was again applied twice to combat glassy wing sharpshooters, bringing the total material applied to the full 14 ounces per acre annually recommended. The cost per application was $32.00 and total cost was $64.00.

Strip Spray

Strip spray activities remained the same as in Development Year 4. A trifluralin herbicide was sprayed once for pre-emergence control of annual grasses and broadleaf weeds. Cost per application was $19.63. This study assumed one application of glyphosate needed to be applied along the vine rows as a general treatment for weed control at a cost of $30.63. Some producers choose to perform weed control by hoeing/hand pulling, which was projected to require 2 hours of unskilled labor per acre totaling $20.00, but were not included in this study’s total cost. Several producers stated that by choosing to manually remove weeds, they could examine the vines closely as they progressed through the vineyard. A post-emergent herbicide glyphosate spot spray was applied twice at a cost of $25.73 per application for a total cost of $51.46.

Sucker Control

In Production Year 5 there was still the need to control suckers growing extensively below the fruiting zone. Two options are available to producers; a glufosinate herbicide application or manual removal. The glufosinate costs $24.63 per application while this study performed manual removal and required 8 hours of unskilled labor costing a total of $80.00. Again, as with the option of hoeing/hand pulling weeds, some producers prefer to manually remove suckers for the same reasons as manual weed removal.


Total Pre-Harvest costs for Production Year 5 amounted to $1,460.30.

Harvest

During harvest in Production Year 5, the vineyard produced at full capacity yield. Labor hours required and machinery costs reflect the larger fruit yield. The typical custom rate for a mechanical harvester seen in the West Texas Region was $300.00 per acre.

The additional tractor cost approximately $25.00 per acre to rent. The forklift cost approximately $40.00 per acre. The harvest machinery cost of $60.05 was now 100% of full production. This expense included the use of the tractor, all-terrain vehicle (ATV), bin trailers, truck, and scale.

Harvest required 2 skilled and 3 unskilled laborers for 2 hours each per acre or a total of 10 man hours per acre. This was 100% of the man hours required for full production harvest. Total cost for skilled labor was $60.00 and unskilled was $60.00 as well. The two other harvest expenses incurred were a drop-off fee and transportation to the winery. The drop-off fee cost a flat $30.00 per acre. Transportation to the winery, as detailed in Establishment Year 3 on pages 32 and 33, cost $525.00.

The total harvest cost for Production Year 5 was $1,100.05.


Cover crop maintenance activities and costs remained the same as in Development Year 4. The soil was disked once prior to seeding and costs $16.15. This study assumed the cover crop to be winter rye, which was applied once at rate of 100 lbs. per acre and an application cost of $36.23. Total cover crop maintenance costs in Production Year 5 were $52.38.

Miscellaneous

Building maintenance and repair, vineyard system maintenance and repair, and irrigation utilities were now 100% of full production costs. The costs were $22.00, $165.68, and $50.00 per acre, respectively. Total post-harvest miscellaneous costs were $237.68.

Total variable costs for Production Year 5 summed to $2,820.41 per acre.

Ownership Expenses


Cash capital expenses remain the same as in Development Year 4 except for an increase in operating interest. Operating interest was calculated by multiplying one-half of the total variable costs for Production Year 5 by the annual interest rate of 7.56% (Federal Reserve Bank of Dallas, 2008). Total operating interest in Year 5 was $107.75. Liability insurance, property insurance, and property taxes are shown in Table 12.B. Their costs per acre were $20.00, $190.66, and $47.66, respectively. Continuing in Year 5 and throughout the life of the enterprise, crop insurance was purchased. The charge per acre for crop insurance was $60.00


and can be found in Table 12.B. Vineyard Management and/or Consultation were not given a value in this study because none was required during Year 5 in this scenario but should be included if warranted. The total cash capital expense in Production Year 5 was $426.07.


Non-cash capital expenses remained the same as in Development Year 4. The amortized establishment cost can be found in Table 5.A and amounted to $1,162.21. The calculation for this value is explained in detail in section Total Amortized Establishment Cost per-acre Beginning in Year 4 and Beyond on page 28. Annual capital recovery for farm equipment was $666.41, for farm buildings, land, and tools was $129.74, and for the drip irrigation system was $198.82. Both expenses are shown in Table 12.B and brought the total non-cash capital expense to $2,157.18.


Land opportunity cost remained $150.00 per acre as it did in Development Year 4. This expense is explained in detail in the section West Texas Region Assumptions on page 17 and Non-Cash Land Expense on page 18. Total non-cash land expense was $150.00.

Total fixed costs were $2,733.25 per acre in Full Production Years 5 - 25.

Total projected cost of production in Full Production Years 5 - 25 was $5,583.66 per acre.

Residual returns to management, unpaid labor, and risk for Full Production Years 5 - 25 were $3,416.34.

Cash & Labor Activity Breakdown (Table 9, Pg. 57)

Table 9 details the cost incurred for each activity based purely on variable expenses. These include operation time, number of applications, labor cost, equipment cost, and material cost. When combined these provide a “Cost per Application” value, which can be interpreted as the cost required to apply one more unit of a given operation. “Cost per Application” should be used to derive costs and must have the same number of applications as those listed in Production Year 5 (Table 8). The “Total Annual Cost” is the product of the cost per application and number

Total Preharvest

Costs26%

Total Harvests Costs20%

Total Post-Harvest Costs

1%

Total Miscellaneous

Costs4%

Total Cash Capital Cost

8%

Total Non-Cash Capital

Cost38%

Total Land Cost3%

Figure 5: Total Cost Proportions for Full Production Years 5-25


of applications. These values should be used to compare with the costs provided in Table 8 and should match. Any inconsistencies can be easily located and remedied.

The operation time required for each activity was the equipment hours plus an additional 20% of that time to account for equipment set up. There are several applications in the event that equipment or chemicals are used to act as a multiplier for their per-use values. The labor rate was included based on whether the activity requires a skilled or unskilled laborer, which was then multiplied by the operation time to estimate labor cost. The equipment hours required for each activity was derived from the grower interviews. This value was the estimated time it requires to perform each activity after set up. This value was then multiplied by the hourly machinery costs found in Hourly Machinery & Equipment Costs (Table 11) of the corresponding equipment. Material costs are drawn from the Chemical Costs & Application Schedule (Table 10). Any custom activity had that expense placed under the “Custom/Rent” column. Activity costs were then tabulated to reflect a per application costs. This value played an important role in Establishment Years 0 through 4 where the number of applications was a reduction of Production Year 5 practices. The “Total Annual” column was simply the “Cost per Application” multiplied by the “Number of Applications”. Total Annual values should match perfectly with Production Year 5 values for each specific operating and capital activity.

Chemical Costs & Application Schedule (Table 10, Pg. 59)

This table details the types of chemicals used, rate per application, cost per application, and number of applications in a given year. Individuals can personalize this table to include specific chemicals they use and the information which corresponds with them. In turn, the changes will be echoed to the pertinent tables. This table was designed to simplify the enterprise budgets as they are partially functions of the chemical applications.

Hourly Machinery & Equipment Costs (Table 11, Pg. 60)

This vineyard scenario required a wide variety of equipment, each of which has varying levels of fuel consumption, expected life, price, and repairs. Table 11 details the assumptions made and calculations to derive the hourly variable cost for each piece of machinery. The hourly variable costs were included into the Cash & Labor Activity Breakdown (Table 9) as “Equipment Costs” which were multiplied by the stated equipment use hours for a given activity to achieve an anticipated variable equipment cost for that activity. On the bottom left-hand corner of the table, also included was the assumed price for gasoline and diesel fuels. Hours of Life, Expected Life, Total Repairs, and Lube for each piece of equipment were found using ASAE guidelines (American Society of Agricultural Engineers, 2000).

Annual Equipment Costs (Table 12, Pg. 61)

Detailed ownership costs for equipment and other investments are found in Table 12. This study assumed that the equipment complement was 100% new. However, we provided an adjusted total to 60% of the new purchase price to illustrate a mix of new and used equipment. Almost a $45,000 reduction in purchase price and approximately a $5,000 decrease in annual cost resulted from the 60% of new purchase price value. This is one of the many cost saving measures that individuals may consider in their own enterprise. Costs listed were divided into


two separate categories: non-cash and cash capital expenses. Purchase price, expected life, and annual capital recovery costs are detailed as discussed in previous sections. Insurance and taxes were calculated as 1% and 0.25% of purchase price (Agricultural & Applied Economics Association Task Force on Commodity Costs and Returns, 1998). The totaled values for annual capital recovery, insurance, and taxes were transmitted to Table 12.B for a per acre calculation.

Annual Investment Costs (Table 12.A, Pg. 61)

Table 12.A details the annual investment costs for buildings, drip irrigations system, trellis system, vineyard establishment, land, and tools. As with Table 12, costs listed were divided into two separate categories: non-cash and cash capital expenses. Rates of insurance and taxes remain at 1% and 0.25% respectively as noted in the table (Agricultural & Applied Economics Association Task Force on Commodity Costs and Returns, 1998). Values given in this table comprise a significant amount of annual capital recovery for the enterprise. The total

values for annual capital recovery, insurance, and taxes were transmitted to Table 12.B for a per acre calculation. Repairs were transferred to the enterprise budget tables and converted to a per acre value.

Annual Business Overhead Costs

(Table 12.B, Pg. 61)

Table 12.B converts both total enterprise cash and non-cash capital expenses to a per acre value. It

should be noted that when analyzing economies of scale, this table is effective when assessing economic efficiency. All “price/unit” values recorded were transmitted from Table 12.B to the enterprise budgets. From examining this table, it is evident that annual capital recovery accounts for nearly 80% of the total overhead costs.

Financial Interest Rates (Table 12.C, Pg. 61)

Table 12.C details interest rates used for both operating loans and capital leases. For this study the rates were 7.56% and 6.87%, respectively (Federal Reserve Bank of Dallas, 2008). An operating loan was considered to be made for any term equal to or less than one calendar year. A capital lease was considered to be made for any term equal to or greater than one calendar year.

54%31%

6%9% Annual Amortized

Establishment Cost

Annual Capital Recovery - Farm Equipment

Annual Capital Recovery - Farm Buildings

Annual Capital Recovery - Drip Irrig. System

Figure 6: Proportions of Major Annual Business Overhead Costs (Table 12.B)


Neither interest rate used accounted for inflation in this study thus, they were presented and calculated in nominal terms.

Machinery & Equipment Price Derivation (Table 13, Pg. 62)

This table is the details of the machinery and equipment complement required for our vineyard scenario. This study based all prices on Manufacturer Suggested Retail Price (MSRP) of the particular piece of equipment listed (Kayne, 2003). Total cost for each type of machinery and equipment is detailed on the right-hand side of the table and was the MSRP multiplied by the quantity required. Values in this table tied directly into Tables 11 and 12. Individuals may require less or more than the equipment and machinery proposed by this study.

Cost per Acre at Varying Yields (Table 14, Pg. 63)

Table 14 summarizes the costs per ton as well as the return possibilities for given yields and market prices during Production Years 5 through 25. With the exception of harvest, all other costs were held constant. Harvest costs are directly related to the yield harvested and so the harvest expense increased as harvested yield increased. The harvest cost increased approximately $220 for every one ton increase in yield. The prices and yields were based on recent averages with input from current growers and industry experts. Range for Cabernet Sauvignon yield was between 2 and 8 tons per acre, with the median of 5 being the assumed level for this study. Price per ton varied between $1,500 and $2,200, with $1,800 being the assumed market price for this study. It should be noted that fruit quality typically declines as yield increases and thus expected price received will also fall. The converse is also true. This is not always the case, but is a good rule of thumb.

Net returns were categorized at the three key points where management decisions are made. First, net returns per acre were shown above total operating costs, or gross margin. This is critical information because producers who do not receive a positive return above operating costs at the expected price and yield should typically not produce. Second, net returns per acre above total cash costs were detailed. This information is critical because this establishes the yield and price needed to meet all cash costs. Third, net returns per acre above total costs were given. This gives insight to the long run profitability of the enterprise.

Table 14 also provides the ability for an approximation of the break-even price at given yields. Net returns per acre above total operating costs, were positive in all yield and price variations. Net returns above total cash costs were positive for all variations as well. Net returns above total costs were positive for all variations above a yield of 3 tons per acre and above a price per ton of $1,800. All of the variations were assumed to be based on Cabernet Sauvignon. This can be a useful tool in management decision making for many things. For example, the scenario of adverse weather could be analyzed with this table. West Texas wine grape producers face the added risks of late spring frosts and mid season hail, both of which may reduce expected yield. If one of these weather events results in a 40% loss in yield, then an individual would examine return possibilities for 3 tons per acre as opposed to 5 tons per acre.


Returns per Acre at Varying Yields, Price, and Varietals (Table 15, Pg. 64)

In Table 15, this study provides a look at returns per acre above total costs with regard to four different varieties. Tables 15.A, 15.B, 15.C, and 15.D examine returns above total costs when yield and price were not held constant with regards to varieties a producer could plant. Information provided in this table may allow prospective and current producers to approximate what returns could be expected depending on the variety selected and the inherent characteristics each variety possesses. The four common varieties in the West Texas Region are Cabernet Sauvignon (the assumed variety in this study), Merlot, Tempranillo, and Viognier.

All three sub tables were calculated with a static Total Cost of Production for a full production year found in Tables 7, 8, and 11. This approach was taken because even though there are different cultivation processes for each respective variety, the difference in total cost of the practices are negligible compared to the price and yield variation an individual might encounter. As stated previously, the total cost, except harvest, remained the same for all possibilities shown in the Tables 15.A, 15.B, 15.C, and 15.D while the total revenue varied.

Returns per-acre Above Total Costs with Cabernet Sauvignon (Table 15.A, Pg. 64)

In Table 15.A, Cabernet Sauvignon produced a positive return above a yield of 3 tons per acre and value of $1,800 per ton. However, Cabernet Sauvignon has been known to produce low yields compared with the other three varieties. If the yield and market price are low, Cabernet Sauvignon has the largest loss of the four varieties. Cabernet Sauvignon possesses the possibility of the highest return benefit but also the largest loss risk. This variety of wine grape is probably the most popular of the reds and the most versatile. Current growers in the Texas High Plains Region have stated the historical expected yield for Cabernet Sauvignon is between 2 to 8 tons.

Returns per Acre Above Total Costs with Merlot (Table 15.B, Pg. 64)

In Table 15.B, Merlot would be expected to produce a positive return above a yield of 3 tons per acre and value of $1,800 per ton. Merlot was in the middle regarding yield consistency and price compared with the other two varieties. Weighed against Cabernet Sauvignon, Merlot had a more consistent yield but is still lower than Tempranillo and Viognier. Merlot does have a slightly lower loss possibility versus Cabernet Sauvignon, which could be enticing to producers with a lower capital ceiling. This variety was also one of the most popular reds and thus has a higher demand from wineries. Current growers in the Texas High Plains Region have stated the historical expected yield for Merlot is between 1 to 7 tons.

Returns per Acre Above Total Costs with Tempranillo (Table 15.C, Pg. 64)

In Table 15.C, Tempranillo produced a positive return above a yield of 3 tons per acre and value of $1,800 per ton, as well as a yield above 4 tons above a value of $1,400 per ton. Again, Tempranillo has a lower loss possibility just as Merlot. The benefit is seen in the yield amount and consistency, which was the highest of the four varieties. The downside to Tempranillo is that many winemakers may not produce a large variety or volume of wines


containing this variety of fruit. However, as wineries produce more port wines or use it as a base in blended wines, the demand for Tempranillo may rival the more popular grape varieties. Current growers in the Texas High Plains Region have stated the historical expected yield for Tempranillo is between 3 to 9 tons.

Returns per Acre Above Total Costs with Viognier (Table 15.D, Pg. 64)

In Table 15.D, Viognier produced a positive return above a yield of 3 tons per acre and above a value of $1,800 per ton, as well as above a yield of 4 tons per acre above a value of $1,400 per ton, and above a yield of 4 tons per acre above a value of $1,700 per ton. Again, Viognier had a lower loss possibility just as Merlot and Tempranillo. The benefit is seen in the yield amount and consistency, which was the second highest of the four varieties. The downside to Viognier, as with Tempranillo, is that many winemakers may not produce a large variety or volume of wines containing this variety of fruit. Current growers in the Texas High Plains Region have stated the historical expected yield for Viognier is between 3 to 9 tons.

The dilemma producer’s face is that lower yields tend to produce higher quality fruit which may be sold at a higher market price, but the agricultural factors they encounter may not result in either a desirable yield or fruit quality. This may be a contributing factor to the shift to varieties other than Cabernet Sauvignon and Merlot which has been seen in recent years. However, the soil type, disease pressure, insect pressure, and weed pressure may very well dictate the variety possibilities individual producers have at their disposal, thus invalidating some, if not most of the decision criteria regarding returns. If this is the case, the producer can still find ways to reduce input costs or obtain higher prices for their fruit to increase the likelihood of profitability. Regardless, all producers should consult at length with their Texas AgriLife Extension Service Viticulture Advisor prior to planting any variety of wine grapes.

Though higher return possibilities may be expressed in varieties other than the assumed Cabernet Sauvignon, other factors should be considered. For instance, the Texas wine industry is still in infancy and many of the wineries are relatively small. This raises the issue of being able to sell large quantities of a particular variety, such as Tempranillo or Viognier. Many current producers in the West Texas Region sell their wine grapes to multiple wineries and can cause an increase in transaction costs that may not offset the higher return realized. Each individual situation warrants a myriad of questions which must be evaluated before venturing into any variety.

Monthly Cash Flow Budget for Production Years (Table 16, Pg. 65)

“It should be obvious that a reliable cash flow projection will enable an operator to determine the timing and magnitude of borrowing, as well as the timing and magnitude of loan repayment” (Boehlje & Eidman, 1984, p. 248). The cash flow budget also “… provides information on liquidity and loan repayability that is very important for both the lender and the farm operator” (Boehlje & Eidman, 1984, p. 249). The enterprise budgets provided in this study show the economic costs and returns of establishing and producing commercial wine grapes in the West Texas Region. Costs included are both cash and non-cash. One specific purpose of this study was to analyze the economic feasibility of establishing a new commercial vineyard. As part of this purpose, a monthly cash flow budget was included to estimate cash flow


requirements to be used for planning cash needs, borrowing, and management decision making. Most lenders require a projected cash flow statement in connection with loan applications regardless of the enterprise.

The Monthly Cash Flow Budget for Production Years (Table 16) illustrates a summary of the annual cash inflows and cash outflows as well as new operating borrowings for a full production year. All of the information included was derived from Production Years 5 – 25 (Table 9) based on estimated timeline suggestions from growers. Table 16 details the cash available and does not consider non-cash related expenses. The month for which this study assumed the costs were incurred is provided in Table 8 in the right most column. The months of expense incurrence are only for the representative vineyard used in this study. Individuals may incur costs at times different from the information provided in this study and should be adjusted accordingly.

A closer look at this table reveals that all new current debt was repaid during the month of August. This was when harvest takes place and this study assumed no revenue was anticipated prior to this month. Some growers do perform forward contracting with the processor. There are many variations of these types of contracts, which may cause their individual cash flow to appear very different from the table provided in this study.

$(2,000)

$(1,000)

$-

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

Figure 7: Bar Graph showing Monthly Cash Available for Production Years 5-25 from Table 16


West Texas Region Summary and Outlook

The cost and returns estimates provided in this study specify results for vinifera in the Texas AgriLife Research West Texas Region. These results were established under the assumption of an excellent site, quality operation management, the use of recommended practices, and 2008 prices regarding inputs, both operating and ownership. There are several key topics which potential investors should be aware of.

First, this study projects that in the West Texas Region the per-acre economic net cost of establishing a commercial wine grape enterprise were approximately $16,580.20 for the vineyard system and pre-production costs through Establishment Year 3. This study assumed 20 bearing acres. Therefore, the entire representative vineyard provided in this study was estimated to have a net cost $331,604.00 for expenses through Establishment Year 3 and can be found in Table 6. This reiterates that capital and labor intensity are prominent characteristics that underlie commercial wine grape production. Potential investors should note that the current economic climate for wine grape production in the West Texas Region can change.

Second, substantial crop loss due to adverse weather condition risk are ever present in the West Texas Region. Spring frosts and mid-season hail are the primary adverse weather concerns. Both unfavorable events can radically reduce yield and in turn slash enterprise returns. Table 14 allows producers to estimate the effects adverse weather may have on their net returns above costs. The full economic impacts of these weather occurrences considering likelihood and severity have not been evaluated for wine grape production in Texas.

Third, potential for inflation of input prices such as fuel and chemicals should also be taken into consideration. 2008 was a prime example of the speed and brevity at which input prices can increase.

Fourth, a consistent seasonal labor base can be difficult to rely upon. Producers in many regions and states have ease of access to seasonal labor due to other crops such as citrus grown in relatively close proximity to the commercial wine grape production. In the West Texas Region, seasonal labor availability has tended to be scarce and unstable. Shifts to heavily mechanized practices have reduced the reliance on seasonal labor for many producers in the West Texas Region and appears it will continue to in the foreseeable future.

All things considered, proficient current producers have established that conditions for growing commercial wine grapes in the West Texas Region can be profitable. This region produces approximately two-thirds of the wine grapes grown in Texas. The two largest wineries in the state, which generate over 60% of Texas’ wine, are also located in this region (MKF Research LLC, 2007). Current growers have confirmed that this region can produce high quality fruit across a number of varieties. It is expected that much of the wine grape production growth would occur in the West Texas Region. Consumption of wine has increased nearly 20% in Texas and over 25% in the United States since 2000 (Adams Wine Handbook, 2008). Given the increased consumption of table wine in the United States and Texas, there is ample long run potential to seize for producers and investors who can weather the inevitable ebbs and flows associated with commercial wine grape production in the West Texas Region.


References

Agricultural & Applied Economics Association Task Force on Commodity Costs and Returns. (1998). Commodity Costs and Returns Estimation Handbook. Ames, Iowa: Iowa State University.

American Society of Agricultural Engineers. (2000). ASAE Standards 2000 (47th Edition ed.). St. Joseph, MI: American Society of Agricultural Engineers.

American Society of Farm Managers and Rural Appraisers. (2008). Trends in Texas Rural Land Values for the Year 2008. San Antonio, Texas: American Society of Farm Managers and Rural Appraisers, Texas Chapter.

Boehlje, M. D., & Eidman, V. R. (1984). Developing Enterprise Budgets: Economic Concepts. In M. D. Boehlje, & V. R. Eidman, Farm Management (p. 87). New York: John Wiley & Sons, Inc.

Eleveld, B., Vasconcelos, M. C., & Hellman, E. W. (2003). Vineyard Economics. In E. W. Hellman, Oregon Viticulture (pp. 21-37). Corvallis, Oregon: Oregon State University Press.

Federal Reserve Bank of Dallas. (2008). Agricultural Survey, Fourth Quarter 2008. Dallas, Texas: Federal Reserve Bank of Dallas.

Kay, R. D., Edwards, W. M., & Duffy, P. A. (2004). Enterprise Budgeting. In R. D. Kay, W. M. Edwards, & P. A. Duffy, Farm Management, 5th Ed. (pp. 150,160). New York: McGraw-Hill.

Kayne, R. (2003). What is MSRP? Retrieved May 1, 2008, from Wisegeek: http://www.wisegeek.com/what-is-msrp.htm

McGourty, G. T., Klonsky, K. M., & De Moura, R. L. (2008). Sample Costs to Establish a Vineyard and Produce Winegrapes, White Varieties - Sauvignon Blanc, North Coast - Lake County 2008. Davis, California: University of California Cooperative Extension.

MKF Research LLC. (2007). The Economic Impact of Wine and Grapes on the State of Texas 2007. St. Helena, California: MKF Reseacrh LLC.

National Agricultural Statistics Service, T. F. (2004). 2004 Texas Custom Rates Statistics. Austin, Texas: NASS Texas Field Office.

The Beverage Information Group. (2008). Adams Wine Handbook. Norwalk, Conneticut: The Beverage Information Group.

White, G. B. (2008). Cost of Establishment and Production of Vinifera Grapes in the Finger Lakes Region of New York-2007. Ithaca, New York: Cornell University.

Description Unit $ / UnitOperating Input or Custom Operation Expenses

Custom Plow 1.00 acre 40.00 40.00 - Custom Disc 2.00 acre 15.00 30.00 - Landplane (custom) 1.00 acre 15.00 15.00 -

Total Land Preparation Costs 85.00$ -$

85.00$

Description Unit $ / Unit

Vineyard Management and/or Consultation* 1.00 acre - - - Total Cash Capital Cost -$ -$

Land Cost - Annual (Opportunity Cost) 1.00 acre 150.00 150.00 - Total Land Cost 150.00$ -$

150.00$ -$

235.00$ -$

85.00$ -$

* Activities which may be required but were not for this study

Table 1Texas AgriLife Vineyard Budget - West Texas Region

Drip Irrigated PROJECTED COSTS PER ACRE, ESTABLISHMENT YEAR 0


Quantity/ Acre

Value or Cost/Unit

Land Preparation

Your Cost

Your CostQuantity/

AcreValue or Cost/Unit


Total Variable Costs

Total Cash Cost for Pre-Production Net Cost (Table 5.A)

Total Fixed Cost

Year 0Total Projected Cost Of Establishment

Ownership Expenses

45

Description Unit $ / UnitDrip Irrigation System

Main Line (per ft.) 97.00 feet 1.50 145.50 - Main Line Installation 1.00 acre 250.00 250.00 - Injector 1.00 acre 30.00 30.00 - Soil Moisture Sensor 1.00 acre 30.00 30.00 - Filter System 1.00 acre 50.00 50.00 - Valves 9.00 valve 25.00 225.00 - Drip Line Support Wire (per ft.) 4,350.00 feet 0.03 108.75 - Drip Line (per ft.) 4,350.00 feet 0.13 565.50 - Emitters (per vine) 1,089.00 emitter 0.40 435.60 - Drip Line Installation 1.00 acre 450.00 450.00 - Drip Line Connectors 18.00 connector 3.00 54.00 - Well/Pump* 1.00 acre - - -

Total Irrigation System Costs 2,344.35$ -$

2,344.35$ -$

* Activities which may be required but were not for this study

Total Establishment Activity Costs Per Acre


Vines, Planting, Trellis and Irrigation Systems Investment Breakdown Investment Cost Per Acre to Establish

Quantity/ Acre

Value or Cost/Unit Your Cost

46


Plant VinesVine Marking (survey & layout) 1.00 acre 15.00 15.00 - Vines (grafted) 1,089.00 vine 4.00 4,356.00 - Vine Planting (2 Skilled Laborers)** 4.00 hour 15.00 60.00 - Vine Planting (2 Unskilled Laborers)** 4.00 hour 10.00 40.00 -

(or) Custom Planting** 1.00 acre 170.00 170.00 - Total Planting Costs 4,541.00$ -$

Trellis SystemVSP Posts 270.00 post 7.50 2,025.00 - End Posts 20.00 post 22.00 440.00 - Rebar 810.00 post 1.75 1,417.50 - Wire (per ft.) 17,400.00 feet 0.03 435.00 -

Installation Labor 40.00 hour 10.00 400.00 - Installation Equipment 1.00 acre 270.00 270.00 -

Total Trellis System Costs 4,987.50$ -$ Vine Training

Grow Tubes - Purchase 1100.00 tube 0.75 825.00 Install Grow Tubes 15.00 hour 10.00 150.00 - Vine Training/Tieing 150.00 hour 10.00 1,500.00 - Tie Tape 1.00 acre 15.00 15.00 -

Fertilizer/Pest ControlFertilizer - Nitrogen (soluble through drip) 3.00 appl. 10.30 30.90 - Fungicide - Sulfur*** 4.00 appl. 12.18 48.71 - Insecticide - Carbaryl (Foliage Feeding Insects)*** 1.00 appl. 17.08 17.08 - Insecticide - Imidacloprid (Sharp Shooters) 1.00 appl. 32.00 32.00 -

Strip SprayHerbicide - Trifluralin (Pre-Emmergence) 1.00 appl. 19.63 19.63 - Herbicide - Glyphosate (Spot Spray) 1.00 appl. 20.83 20.83 -

Total Pre-Growth Costs 2,659.14$ -$ Post-Growth

Cover Crop MaintenanceDisking 1.00 appl. 16.15 16.15 - Cover Crop Seed & Planting(Rye) 1.00 appl. 36.23 36.23 -

Total Cover Crop Maintenance Costs 52.38$ -$ Miscellaneous

Remove Grow Tubes 10.00 hour 10.00 100.00 - Buildings, Tools - Maintenance & Repair 1.00 acre 4.40 4.40 - Vineyard System - Maintenance & Repair 1.00 acre 33.14 33.14 - Irrigation - Utilities 1.00 acre 10.00 10.00 -

Total Miscellaneous Costs 147.54$ -$

12,387.56$ -$


Operating Interest (7.56%) 1.00 acre 468.25 468.25 - Liability Insurance 1.00 acre 20.00 20.00 - Property Insurance 1.00 acre 190.66 190.66 - Property Taxes 1.00 acre 47.66 47.66 - Vineyard Management and/or Consultation*** 1.00 acre - - -

Total Cash Capital Cost 726.57$ -$

Annual Capital Recovery - Farm Equipment 1.00 acre 666.41 666.41 - Annual Capital Recovery - Farm Buildings 1.00 acre 129.74 129.74 - Annual Capital Recovery - Drip Irrig. System 1.00 acre 198.82 198.82 -

Total Non-Cash Capital Cost 994.97$ -$


1,871.54$ -$

14,259.11$ -$

13,114.14$ -$

* Activities which may be required but were not for this study*** Chemicals considered by this study to be Tank Mixed



Total Projected Cost Of Establishment


Quantity/ Acre

Value or Cost/Unit Your Cost

Your Cost

Pre-Growth


Year 1

Ownership ExpensesQuantity/




Total Fixed Cost


47


Removal of Cover CropHerbicide - Glyphosate 1.00 appl. 30.63 30.63 -

Replant VinesReplant Vines (2.5%) 27.00 vine 4.00 108.00 - Replant Labor (2.5% of Planting Labor) 0.50 hour 10.00 5.00 -

Vine TrainingInstall Grow Tubes (Replant Only) 0.50 hour 10.00 5.00 - Pruning 25.00 hour 10.00 250.00 - Vine Training/Tieing 45.00 hour 10.00 450.00 - Tie Tape 1.00 acre 15.00 15.00 - Move Catch Wires (Up) 4.00 hour 10.00 40.00 - Move Catch Wires (Down) 4.00 hour 10.00 40.00 -

Fertilizer/Pest ControlFertilizer - Nitrogen (soluble through drip) 3.00 appl. 10.86 32.58 - Fungicide - Sulfur*** 4.00 appl. 12.18 48.71 - Insecticide - Carbaryl (Foliage Feeding Insects)*** 1.00 appl. 17.08 17.08 - Insecticide - Imidacloprid (Sharp Shooters) 1.00 appl. 32.00 32.00 -

Strip SprayHerbicide - Trifluralin (Pre-Emmergence) 1.00 appl. 19.63 19.63 - Herbicide - Glyphosate (Spot Spray) 2.00 appl. 25.73 51.46 -

Total Pre-Growth Costs 1,145.08$ -$ Post-Growth



Remove Grow Tubes (Replant Only) 0.25 hour 10.00 2.50 - Buildings, Tools - Maintenance & Repair 1.00 acre 7.26 7.26 - Vineyard System - Maintenance & Repair 1.00 acre 54.67 54.67 - Irrigation - Utilities 1.00 acre 16.50 16.50 -


1,278.39$ -$







1,451.62$ -$

Year 2 2,730.01$ -$

1,585.04$ -$

* Activities which may be required but were not for this study** The more costly of the two activites was included in Total System Costs

*** Chemicals considered by this study to be Tank Mixed

Total Projected Cost Of Establishment

Total Variable CostsOwnership Expenses





Quantity/ Acre

Value or Cost/Unit

Your Cost

Your Cost

Quantity/ Acre

Value or Cost/Unit

Pre-Growth

Total Fixed Cost



48


Grape Variety 1 (50% of full production) 2.50 ton 1,800.00 4,500.00 -

4,500.00$ -$

Operating Input or Custom Operation Expenses



PruningPre-Pruning (Custom) 1.00 acre 100.00 100.00 - Finish Pruning 40.00 hour 10.00 400.00 - Pull/Rake Brush** 5.00 hour 15.00 75.00 -

(or) Flail Canes 1.00 appl. 24.78 24.78 - Vine Training

Vine Training/Tieing 25.00 hour 10.00 250.00 - Tie Tape 1.00 acre 15.00 15.00 - Move Catch Wires (Up) 4.00 hour 10.00 40.00 - Move Catch Wires (Down) 4.00 hour 10.00 40.00 -

Fertilizer/Pest ControlFertilizer - Nitrogen (soluble through drip) 3.00 appl. 11.24 33.71 - Fertilizer - Zinc Spray 3.00 appl. 27.88 83.63 - Fungicide - Sulfur*** 4.00 appl. 12.18 48.71 - Fungicide - Boscalid & Pyraclostrobin*** 2.00 appl. 32.62 65.24 - Insecticide - Carbaryl (Leafhoppers)*** 1.00 appl. 17.08 17.08 - Insecticide - Imidacloprid (Sharp Shooters) 2.00 appl. 32.00 64.00 -

Strip SprayHerbicide - Trifluralin (Pre-Emmergence) 1.00 appl. 19.63 19.63 - Herbicide - Glyphosate** 1.00 appl. 30.63 30.63 -

(or) Hoeing/Hand Pulling 2.00 hour 10.00 20.00 - Herbicide - Glyphosate (Spot Spray) 2.00 appl. 25.73 51.46 -

Sucker ControlHerbicide - Glufosinate** 1.00 appl. 24.63 24.63 -

(or) Manual Removal 8.00 hour 10.00 80.00 - Total Preharvest Costs 1,444.70$ -$

Custom Machine Harvest 1.00 acre 300.00 300.00 - Tractor Rent 1.00 acre 25.00 25.00 - Loader/Forklift Rent 1.00 acre 40.00 40.00 - Harvest Machinery Cost 1.00 appl. 30.02 30.02 - Harvest Support Labor (2 Skilled) 2.00 hour 15.00 30.00 - Harvest Support Labor (3 Unskilled) 3.00 hour 10.00 30.00 - Transportion to Winery 700.00 mile 0.38 262.50 - Drop-Off Fee 1.00 acre 30.00 30.00 -

Total Harvests Costs 747.52$ -$ Post-Harvest



Buildings, Tools - Maintenance & Repair 1.00 acre 11.00 11.00 - Vineyard System - Maintenance & Repair 1.00 acre 82.84 82.84 - Irrigation - Utilities 1.00 acre 25.00 25.00 -


2,363.45$ -$

2,136.55$ -$

Your Cost

Primary Revenue

Harvest



Drip Irrigated PROJECTED COSTS AND RETURNS PER ACRE, ESTABLISHMENT YEAR 3

Total Gross Revenue

Quantity/ Acre

Quantity/ Acre

Value or Cost/Unit

Pre-Harvest

Your RevenueValue or Cost/Unit

Gross Margin

49







1,492.63$ -$

3,856.08$ -$

643.92$ -$

2,711.11$ -$

* Activities which may be required but were not for this study** The more costly of the two activites is included in Total Variable Costs


Table 5.APre-Productive Cost Summary

-$

-$

Your Cost

12,995.29$

Total Fixed Cost

Total Projected Cost Of Production




1,162.21$

Ownership ExpensesQuantity/


Total Amortized Establishment Cost Per Acre Beginning in Year 4 and Beyond


Residual Returns To Management, Unpaid Labor, & Risk

Total Pre-Production Net Cost Establishment Years 0 - 3

50

CCM = Cover Crop Maintenance SC = Sucker Control

Year: Prep 1st 2nd 3rd TOTALTons Per Acre: 0.00 0.00 0.00 2.50 2.50

Land Preparation Costs:Land Prep: Plow (custom) 40.00 - - - 40.00 Land Prep: Disk 2x (custom) 30.00 - - - 30.00 Land Prep: Landplane (custom) 15.00 - - - 15.00 TOTAL LAND PREPARATION COSTS 85.00 - - - 85.00

Planting & Infrastructure Costs:Planting: Survey & Layout - 15.00 - - 15.00 Planting: Cultivate - 170.00 5.00 - 175.00 Planting: Vines @ 1017/acre (2.5% replant Year 2) - 4,356.00 108.00 - 4,464.00 Trellis System Installation - 4,987.50 - - 4,987.50 TOTAL PLANTING & INFRASTRUCTURE COSTS - 9,528.50 113.00 - 9,641.50

Pre Harvest Costs:CCM: Herbicide - Glyphosate - - 30.63 30.63 61.25 Pruning: Pruning - - 250.00 - 250.00 Pruning: Pre-Pruning - - - 100.00 100.00 Pruning: Finish Pruning - - - 400.00 400.00 Pruning: Pull/Rake Brush** - - - 75.00 75.00

(or) Flail Canes** - - - 24.78 24.78 Pruning: Summer Hedging - - - - - VT: Purchase Grow Tubes - 825.00 - - 825.00 VT: Install Grow Tubes - 150.00 5.00 - 155.00 VT: Vine Training/Tieing - 1,500.00 450.00 250.00 2,200.00 VT: Tie Tape - 15.00 15.00 15.00 45.00 VT:Move Catch Wires (Up) - - 40.00 40.00 80.00 VT:Move Catch Wires (Down) - - 40.00 40.00 80.00 FPC: Fertilizer - Nitrogen (soluble through drip) - 30.90 32.58 33.71 97.19 FPC: Fertilizer - Zinc Spray - - - 83.63 83.63 FPC: Fungicide - Sulfur*** - 48.71 48.71 48.71 146.12 FPC: Fungicide - Boscalid & Pyraclostrobin*** - - - 65.24 65.24 FPC: Insecticide - Carbaryl (Flea Beatle) - 17.08 17.08 17.08 51.23 FPC: Insecticide - Imidacloprid (Sharp Shooter) - 32.00 32.00 64.00 128.00 SS: Herbicide - Trifluralin (PreImmergence) - 19.63 19.63 19.63 58.88 SS: Herbicide - Glyphosate** - - - 30.63 30.63

(or) Hoeing/Hand Pulling - - - 20.00 20.00 SS: Herbicide - Glyphosate (Spot Spray) - 20.83 51.46 51.46 123.75 SC: Herbicide - Glufosinate** - - - 24.63 24.63

(or) Manual Removal - - - 80.00 80.00

Harvest Costs:Custom Machine Harvest - - - 300.00 300.00 Tractor Rent - - - 25.00 25.00 Loader/Forklift Rent - - - 40.00 40.00 Harvest Machinery Cost - - - 30.02 30.02 Harvest Labor - - - 60.00 60.00 Transportion to Winery - - - 262.50 262.50 Drop-Off Fee - - - 30.00 30.00

Post-Harvest Costs:CCM: Disking - 16.15 16.15 16.15 48.46 CCM: Cover Crop Seed & Planting(Rye) - 36.23 36.23 36.23 108.69

Drip Irrigated

Cost Per Acre

COST PER ACRE TO ESTABLISH SUMMARY - YEARS 0 THRU 3 -


SS= Strip SprayVT = Vine Training FPC = Fertilizer/Pest Control

51

Miscellaneous Costs:Remove Grow Tubes - 100.00 2.50 - 102.50 Buildings, Tools - Maintenance & Repair - 4.40 7.26 11.00 22.66 Vineyard System - Maintenance & Repair - 33.14 54.67 82.84 170.65 Irrigation - Utilities - 10.00 16.50 25.00 51.50 TOTAL CULTURAL COSTS - 2,859.06 1,165.39 2,363.45 6,387.91

TOTAL OPERATING COSTS/ACRE 85.00 12,387.56 1,278.39 2,363.45 16,114.41

Cash Overhead Costs:Operating Interest (7.56%) - 468.25 48.32 89.34 605.91 Crop Insurance - - - - - Liability Insurance - 20.00 20.00 20.00 60.00 Property Insurance - 190.66 190.66 190.66 571.98 Property Taxes - 47.66 47.66 47.66 142.99 Vineyard Management and/or Consultation*** - - - - -

TOTAL CASH OVERHEAD COSTS - 726.57 306.65 347.66 1,380.88 TOTAL CASH COSTS/ACRE 85.00 13,114.14 1,585.04 2,711.11 17,495.29 INCOME/ACRE FROM PRODUCTION - - - 4,500.00 4,500.00 NET CASH COSTS/ACRE FOR THE YEAR 85.00 13,114.14 1,585.04 - PROFIT/ACRE ABOVE CASH COSTS - - - 1,788.89 ACCUMULATED NET CASH COSTS/ACRE 85.00 13,199.14 14,784.18 12,995.29

Non-Cash Overhead Costs (Capital Recovery):Amortized Establishment Cost - - - - - Annual Capital Recovery - Farm Buildings - 666.41 666.41 666.41 1,999.23 Annual Capital Recovery - Farm Equipment - 129.74 129.74 129.74 389.22 Annual Capital Recovery - Drip Irrig. System - 198.82 198.82 198.82 596.46 Land Cost - Annual (Opportunity Cost) 150.00 150.00 150.00 150.00 600.00

TOTAL NON-CASH OVERHEAD COSTS 150.00 1,144.97 1,144.97 1,144.97 3,584.91 TOTAL COST/ACRE FOR THE YEAR 235.00 14,259.11 2,730.01 3,856.08 21,080.20 INCOME/ACRE FROM PRODUCTION - - - 4,500.00 4,500.00 TOTAL NET COSTS/ACRE FOR THE YEAR 235.00 14,259.11 2,730.01 - NET PROFIT/ACRE ABOVE TOTAL COST - - - 643.92 TOTAL ACCUMULATED NET COSTS/ACRE 235.00 14,494.11 17,224.12 16,580.20

52


Grape Variety 1 (75% of full production) 3.75 ton 1,800.00 6,750.00 -

6,750.00$ -$




PruningPre-Pruning (Custom) 1.00 acre 100.00 100.00 - Finish Pruning 40.00 hour 10.00 400.00 - Pull/Rake Brush** 5.00 hour 15.00 75.00 -

(or) Flail Canes 1.00 appl. 24.78 24.78 - Hedging to Facilitate Machine Harvest - hour 10.00 - -

Vine TrainingVine Training/Tieing 25.00 hour 10.00 250.00 - Tie Tape 1.00 acre 15.00 15.00 - Move Catch Wires (Up) 4.00 hour 10.00 40.00 - Move Catch Wires (Down) 4.00 hour 10.00 40.00 -

Fertilizer/Pest ControlFertilizer - Nitrogen (soluble through drip) 3.00 appl. 11.24 33.71 - Fertilizer - Zinc Spray 3.00 appl. 27.88 83.63 - Fungicide - Sulfur*** 4.00 appl. 12.18 48.71 - Fungicide - Boscalid & Pyraclostrobin*** 2.00 appl. 32.62 65.24 - Insecticide - Carbaryl (Leafhoppers)*** 1.00 appl. 17.08 17.08 - Insecticide - Imidacloprid (Sharp Shooters) 2.00 appl. 32.00 64.00 -

Strip SprayHerbicide - Trifluralin (Pre-Emmergence) 1.00 appl. 19.63 19.63 - Herbicide - Glyphosate** 1.00 appl. 30.63 30.63 -

(or) Hoeing/Hand Pulling 2.00 hour 10.00 20.00 - Herbicide - Glyphosate (Spot Spray) 2.00 appl. 25.73 51.46 -

Sucker ControlHerbicide - Glufosinate** 1.00 appl. 24.63 24.63 -

(or) Manual Removal 8.00 hour 10.00 80.00 - Total Preharvest Costs 1,444.70$ -$

Custom Machine Harvest 1.00 acre 300.00 300.00 - Tractor Rent 1.00 acre 25.00 25.00 - Loader/Forklift Rent 1.00 acre 40.00 40.00 - Harvest Machinery Cost 1.00 appl. 45.04 45.04 - Harvest Support Labor (2 Skilled) 3.00 hour 15.00 45.00 - Harvest Support Labor (3 Unskilled) 4.50 hour 10.00 45.00 - Transportion to Winery 700.00 mile 0.56 393.75 - Drop-Off Fee 1.00 acre 30.00 30.00 -

Total Harvests Costs 923.79$ -$ Post-Harvest



Buildings, Tools - Maintenance & Repair 1.00 acre 16.50 16.50 - Vineyard System - Maintenance & Repair 1.00 acre 124.26 124.26 - Irrigation - Utilities 1.00 acre 37.50 37.50 -


2,599.13$ -$

4,150.87$ -$

Quantity/ Acre

Primary Revenue

Pre-Harvest

Harvest


Gross Margin

Quantity/ Acre Your Cost


Drip Irrigated PROJECTED COSTS AND RETURNS PER ACRE, DEVELOPMENT YEAR 4

Total Gross Revenue

Your Revenue

Value or Cost/Unit

Value or Cost/Unit

53


Operating Interest (7.56%) 1.00 acre 98.25 98.25 - Crop Insurance 1.00 acre 60.00 60.00 - Liability Insurance 1.00 acre 20.00 20.00 - Property Insurance 1.00 acre 190.66 190.66 - Property Taxes 1.00 acre 47.66 47.66 - Vineyard Management and/or Consultation*** 1.00 acre - - -


Amortized Establishment Cost 1.00 acre 1,162.21 1,162.21 - Annual Capital Recovery - Farm Equipment 1.00 acre 666.41 666.41 - Annual Capital Recovery - Farm Buildings 1.00 acre 129.74 129.74 - Annual Capital Recovery - Drip Irrig. System 1.00 acre 198.82 198.82 -

Total Non-Cash Capital Cost 2,157.18$ -$


2,723.76$ -$

5,322.89$ -$

1,427.11$ -$

* Activities which may be required but are not for this study** The more costly of the two activites is included in Total Variable Costs



Quantity/ Acre



Ownership Expenses


Total Fixed Cost


Your CostValue or Cost/Unit

54


Grape Variety 1 (100% of Full Production) 5.00 ton 1,800.00 9,000.00 - Aug

9,000.00$ -$



Removal of Cover CropHerbicide - Glyphosate 1.00 appl. 30.63 30.63 - Aug

PruningPre-Pruning (Custom) 1.00 acre 100.00 100.00 - FebFinish Pruning 40.00 hour 10.00 400.00 - AprPull/Rake Brush** 5.00 hour 15.00 75.00 - Apr

(or) Flail Canes 1.00 appl. 24.78 24.78 - AprHedging to Facilitate Machine Harvest 1.00 hour 10.00 10.00 - Aug

Vine TrainingVine Training/Tieing 25.00 hour 10.00 250.00 - Apr, May, Jun, JulTie Tape 1.00 acre 15.00 15.00 - AprMove Catch Wires (Up) 4.00 hour 10.00 40.00 - JulyMove Catch Wires (Down) 4.00 hour 10.00 40.00 - Jan

Fertilizer/Pest ControlFertilizer - Nitrogen (soluble through drip) 3.00 appl. 13.10 39.30 - May, Jun, JulFertilizer - Zinc Spray 3.00 appl. 27.88 83.63 - Apr, May, JunFungicide - Sulfur*** 4.00 appl. 12.18 48.71 - May, Jun, Sept, OctFungicide - Boscalid & Pyraclostrobin*** 2.00 appl. 32.62 65.24 - Apr, JulInsecticide - Carbaryl (Leafhoppers)*** 1.00 appl. 17.08 17.08 - JulInsecticide - Imidacloprid (Sharp Shooters) 2.00 appl. 32.00 64.00 - Jun, Jul

Strip SprayHerbicide - Trifluralin (Pre-Emmergence) 1.00 appl. 19.63 19.63 - MarHerbicide - Glyphosate** 1.00 appl. 30.63 30.63 - Apr

(or) Hoeing/Hand Pulling 2.00 hour 10.00 20.00 - AprHerbicide - Glyphosate (Spot Spray) 2.00 appl. 25.73 51.46 - Jun, Jul

Sucker ControlHerbicide - Glufosinate** 1.00 appl. 24.63 24.63 - Jun

(or) Manual Removal 8.00 hour 10.00 80.00 - JunTotal Preharvest Costs 1,460.30$ -$

Custom Machine Harvest 1.00 acre 300.00 300.00 - AugTractor Rent 1.00 acre 25.00 25.00 - AugLoader/Forklift Rent 1.00 acre 40.00 40.00 - AugHarvest Machinery Cost 1.00 appl. 60.05 60.05 - AugHarvest Support Labor (2 Skilled) 4.00 hour 15.00 60.00 - AugHarvest Support Labor (3 Unskilled) 6.00 hour 10.00 60.00 - AugTransportion to Winery 700.00 mile 0.75 525.00 - AugDrop-Off Fee 1.00 acre 30.00 30.00 - Aug

Total Harvests Costs 1,100.05$ -$ Post-Harvest

Cover Crop MaintenanceDisking 1.00 appl. 16.15 16.15 - SeptCover Crop Seed & Planting(Rye) 1.00 appl. 36.23 36.23 - Sept


Buildings, Tools - Maintenance & Repair 1.00 acre 22.00 22.00 - JanVineyard System - Maintenance & Repair 1.00 acre 165.68 165.68 - JanIrrigation - Utilities 1.00 acre 50.00 50.00 - May, Jun, Jul, Aug


Total Variable Costs 2,850.41$ -$ 6,149.59$ -$

Qty/ Acre

Harvest


Drip Irrigated PROJECTED COSTS AND RETURNS PER ACRE, FULL PRODUCTION YEARS 5 - 25

Total Gross Revenue

Value or Cost/Unit

Primary RevenueYour Revenue

Gross Margin

Your Cost

Month of Item Incurrence for Cash

Flow (Table 16)Qty/ Acre

Value or Cost/Unit

Pre-Harvest

55


Operating Interest (7.56%) 1.00 acre 107.75 107.75 - Crop Insurance 1.00 acre 60.00 60.00 - JanLiability Insurance 1.00 acre 20.00 20.00 - JanProperty Insurance 1.00 acre 190.66 190.66 - JanProperty Taxes 1.00 acre 47.66 47.66 - JanVineyard Management and/or Consultation*** 1.00 acre - - - Jan


Amortized Establishment Cost 1.00 acre 1,162.21 1,162.21 - Annual Capital Recovery - Farm Buildings 1.00 acre 666.41 666.41 - Annual Capital Recovery - Farm Equipment 1.00 acre 129.74 129.74 - Annual Capital Recovery - Drip Irrig. System 1.00 acre 198.82 198.82 -

Total Non-Cash Capital Cost 2,157.18$ -$


Total Fixed Cost 2,733.25$ -$

5,583.66$ -$

3,416.34$ -$







Cash Capital ExpenseYour Cost

Ownership Expenses

Qty/ Acre

Value or Cost/Unit

acre of Item Incurrence for Cash

Flow (Table 16)

56

Operation

Pre-Harvest:Cover Crop Removal

Herbicide - Glyphosate 0.60 1.00 15.00 9.00 0.50 6.88 14.75 30.63 30.63$ Pruning

Pre-Pruning Custom 100.00 100.00 100.00$ Finish Pruning 40.00 10.00 400.00 400.00 400.00$ Pull/Rake Brush 5.00 15.00 75.00 75.00 75.00$

(or) Flail Canes 1.00 1.00 15.00 15.00 0.50 9.78 24.78 24.78$ Hedging to Facilitate Machine Harvest 1.00 10.00 10.00 10.00 10.00$

Vine TrainingVine Training/Tieing 25.00 10.00 250.00 250.00 250.00$ Tie Tape 15.00 15.00 15.00$ Move Catch Wires (Up) 4.00 10.00 40.00 40.00 40.00$ Move Catch Wires (Down) 4.00 10.00 40.00 40.00 40.00$

Fertilizer/Animal ControlFertilizer - Nitrogen (soluble through drip) 0.50 3.00 15.00 7.50 5.60 13.10 39.30$ Fertilizer - Zinc Spray 0.60 3.00 15.00 9.00 0.50 6.88 12.00 27.88 83.63$ Fungicide - Sulfur*** 0.30 4.00 15.00 4.50 0.25 4.08 3.60 12.18 48.71$ Fungicide - Boscalid & Pyraclostrobin*** 0.30 2.00 15.00 4.50 0.25 4.08 24.05 32.62 65.24$ Insecticide - Carbaryl (Leafhoppers)*** 0.30 1.00 15.00 4.50 0.25 4.08 8.50 17.08 17.08$ Insecticide - Imidacloprid (Sharp Shooters) 0.50 2.00 15.00 7.50 - - 24.50 32.00 64.00$

Strip SprayHerbicide - Trifluralin (Pre-Emmergence) 0.60 1.00 15.00 9.00 0.50 6.88 3.75 19.63 19.63$ Herbicide - Glyphosate** 0.60 1.00 15.00 9.00 0.50 6.88 14.75 30.63 30.63$

(or) Hoeing/Hand Pulling 2.00 10.00 20.00 20.00 20.00$ Herbicide - Glyphosate (Spot Spray) 0.60 2.00 15.00 9.00 0.50 6.88 9.85 25.73 51.46$

Sucker ControlHerbicide - Glufosinate** 0.60 1.00 15.00 9.00 0.50 6.88 8.75 24.63 24.63$

(or) Manual Removal 8.00 10.00 80.00 80.00 80.00$

TOTAL PRE-HARVEST COSTS 91.90 6.75 74.23 187.85 100.00

Harvest:Custom Machine Harvest Custom 300.00 300.00 300.00$ Tractor Rent Fee 25.00 25.00 25.00$ Loader/Forklift Rent Fee 40.00 40.00 40.00$ Harvest Machinery Cost 2.50 1.00 2.00 60.05 60.05 60.05$ Harvest Support Labor (2 Skilled) 4.00 15.00 60.00 60.00 60.00$ Harvest Support Labor (3 Unskilled) 6.00 10.00 60.00 60.00 60.00$ Transportion to Winery - - 525.00 525.00 525.00$ Drop-Off Fee Fee 30.00 30.00 30.00$

TOTAL HARVEST COSTS 12.50 2.00 60.05 - 920.00

Post-Harvest:Disking 0.60 1.00 15.00 9.00 0.50 7.15 16.15 16.15$ Cover Crop Planting & Seed 0.60 1.00 15.00 9.00 0.50 7.23 20.00 36.23 36.23$

TOTAL POST-HARVEST COSTS 1.20 1.00 14.38 20.00 -


Cash and Labor Activity Breakdown for Production Year 5Cost per Acre to Produce

Operation Time

(Hrs/A)Number of Apps

120.00 1,100.05$

Equipment Hours

Cash and Labor Cost Per Acre

Equipment Cost

Cost per App

Total Annual

Cost

968.50 1,460.30$

Labor Rate

Labor Cost

Material Cost

Custom/ Rent

18.00 52.38$

57

Miscellanous:Buildings, Tools - Maintenance & Repair 22.00$ Vineyard System - Maintenance & Repair 165.68$ Irrigation - Utilities 50.00$

TOTAL MISCELLANOUS COSTS - - - - -

TOTAL OPERATING COSTS/ACRE 105.60 9.75 148.66 207.85 1,020.00

CASH OVERHEAD:Operating Interest (7.56%) 107.75$ Crop Insurance 60.00$ Liability Insurance 20.00$ Property Insurance 190.66$ Property Taxes 47.66$ Vineyard Management and/or Consultation*** -$ TOTAL CASH OVERHEAD COSTSTOTAL CASH COSTS/ACRE

NON-CASH OVERHEAD:Investment:Amortized Establishment Cost 1,162.21$ Annual Capital Recovery - Farm Equipment 666.41$ Annual Capital Recovery - Farm Buildings 129.74$ Annual Capital Recovery - Drip Irrig. System 198.82$ Land Cost - Annual (Opportunity Cost) 150.00$

TOTAL NON-CASH OVERHEAD COSTSTOTAL OVERHEAD COSTSTOTAL COST/ACRE



- 237.68$

129.74

1,106.50

150.00

5,583.66$

426.07$ 3,276.48$

2,850.41$

2,733.25$

666.41

2,307.18 2,307.18$

1,162.21

198.82

58

2008 Nitrogen (Year 1) Fertilizer 0.56$ lb 5.00 2.80$ - 3.00 - - - - 2008 Nitrogen (Year 2) Fertilizer 0.56$ lb 6.00 3.36$ - - 3.00 - - - 2008 Nitrogen (Year 3,4) Fertilizer 0.56$ lb 6.67 3.74$ - - - 3.00 3.00 - 2008 Nitrogen (Year 5) Fertilizer 0.56$ lb 10.00 5.60$ - - - - - 3.00 2008 Zinc Fertilizer 16.00$ gal 0.75 12.00$ - - - 3.00 3.00 3.00 2008 Lime Sulfur*** Fungicide 1.20$ gal 3.00 3.60$ - 4.00 4.00 4.00 4.00 4.00 2008 Boscalid & Pyraclostrobin*** Fungicide 2.29$ oz 10.50 24.05$ - - - 2.00 2.00 2.00 2008 Carbaryl*** Insecticide 4.25$ pint 2.00 8.50$ - 1.00 1.00 1.00 1.00 1.00 2008 Imidacloprid Insecticide 3.50$ oz 7.00 24.50$ - 1.00 1.00 2.00 2.00 2.00 2008 Trifluralin Pre-Emmergent Herbicide 15.00$ gal 0.25 3.75$ - 1.00 1.00 1.00 1.00 1.00 2008 Glyphosate Post-Emmergent Herbicide 59.00$ gal 0.25 14.75$ - - 1.00 1.00 1.00 1.00 2008 Glyphosate (Strip Spray) Post-Emmergent Herbicide 59.00$ gal 0.25 14.75$ - - 1.00 1.00 1.00 1.00 2008 Glyphosate (Spot Spray) Post-Emmergent Herbicide 59.00$ gal 0.17 9.85$ - 1.00 2.00 2.00 2.00 2.00 2008 Glufosinate Post-Emmergent Herbicide 35.00$ gal 0.25 8.75$ - - - 1.00 1.00 1.00

2008 Winter Rye Cover Crop 2.00$ lb 20.00 40.00$ - 1.00 1.00 1.00 1.00 1.00


# of Apps Year 1

# of Apps Year 1


Chemical Costs & Application ScheduleYear Chemical Common Name Type UnitMSRP ($) Rate Per

Application

Rate Per Application

Cost Per Application

# of Apps Year 0

Cost Per Application

# of Apps Year 0

Year Chemical Common Name Type UnitMSRP ($) # of Apps Year 2

# of Apps Year 3

# of Apps Year 4

# of Apps Year 5

# of Apps Year 5

# of Apps Year 2

# of Apps Year 3

# of Apps Year 4

59

Year Price Hours of

LifeExpected Life (yrs)

Total Repairs

Repairs $/Hr

Hourly Fuel

Cons. (gal.)

Fuel $/Hr

Lube (15% of

Fuel) $/Hr

Total Hourly

Variable Costs

2008 Tractor (50 HP) 34,800 16,000 15 80% 1.74 3.00 8.25 1.24 11.23 2008 ATV 4WD 6,000 2,500 5 50% 1.20 0.50 1.00 0.15 2.35 2008 Bin Trailers 4,500 3,000 20 50% 0.75 0.50 1.00 0.15 1.90 2008 Mower Flail 9,000 2,000 10 150% 6.75 0.50 1.38 0.21 8.33 2008 Airblast Sprayer (200 gallons) 11,657 2,000 20 60% 3.50 0.50 1.38 0.21 5.08 2008 Truck 30,693 2,500 7 80% 9.82 2.00 4.00 0.60 14.42 2008 Herbicide Sprayer (50 gallons) 3,152 2,000 10 60% 0.95 0.50 1.38 0.21 2.53 2008 Disk 5,000 2,000 10 60% 1.50 0.50 1.38 0.21 3.08 2008 Grain Drill 3,300 1,500 10 75% 1.65 0.50 1.38 0.21 3.23 2008 Scale 1,500 3,000 20 25% 0.13 - - - 0.13 2008 ATV Trailer 2,000 3,000 15 50% 0.33 - - - 0.33

TOTAL 111,602 28 21 3 53

Gas ($/gallon) $2.00Diesel ($/gallon) $2.75

Description


Hourly Machinery & Equipment Costs

60

Year Total Price Expected Life (yrs)

Salvage Value

Capital to be Recovered

Capital Recovery

Factor

Annual Capital

Recovery

Insurance (1% of Purchase

Price)

Taxes (.25% of Purchase

Price) Total2008 Tractor (50 HP) 34,800 15 9,217 25,583 0.1089 3,419 348 87 3,854 2008 ATV 4WD 6,000 5 2,950 3,050 0.2430 944 60 15 1,019 2008 Bin Trailers 4,500 10 796 3,704 0.1415 579 45 11 635 2008 Mower Flail 9,000 10 2,103 6,897 0.1415 1,121 90 23 1,233 2008 Airblast Sprayer (200 gallons) 11,657 10 2,061 9,596 0.1415 1,500 117 29 1,645 2008 Truck 30,693 7 13,335 17,358 0.1847 4,122 307 77 4,506 2008 Herbicide Sprayer (50 gallons) 3,152 10 931 2,221 0.1415 378 32 8 418 2008 Disk 5,000 10 2,061 2,939 0.1415 558 50 13 620 2008 Grain Drill 3,300 10 1,360 1,940 0.1415 368 33 8 409 2008 Scale 1,500 20 411 1,089 0.0934 130 15 4 149 2008 ATV Trailer 2,000 15 192 1,808 0.1089 210 20 5 235

TOTAL 111,602 35,418 76,184 13,328 1,116 279 14,723 60% of New Cost 66,961 21,251 45,711 7,997 670 167 8,834

DescriptionTotal Price

Expected Life

Salvage Value

Capital to be Recovered

Capital Recovery

Factor

Annual Capital

Recovery

Insurance (1% of Purchase

Price)Taxes (.25% of Purchase Price) Repairs Total

Buildings 25,000 25 - 25,000 0.0848 2,120 250 63 400 2,833 Vines 93,080 22 - (See Table 3 & Table 5.A) 931 233 106 1,269

99,750 22 - (See Table 3 & Table 5.A) 998 249 2,267 3,514 Drip Irrigation System 46,887 25 - 46,887 0.0848 3,976 469 117 938 5,500

3,000 25 3,000 - 0.0848 206 30 8 3 247 Tools 2,000 10 200 1,800 0.1415 268 20 5 40 333

269,717 3,200 73,687 6,571 2,697 674 3,754 13,696

Table 12.B

Units/ Farm Unit Price/ Unit Total CostAnnual Amortized Establishment Cost (From Table 5.A) 20 acre 1,162.21 23,244 Annual Capital Recovery - Farm Equipment (From Table 12 & 12.A) 20 acre 666.41 13,328 Annual Capital Recovery - Farm Buildings (From Table 12 & 12.A) 20 acre 129.74 2,595 Annual Capital Recovery - Drip Irrig. System (From Table 12 & 12.A) 20 acre 198.82 3,976

20 acre 60.00 1,200 20 acre 20.00 400 20 acre 190.66 3,813 20 acre 47.66 953

TOTAL 1,313.29 26,266

Table 12.C

7.56%6.87%

Operating Loan ( < 1 Year)Capital Lease ( > 1Year)

Description Annual Percentage RateFinancing Interest Rates



Description

Table 12.A


Property Taxes (From Table 12 & 12.A)

Trellis System

Land (Opportunity Cost)

Description

Crop Insurance

Cash Overhead

Annual Equipment Costs

Liability Insurance Property Insurance (From Table 12 & 12.A)

Annual Investment Costs

TOTAL

Annual Business Overhead Costs


61

Year Qty MSRP ($) Total Cost ($)

2008 1 $34,800.00 34,800$

2008 1 $6,000.00 6,000$

2008 Bin Trailers 3 $1,500.00 4,500$

2008 Mower Flail 1 $9,000.00 9,000$

2008 1 $11,657.00 11,657$

2008 Truck 1 $30,693.00 30,693$

2008 1 $3,152.00 3,152$

2008 Disk 1 $5,000.00 5,000$

2008 Grain Drill 1 $3,300.00 3,300$

2008 ATV Trailer 1 $2,000.00 2,000$

2008 Scale 1 $1,500.00 1,500$

Tractor (>=50 HP)

ATV 4WD

Airblast Sprayer (200 gallons)

Herbicide Sprayer (50 gallons)


Machinery & Equipment Price DerivationType

62

2.00 3.00 4.00 5.00 6.00 7.00 8.00OPERATING COSTS:Cultural Cost 1,750.36 1,750.36 1,750.36 1,750.36 1,750.36 1,750.36 1,750.36 Harvest (pick) 440.02 660.03 880.04 1,100.05 1,320.06 1,540.07 1,760.08 TOTAL OPERATING COSTS/ACRE 2,190$ 2,410$ 2,630$ 2,850$ 3,070$ 3,290$ 3,510$ Total Operating Costs/ton 1,095 803 658 570 512 470 439 CASH OVERHEAD COSTS/ACRE 426.07 426.07 426.07 426.07 426.07 426.07 426.07 TOTAL CASH COSTS/ACRE 2,616$ 2,836$ 3,056$ 3,276$ 3,496$ 3,716$ 3,937$ Total Cash Costs/ton 1,308 945 764 655 583 531 492 NON-CASH OVERHEAD COSTS/ACRE 2,307.18 2,307.18 2,307.18 2,307.18 2,307.18 2,307.18 2,307.18 TOTAL COSTS/ACRE 4,924$ 5,144$ 5,364$ 5,584$ 5,804$ 6,024$ 6,244$ Total Costs/ton 2,462 1,715 1,341 1,117 967 861 780

PRICE$/ton 2.00 3.00 4.00 5.00 6.00 7.00 8.00

1,500 810 2,090 3,370 4,650 5,930 7,210 8,490 1,600 1,010 2,390 3,770 5,150 6,530 7,910 9,290 1,700 1,210 2,690 4,170 5,650 7,130 8,610 10,090 1,800 1,410 2,990 4,570 6,150 7,730 9,310 10,890 1,900 1,610 3,290 4,970 6,650 8,330 10,010 11,690 2,000 1,810 3,590 5,370 7,150 8,930 10,710 12,490 2,100 2,010 3,890 5,770 7,650 9,530 11,410 13,290 2,200 2,210 4,190 6,170 8,150 10,130 12,110 14,090

PRICE$/ton 2.00 3.00 4.00 5.00 6.00 7.00 8.00

1,500 384 1,664 2,944 4,224 5,504 6,784 8,063 1,600 584 1,964 3,344 4,724 6,104 7,484 8,863 1,700 784 2,264 3,744 5,224 6,704 8,184 9,663 1,800 984 2,564 4,144 5,724 7,304 8,884 10,463 1,900 1,184 2,864 4,544 6,224 7,904 9,584 11,263 2,000 1,384 3,164 4,944 6,724 8,504 10,284 12,063 2,100 1,584 3,464 5,344 7,224 9,104 10,984 12,863 2,200 1,784 3,764 5,744 7,724 9,704 11,684 13,663

PRICE$/ton 2.00 3.00 4.00 5.00 6.00 7.00 8.00

1,500 (1,924) (644) 636 1,916 3,196 4,476 5,756 1,600 (1,724) (344) 1,036 2,416 3,796 5,176 6,556 1,700 (1,524) (44) 1,436 2,916 4,396 5,876 7,356 1,800 (1,324) 256 1,836 3,416 4,996 6,576 8,156 1,900 (1,124) 556 2,236 3,916 5,596 7,276 8,956 2,000 (924) 856 2,636 4,416 6,196 7,976 9,756 2,100 (724) 1,156 3,036 4,916 6,796 8,676 10,556 2,200 (524) 1,456 3,436 5,416 7,396 9,376 11,356


YIELD (tons/acre)

YIELD (tons/acre)

Cost Per Acre at Varying YieldsYIELD (tons/acre)

YIELD (tons/acre)

NET RETURNS PER ACRE ABOVE TOTAL OPERATING COSTS

NET RETURNS PER ACRE ABOVE TOTAL CASH COSTS

NET RETURNS PER ACRE ABOVE TOTAL COSTS

63

Table 15.APRICE$/ton 2.00 3.00 4.00 5.00 6.00 7.00 8.00

1,500 (1,924)$ (644)$ 636$ 1,916$ 3,196$ 4,476$ 5,756$ 1,600 (1,724)$ (344)$ 1,036$ 2,416$ 3,796$ 5,176$ 6,556$ 1,700 (1,524)$ (44)$ 1,436$ 2,916$ 4,396$ 5,876$ 7,356$ 1,800 (1,324)$ 256$ 1,836$ 3,416$ 4,996$ 6,576$ 8,156$ 1,900 (1,124)$ 556$ 2,236$ 3,916$ 5,596$ 7,276$ 8,956$ 2,000 (924)$ 856$ 2,636$ 4,416$ 6,196$ 7,976$ 9,756$ 2,100 (724)$ 1,156$ 3,036$ 4,916$ 6,796$ 8,676$ 10,556$ 2,200 (524)$ 1,456$ 3,436$ 5,416$ 7,396$ 9,376$ 11,356$

Table 15.BPRICE$/ton 1.00 2.00 3.00 4.00 5.00 6.00 7.00

1,500 (3,204)$ (1,924)$ (644)$ 636$ 1,916$ 3,196$ 4,476$ 1,600 (3,104)$ (1,944)$ (564)$ 816$ 2,196$ 3,576$ 4,956$ 1,700 (3,004)$ (1,744)$ (264)$ 1,216$ 2,696$ 4,176$ 5,656$ 1,800 (2,904)$ (1,544)$ 36$ 1,616$ 3,196$ 4,776$ 6,356$ 1,900 (2,804)$ (1,344)$ 336$ 2,016$ 3,696$ 5,376$ 7,056$ 2,000 (2,704)$ (1,144)$ 636$ 2,416$ 4,196$ 5,976$ 7,756$ 2,100 (2,604)$ (944)$ 936$ 2,816$ 4,696$ 6,576$ 8,456$ 2,200 (2,504)$ (744)$ 1,236$ 3,216$ 5,196$ 7,176$ 9,156$

Table 15.CPRICE$/ton 3.00 4.00 5.00 6.00 7.00 8.00 9.00

1,200 (1,544)$ (564)$ 416$ 1,396$ 2,376$ 3,356$ 4,336$ 1,300 (1,244)$ (164)$ 916$ 1,996$ 3,076$ 4,156$ 5,236$ 1,400 (944)$ 236$ 1,416$ 2,596$ 3,776$ 4,956$ 6,136$ 1,500 (644)$ 636$ 1,916$ 3,196$ 4,476$ 5,756$ 7,036$ 1,600 (344)$ 1,036$ 2,416$ 3,796$ 5,176$ 6,556$ 7,936$ 1,700 (44)$ 1,436$ 2,916$ 4,396$ 5,876$ 7,356$ 8,836$ 1,800 256$ 1,836$ 3,416$ 4,996$ 6,576$ 8,156$ 9,736$ 1,900 556$ 2,236$ 3,916$ 5,596$ 7,276$ 8,956$ 10,636$

Table 15.DPRICE$/ton 3.00 4.00 5.00 6.00 7.00 8.00 9.00

1,300 (1,244)$ (164)$ 916$ 1,996$ 3,076$ 4,156$ 5,236$ 1,400 (944)$ 236$ 1,416$ 2,596$ 3,776$ 4,956$ 6,136$ 1,500 (644)$ 636$ 1,916$ 3,196$ 4,476$ 5,756$ 7,036$ 1,600 (344)$ 1,036$ 2,416$ 3,796$ 5,176$ 6,556$ 7,936$ 1,700 (44)$ 1,436$ 2,916$ 4,396$ 5,876$ 7,356$ 8,836$ 1,800 256$ 1,836$ 3,416$ 4,996$ 6,576$ 8,156$ 9,736$ 1,900 556$ 2,236$ 3,916$ 5,596$ 7,276$ 8,956$ 10,636$ 2,000 856$ 2,636$ 4,416$ 6,196$ 7,976$ 9,756$ 11,536$


Returns Per Acre at Varying Yields, Varying Prices, and Varietals

RETURNS PER ACRE ABOVE TOTAL COST

YIELD (tons/acre)

WITH CABERNET SAUVIGNON



YIELD (tons/acre)

YIELD (tons/acre)


YIELD (tons/acre)

WITH VIOGNIER

WITH TEMPRANILLO

WITH MERLOT

64

Item Jan. Feb. Mar. Apr. May Jun.BEGINNING CASH BALANCE -$ -$ -$ -$ -$ -$

Cash Inflows:Farm Product Sales

Grape Variety 1 - - - - - - Total Cash Inflow - - - - - -

Cash Outflows:Operating Expenses

Pre-Harvest Costs 40 100 20 644 116 253 Harvest Costs - - - - - - Post-Harvest Costs - - - - - - Miscellaneous Costs 188 - - - 13 13

Cash Capital Costs 318 - - - - - Total Cash Outflow 546 100 20 644 128 266

CASH AVAILABLE (546)$ (100)$ (20)$ (644)$ (128)$ (266)$ New Borrowings: 546 100 20 644 128 266

Total Accrued New Borrowings 546 646 666 1,309 1,437 1,703 Accrued Interest on New Borrowings 3 8 12 20 29 40 Payments on New Current Debt:

Principal - - - - - - Interest - - - - - -

Total Debt Repayments - - - - - -

ENDING CASH BALANCE -$ -$ -$ -$ -$ -$

Item Jul. Aug. Sept. Oct. Nov. Dec. TOTALBEGINNING CASH BALANCE -$ -$ 5,908$ 5,843$ 5,831$ 5,831$

Cash Inflows:Farm Product Sales

Grape Variety 1 - 9,000 - - - - 9,000 Total Cash Inflow - 9,000 - - - - 9,000

Cash Outflows:Operating Expenses

Pre-Harvest Costs 223 41 12 12 - - 1,460.30 Harvest Costs - 1,100 - - - - 1,100.0 Post-Harvest Costs - - 52 - - - 52.4 Miscellaneous Costs 13 13 - - - - 237.7

Cash Capital Costs - - - - - - 318.3 Total Cash Outflow 236 1,153 65 12 - - 3,168.7

CASH AVAILABLE (236)$ 7,847$ 5,843$ 5,831$ 5,831$ 5,831$ 5,831$ New Borrowings: 236 - - - - -

Total Accrued New Borrowings 1,939 - - - - - 1,939 Accrued Interest on New Borrowings 52 - - - - - 52 Payments on New Current Debt:

Principal - 1,939 - - - - 1,939 Interest - 52 - - - - 52

Total Debt Repayments - 1,991 - - - - 1,991

ENDING CASH BALANCE -$ 5,908$ 5,843$ 5,831$ 5,831$ 5,831$ 5,831$


Monthly Cash Flow Budget for Production Years

65

Documents

Texas Vineyard Budgetsagrilifecdn.tamu.edu/winegrapes/files/2016/03/west-tx-budget.pdf · to fruit characteristics. Fruit quality is a function of site characteristics, vineyard management,