Breakeven yields can be calculated several ways. Most growers probably look at their cash costs. I think a better way is to include a value for operator and unpaid family labor. I calculate operator labor in the total cost portion of the Lake Erie Grape Farm Cost Survey (LEGFCS). We have growers on the LEGFCS that have average Schedule F costs per acre from under $800 to over $1700! Adding operator labor may tighten up the range a bit, but there is still a lot of variation. Grape prices play a key role here. Growers breakevens go down as prices go up.

Looking at 1998 and 1999 LEGFCS figures, we had profits with the yields in the 4 tons per acre range. Back in 1994 and 1995 those same farmers needed 6 t/a or better to break even. High cost per acre farms will have higher breakevens over 7 t/a for some!

Breakevens tell you part of the story. What are the actual yields for the operation? I'd rather have a breakeven of 6 t/a and average 7 t/a then have a breakeven of 5 t/a and average 4 t/a! What are family living expenditures? How much are principal repayments? Answering these questions will give you a fuller picture of your situation. Remember not to use your breakeven numbers as goals for your operation. Please aim higher!

I recently had an e-mail from a grower that asserted that growers ought to clear $1,000 per acre on average. He also mentioned his per acre Schedule F cost had only varied about $30 in the last five years. His example points out the fact that different farms have different cost structures and most will not vary too much year to year. For example, some farms may average $1000 per acre costs and others $1400 per acre costs and the costs normally will vary $50 or so per year. Grape income varies more depending on yields and markets. Can juice grape growers expect to net $1,000 per acre? I think growers can reach this goal sometimes. 1999 was one of those years and we had some growers exceed $1,000 Schedule F profits per acre in the Lake Erie Grape Farm Cost Survey (LEGFCS). 1999 was a record year for income with average income per acre over $2,000!

I think $1,000 per acre profits on average is unrealistic. Even outstanding growers usually make $500-800 per acre. I would imagine in order to net $1,000 per acre, the grower would probably need to gross over $2,200 per acre with good cost control. I have not seen any juice grape producer in the LEGFCS accomplish this on average.

The expense side of the business is very important. It's what stands between productivity and operating profits. The way to analyze farm expenses is to start with general questions and work towards the specific.

Look first at broad categories such as cost per ton, operating costs, and overhead costs. Most grape growers can use their overall Schedule F expenses or better yet, their income statement. If you have multiple crops, you would be better off with enterprise profit and loss (P&L) statements. Once you determine that a broad category such as operating costs is too high, then concentrate on more specific categories like paid labor or crop chemicals. The Lake Erie Grape Farm Cost Survey (LEGFCS) has yearly averages from the general to the specific. We track nine specific categories on a per ton and per acre basis that can help with your analysis.

For analysis purposes, I think the most informative way to look at any expense category is to chart it over time. If you don't have trends lining the wall of your farm office, you're missing not only the meaningful kind of analysis but also the most interesting.

An overlooked material in the fight against powdery mildew in this area is sulfur. The main reason for this is the sensitivity of Concord to sulfur.

However, the next three most popular varieties in the belt are not sensitive to sulfur. Growers of Niagara, Catawba, and Elvira can use sulfur and save some money! The Catawba market is unsettled and this would be one way to reduce input costs while protecting the crop.

Sulfur is mainly effective against powdery mildew. Sulfur is not really effective under cool conditions and can cause some injury at high temperatures (85°F or above) during or immediately following the application. Sulfur is a mainstay for the California grape industry.

Reasons for using sulfur include:

• Resistance management
• Inexpensive
• Tank mix with most products

Material cost would be $1+ per acre! This is a lot cheaper than even copper and lime! I would consider using it for a late season powdery mildew spray or tank mix it for 10-12 inch spray and beyond.

Many growers, looking to reduce operating costs, try to reduce labor costs by spraying fungicides at high speeds and lower gallons of water per acre (25-50 ga./acre). However, poor coverage (including poor canopy penetration) is a leading cause of poor disease control. Are some growers kidding themselves with saving labor at the expense of crop protection? Let's look at three crop protection strategies for a 100 acre grower with a 300 gallon sprayer, 30 minute turnaround time per tank, and total labor costs of $8.00/hour. The strategies are minimizing labor, maximizing coverage, and primary infection management with maximum coverage.

The difference between the minimized labor and maximum coverage approaches is $781.60 or at $250 a ton only 3.13 tons. The break-even per acre is less than 63 lbs. of additional grapes (or reduced losses). Managers may also discover reduced repair bills with slower ground speeds.

If a grower minimizes fungicide spray labor, he probably will need an additional spray or two to equal the control of the maximum coverage approach. One extra spray on 100 acres would increase the overall cost of the minimizing labor grower by $1500 or more (labor and material costs). The three spray maximum coverage primary infection program would save roughly $1100 (or $11 per acre) compared to a four spray minimum labor program. This analysis suggests that growers should spend more on fungicide spray labor and get the full benefits of properly applied fungicides. Many managers may find that the extra labor expense is not a factor due to full-time employees. This would only strengthen the argument for taking the time to get proper coverage.

One way to save money and get good results in agriculture is proper timing of production practices. For instance, Farmer Timely sprays her grapes with fungicides at the proper time. Her neighbor, Farmer Tardy, gets his spray on two weeks late. He will probably spend more on fungicide spray materials and won't be able to take that vacation in August!

Timing for some operations (pruning, trellis work, etc.) are not so critical. Disease, insect, and weed management all have critical timing considerations. This growing season is shaping up to reward growers that use the right products, at the right time, with good coverage. What worked the last two years (low disease pressures) may not work this year (favorable weather for disease development). The better than average growers usually do the important operations in a timely manner.

Here is a simple quiz for Concord, Niagara and Catawba growers. Use a 4 or 5 year average of your own farm to compare with the quiz. Don't just use 1999's figures for comparison. This quiz should be used to indicate some possible problems or opportunities in your operation. This quiz does not replace a thorough analysis of your farm. Growers participating in the Lake Erie Grape Farm Cost Survey (LEGFCS) get these numbers and more generated for their analysis.

1. Production on bearing acres;
   Less than 4 tons - 6 points
   Between 4 to 5 tons - 2 points
   Between 5 to 6 tons - 1 point
   Over 7 tons/acre - 0 points
   
2. Cash costs per acre (one easy way to calculate this is to take your Schedule F total costs minus depreciation divided by vineyard acres).
   Over $1400 - 4 points
   Between $1200-$1400 - 3 points
   Between $1000-$1200 - 2 points
   Between $850-$1000 - 1 point
   Less than $850 - 0 points
   
3. Hired labor cost (including piece work and payroll taxes) per ton.
   Over $75 - 3 points
   Between $60-$75 - 2 points
   Between $45-$60 - 1 point
   Under $45 - 0 points
   
4. Tons per worker (includes all paid and unpaid labor). Estimate total hours worker including operators labor. Divide that total by 208 (hours per month) then divide by 12 to get full time workers. Divide tonnage by worker equivalents. For example, a farmer estimated 3000 total hours of labor. His yield was 320 tons. 3000/208=14.4 months of labor or 1.20 workers. 320 tons/1.20 workers=267 tons per person.
   Under 120 - 3 points
   Between 120-180 - 2 points
   Between 180-240 - 1 point
   Above 240 - 0 points

Total Your Points:

Total points are 11 - 16. You are uncompetitive in todays' juice grape market. You are probably losing money most years. Returns for your labor and farm investment are probably negative. You need to get more efficient. Leasing your vineyards may be better for you. Increasing production per acre is one of the best ways to lower costs per ton, then look at ways to cut costs per acre.

Total points are 6 - 10. You may feel you are only getting by. The high grape prices of the last couple of years has helped to keep profits up. Your net worth probably is stagnant unless you have other sources of income. You need to keep track of your financial condition and to incorporate changes, large or small, in your operation. Expansion may reduce overhead costs (including family living) per acre and per ton.

Total points are 2 - 5. You probably have a smooth running operation. Progress is still needed to stay up to date. Drastic changes are probably not needed. Expansion may be needed to cover family living expenditures. Retirement planning should be implemented.

Total points are 0 - 1. Congratulations! Your costs per ton are where you can be profitable every year. Tax planning should be done every year especially after harvest. Continue to train yourself and important employees. Set realistic production and financial goals. Retirement and estate planning should be done. Pay attention to long term market trends, you have more flexibility to respond to opportunities.

The glib answer is to do both. The right answer depends on the individual farm finances, production history, and proposed change. With some farms with high debt loads and good production, debt reduction may be the best choice. For others, improving your production can be more effective. Here is one example. Nick Niagara has a spare $6,000 to use on his 40 vineyard acre farm. He has farm assets of $250,000, debts of $100,000, and a farm net worth of $150,000. Nick is torn between paying down his debt or installing tile on an 8 acre block of Concord. That block has pockets of poor yields due to poor water drainage. Nick estimates that with proper tiling, that block could average 1 ton per acre more. What should Nick do to best strengthen his operation? I would look at some financial ratios and use the payback method to analyze the two different options.

Nick's debt/asset ratio now is 40% debt and 60% equity. If Nick applies the $6,000 to his debts then the debt/asset ratio will go to 37.6% (100,000 - 6,000) divided by 250,000 X 100%. Nick's equity would increase and his yearly interest cost would be reduced by $600 (6,000 X .10). Nick's payback period is calculated as $6,000 divided by $600 (yearly interest savings) = 10 years.

The tile drainage option and vine relacement will also cost $6,000. Nick figures $250 for Concord prices and $38 for picking and hauling. Nick figures the annual increased returns would be (240-38) * 8 tons = $1,616. The payback period would be $6,000 divided by $1,616 = 3.7 years.

With a long term improvement like tiling paying off within 4 years, this investment would be better than reducing debt. Longer term, the increased revenues can be used to pay down debt. Nick's debt level were not in a critical range and the improvement in debt/asset ratio does not outweigh the clear cut advantage in the payback period.

Most juice grape growers know to keep their vine count up. I recently heard of one large grower that identified nearly 6% missing vines in his vineyards. No missing vines is a tough goal to achieve but one to strive towards.

I believe that keeping vine numbers and trellis fill up are fundamentals of viticulture. Reduced vine numbers and reduced trellis fill hurts growers wallets. Most operating and all fixed expenses are incurred whether you have a vine in place or not! About the only expenses saved by missing vines are pruning and tying. Fertilizer, fungicide, taxes, and depreciation are examples of expenses that are not reduced due to missing vines.

If you have lots of missing vines look at replanting with grafted vines. Analyze why you have missing vines and fix the problem(s). If you have a water drainage problem, for example, fix the problem before planting vines or dippers. Using dippers (layers) is fine but that is difficult unless you have a mother vine next to the vacancy.

The following chart will give you an idea how much revenue you are missing per missing vine per year. This is based on 9'X 8' spacing. Revenues per vine is as follows:

Growers with skips have been losing $2-4 per vine per year for the last few years. Redouble your efforts to fill in skips. When grape prices fall, these efforts may make the difference between making and losing money in some vineyards!

In our Lake Erie Grape Farm Cost Survey (LEGFCS) we have farm records for ten years (1991-2000). We have twelve farms that have 10 years worth of data. Out of those 12, I selected 2 farms (A&B) I consider above average, and 2 farms (C&D) I consider consistently below average in profitability.

Decent yields are vital to profitability in the juice grape business. I have a rule of thumb that "it is hard to be profitable under 6 t/a, and hard to lose money above 6 t/a." However, there are always exceptions to the rule including times of high grape prices. Here are the farm wide yields for our 4 farms:

Farms C&D consistently are yielding less than 6 t/a. Farms A&B also had yields dip under 6 t/a once or twice during this time frame. Growers of perennial crops should look at multiple year averages. Even good growers can have an off year or two!

Training systems do play a role in yields and profitability. Farm A has both HRU and GDC with some machine-pruned vineyards. Farm B is 100% hand-pruned GDC. Farm C is 100% hand-pruned HRU. Farm D is hand-pruned and primarily HRU.

Farm size is a factor with both pluses and minuses. Some of our highest yielding farms are in the 40-75 acre range. Both A&B happen to be in this range. Farm A happens to be a part-time grower. Farm C is a small (under 30- vineyard acres) size farm. Farm D is over 100-vineyard acre farm with fulltime employees and part-time management. Larger farm size can allow family living and other expenses to be spread over more acres and tonnage.

Costs and yields per acre combine to give us cost per ton. Our 4 growers show a wide range primarily due to yields:

Farm C does better than expected due to low costs per acre including most of the work done by the manager and family. Farm D shows high costs per ton due to low yields and average costs per acre. The blips upward for Farms A&B occur in their light crop years.

Profits are figured two ways in the LEGFCS. The Schedule F profits are the profits stated on growers' tax returns. The management (total) profit subtracts out operator and other unpaid labor from the Schedule F profit. Taking out "wages" gives us an approximation of returns to management and investment. A negative management profit means that the farm operator received less than "wages". The current adjustment for unpaid labor is $1,600 per month or $7.75 per hour. Do you see any surprises with our 4 farms?

All 4 farms market their grapes through co-operatives so marketing differences does not explain the divergence in profitability. Farm C (under 30 acres) really is too small to farm fulltime growing juice grapes.

What should these farms do to improve their operations? Advice given to Farm C includes getting nonbearing grapes into production faster, look at expansion, increase gross income per acre, and get yields up to 6 t/a. Advice for Farm D include better weed management needed, more labor supervision needed, or possible leasing of the farm. Advice for Farms A&B are less focused on production and more with other concerns such as retirement planning. Farms A&B production already is good and the managers are just fine-tuning their operations. Farms C&D have some serious challenges to face.

Growers should heed these results from their peers and keep average juice grape yields above 6 t/a! Track your cost per ton and try to keep it under $200 per ton. The best way for most growers to reduce costs per ton is to increase yields and not cut costs per acre.

Growers can improve profits by utilizing some cost accounting principles. We would like to compare the income and expenses by block or variety to see which areas are profitable (unprofitable). Then managers will have more information for decision-making.

We'll look at a simple example. Corey Concord only grows Concord on 25 acres in 4 different blocks. Corey's management is the same across blocks (same spray schedule, pruning regime, etc.). Corey participates in the Lake Erie Grape Farm Cost Study (LEGFCS) so he knows that he has a 5-year average of 6 t/a and Schedule F costs of $1200 per acre. Corey knows that on average his cost of production is $1200/6=$200 per ton. This tells us much of Corey's performance with his peers but not enough for drastic management changes. Here are the block averages for Corey's farm:

Corey knows that he averaged $250/ton for the past 5 years. What kind of contribution did each block make over the last 5 years? The simplest method is comparing average returns versus average costs rather than yearly figures.

The 3 acre block contribution is 4t/a X $250 per ton= $1000 income -$1200 expenses=$200 loss per acre. The 7 acre block contribution is 8t/a X $250 per ton =$2000 income-$1200 expenses= $800 profit per acre. The 10 acre block contribution is 6t/a X $250/ton= $1500 income - $1200 expenses= $300 profit per acre. The 5 acre bloc contribution is 4.4t/a X $250/ton=$1100 income - $1200 expenses= $100 loss per acre.

Now Corey has more information to work with. He has two blocks that make money and two that don't on average. What should he do? What would you do in Corey's shoes?

I would question the differences in yield considering the same management. Why is one block averaging 8t/a and two close to half that? What are the limiting factors with the two blocks that are losing money for Corey? Can the yields improve or costs reduced for the 3 and 5-acre blocks? What would happen if Corey sold or abandoned those losing blocks? These are some of the questions managers should be mulling over.

If every vineyard block made a profit, most growers would increase their profit margin! Remember each block should over time pay for itself! Sometimes marketing or other reasons do intrude on simple profit maximization. You may keep something that doesn't make money in order to sell other varieties that do make money.

When a farmer has multiple varieties you can do this analysis by individual block and/or variety. Production costs and returns will likely vary between varieties. This could range from minor differences i.e. Concord vs. Niagara to very significant i.e. Catawba vs. Pinot Noir. Your bookkeeper, accounting software, or tax professional may be a good resource for preparing this type of information.

Dr. Kohl of VPI in Ag Lender urged ag lenders to actively target growers that have skills, interests, and possess:

• Marketing - He said Number one on the list. Market leaders in commodity production will know their cost of production, have a plan, execute, monitor and have tools in place to mitigate risk.
• Technology - Selective adaptation.
• Location
• Money Management Skills - Winners will possess skills in managing working capital and cash flow…maintain reserves for downside risk. They also have reasonable personal budgets. Generally, withdrawals are under 10 percent of gross revenue.
• People Management Skills - This includes managing hired and family labor expanding out to networking with suppliers and other producers.

If you are interested in knowing your cost of production, that is one advantage of joining the Lake Erie Grape Farm Cost Survey (LEGFCS). I'm in the process of finishing up 2000 data collection, but I'd be glad to get a couple more new growers in the survey. If you would like to join or get more information contact me bes9@cornell.edu.

Breakeven yields can be calculated several ways. Most growers probably look at their cash costs. I think a better way is to include a value for operator and unpaid family labor. I calculate operator labor in the total cost portion of the Lake Erie Grape Farm Cost Survey (LEGFCS).

We have growers on the LEGFCS that have average Schedule F costs per acre from under $800 to over $1700! Adding operator labor may tighten up the range a bit, but there is still a lot of variation. Grape prices play a key role here. Growers' breakevens go down as prices go up. Looking at 1998 and 1999 LEGFCS figures, we had profits with the yields in the 4 tons per acre range. Back in 1994 and 1995 those same farmers needed 6 t/a or better to break even. High cost per acre farms will have higher breakevens over 7 t/a for some!

Breakevens tell you part of the story. What are the actual yields for the operation? I'd rather have a breakeven of 6 t/a and average 7 t/a then have a breakeven of 5 t/a and average 4 t/a! What are family living expenditures? How much are principal repayments? Answering these questions will give you a fuller picture of your situation. Remember not to use your breakeven numbers as goals for your operation. Please aim higher!

A grower recently asked what kind of returns per hour juice grape producers are making. He thought that growers ought to average $40 per hour considering the investment, management, and labor involved. He was shocked when I told him that it has been as low as $6 an hour (LEGFCS 1995 average).

He has a strong point about adequate compensation for running a business. We like to look at assigning a value for the labor performed and then see what is left for management and investment. Then you can get fair results comparing the investment side of things. Using labor only doesn't take into account different farm sizes. All things being equal, a 100-acre grower should get higher returns per hour than a 50-acre grower working the same amount of time.

Bottom line, many growers need to improve returns. We can learn from growers that are achieving good returns. Good vine size and minimizing skips are two key factors that growers can control. Concentrate on factors that you have some control of!

Vineyard managers need to be aware of suspicious activities around their farm. With recent milk tampering cases in the news, we could see some attempt to tamper with grapes at harvest. Have your harvest crew be on the lookout for strange people or vehicles near your loading areas.

• Vandalism
• Arson
• Theft

• Fertilizer
• Fuel
• Tools
• Equipment
• Chemicals

• Increase lighting around storage and equipment areas. There are many options for outside lighting such as motion detector and dusk to dawn lights.
• Install an alarm system.
• Report suspicious activities to local law enforcement ASAP.
• Limit access to equipment, fuel, fertilizer, etc. Install locks on pesticide sheds and give keys out to employees than need access.
• Have hunters and visitors park in easily identified and monitored locations.
• Install surveillance equipment wherever practical.
• Lock up after you are done for the day.
• Keep inventories on key items (fertilizer, chemicals). Some growers could be a victim of theft and not realize it.
• Background checks on employees. I would not take this step for casual pruning labor, but I think it would be a good idea for any prospective full-time employees.
• Utilize all of your employees to keep an eye out for things that don't "feel" right or other suspicious activities.
• Talk to your insurance company or law enforcement friend to review your operation and make cost-effective suggestions to beef up security.

I look at a lot of Schedule F's every year and some growers seem to be satisfied with eking out a profit on the Schedule F. I know they need to aim higher! The first level to hurdle is cash flow. I look at this usually based on a per acre basis. Cash flow per acre in the Lake Erie Grape Farm Cost Study (LEGFCS) is Schedule F profit per acre plus depreciation cost per acre. Cash flow can be positive while showing a loss on the Schedule F! LEGFCS average cash flow per acre has ranged from a low of $196 in 1995 to a high of $662 in 1999. I'd like to see $450 or higher for individual farms.

The next hurdle is a little higher. Esp. for fulltime grape growers, growers should make a profit on their Schedule F on average. Average Schedule F profit per acre for LEGFCS has ranged from a low of $51 in 1995 to a high of $434 in 1999. I'd like to see growers averaging $300 per acre. The LEGFCS average has only exceeded $300 in 1991,1992, 1994, and 1999. All four of these years featured above average yields for the group.

The next hurdle is even harder to sail over. Total profit per acre is calculated from Schedule F profit per acre minus a calculated charge for operator and other unpaid labor. This takes in account "wages" and what is left should approximate returns to management and investment. LEGFCS total profit per acre averages have ranged from -88 in 1995 to $328 in 1999. I would like to see growers clear the $150 mark. The LEGFCS average has only exceeded this in 1991, 1994, 1997 and 1999. If a grower had farm assets averaging $5,000 per acre and $150 per acre in total profit, return on assets (ROA) would be 150/5,000=3%. That is about what you can make in a CD and certainly beats a negative ROA! Unfortunately, every year the LEGFCS has farms that have negative total profits.

Successful farm managers will clear all three hurdles - cash flow per acre, Schedule F profit per acre, and total profit per acre. They will most likely do it with a combination of decent yields and Schedule F cost per ton of $200 or less.

If you would like for your grape farm to be in the LEGFCS and get these numbers and more analyzed for your specific operation, please give me a call at 716-679-3185 or e-mail me at bes9@cornell.edu.

Good news for investors! The limits for IRAs (both traditional and Roth) are now up to $3,000 per year starting in 2002. For investors age 50 and above, they can invest an extra $500 per year as a "catch-up" provision.

For example, a 55-year-old couple would max out their IRAs at $4,000 for 2001. For 2002, they could invest up to $7,000! These higher limits will help investors to manage today's taxes and invest more for retirement.

1. COMMUNICATE! Don't assume that everyone involved will have the same goals and aspirations as you do. Have business discussions separate from family discussion.
2. Sometimes the best person to run the farm is not the obvious person. Not everybody interested in farming will make a good farm manager. Maybe a daughter or nephew would be a better choice.
3. Groom your candidate! Allow him increasing responsibilities from year to year. I think a gradual transfer (3-5 years) is best. This allows him to make mistakes on a smaller scale and to learn from them. This approach also allows you to gradually disengage from the day-to-day management of the farm. A sudden turnover of all responsibility could easily overwhelm the candidate and threaten the survival of the farm.
4. Continue to be a source of advice when asked.
5. Your candidate should have working knowledge of all facets of the business before full transition occurs. I've seen operations suffer rough patches when a son takes over and he hasn't had experience in one critical operation. Everybody has their favorite parts of the business, but don't exclude others from learning that part from you.
6. Plan for this day! A mark of a truly successful manager is to prepare for succession and done better slowly than overnight.
7. Remember to communicate! Don't let any disagreements get in the way of communication... the business goes on.

In most cases, juice grape growers can try to improve yields in order to reduce costs per ton. Some farms have high cost structures no matter what their yields are. We will see some examples in the following graphs.

We had 30 farms that participated in all five years between 1996-2000 in the Lake Erie Grape Farm Cost Study (LEGFCS). For analysis purposes, I like to look at results from more than one year. A 3-5 year average certainly gives you a more accurate picture of yields, income, profits, etc. than any single year.

The combination of average yields and average cost structure is expressed by cost per ton. Management (total) cost includes a charge for operator labor. Some farms will have a big difference between the two costs. These farms tend to have a high percentage of operator labor compared to the total. The farms are ranked in the same order as the first graph:

Farms 10 and 17 both have high ($2600 and up total costs per acre) cost structures. Even with decent yields, their cost per ton is too high! Both farms were under 30 bearing acres and probably weren't at an optimum economic size esp. concerning machinery investments.

An interesting note about high yields and farm size is that 4 out of the top 5 farms by yield all were in the 40-70 acre range. Maybe closer supervision by the farm managers of these medium-sized farms help to explain the outstanding results.

Every farm is different, but there are some rules of thumb concerning yields and profitability. Even with below average costs per acre (i.e. no mortgage) growers need to average 5 t/a or more to breakeven. Average production costs mean managers need 6 t/a or better to breakeven. Some juice grape operations need 7 t/a just to breakeven! With the downward trend in prices from most processors, these breakeven numbers are likely to be higher!

Many growers should consider using Ponnax to help increase set in certain years. Application needs to be done during bloom, which likely means a separate spray from your immediate prebloom fungicide spray. Vineyards with variable bloom times (primary and secondary shoots blooming at different times) will not be the best candidates for a Ponnax application. Here is a method to determine the breakeven yield required to consider applying Ponnax:

• X +A= Y*I*(P-H)
• X is the product cost per acre @ $50.
• A is application cost per acre (labor and equipment costs @$16.25)
• Y is unsprayed yield potential in tons per acre
• I is expected increase in yield in decimals
• P is price per ton
• H is harvest and hauling expense per ton est. @$40

• 50+16.25=Y*.15*(260-40)
• 66.25=Y*.15*220
• 66.25=Y*33
• 66.25/33=Y
• 2 t/a=Y

So vineyards with 2 t/a or better crop potential could be profitable with a Ponnax application with these assumptions. A 10% increase in yield would bump the breakeven to 3 t/a. I feel the payoff will be best in the 3-7 expected yield range.

A grower recently asked what kind of returns per hour juice grape producers are making. He thought that growers ought to average $40 per hour considering the investment, management, and labor involved. He was shocked when I told him that it has been as low as $6 an hour (LEGFCS 1995 average).

He has a strong point about adequate compensation for running a business. We like to look at assigning a value for the labor performed and then see what is left for management and investment. Then you can get fair results comparing the investment side of things. Using labor only doesn't take into account different farm sizes. All things being equal, a 100-acre grower should get higher returns per hour than a 50-acre grower working the same amount of time.

Bottom line, many growers need to improve returns. We can learn from growers that are achieving good returns. Good vine size and minimizing skips are two key factors that growers can control. Concentrate on factors that you have some control of!

Growers should manage their vineyards by block. Individual blocks can differ with pest pressure, vine vigor, etc. Weather is ALWAYS important when figuring out crop protection programs. However, some growers look at the New York and Pennsylvania Pest Management Guidelines for Grapes: 2003 and get confused.

Some growers would like a "typical" fungicide spray program and like to know which ones are most important. Remember that you need to adjust your actual spray program due to field history, current and expected weather, risk tolerance, potential crop size, chemicals used, etc. The listing is in order of relative importance in typical weather and not in timing of the sprays.

• Concord and Niagara 4-Spray Fungicide Program
• Immediate prebloom
• Immediate postbloom
• Second postbloom
• 10-12" shoot growth (or earlier)

If additional fungicide sprays are needed early season sprays would be preferred then spraying in August. Getting good coverage is SO much easier in May compared to August!

Vineyard owners and operators in the Lake Erie Grape Belt tend to lease vineyards two ways. The first type is a cash lease where the vineyard owner would receive a fixed dollar amount per acre usually ranging from $100-200 per acre per year.

• Simplicity
• Steady rental income
• Managerial freedom for the tenant
• Low capital requirements for the landlord although many leases specify trellis materials are to be supplied by the owner.

• Poor land use by the tenant particularly under short-term leases.
• Poor improvements because owners are reluctant to invest in improvements since they don't share in any additional income the improvements provide.
• Inflexible Rents

The second main type is called a crop share lease but it is done a little differently than the textbook example of sharing operating expenses. In the Lake Erie Grape Belt, most crop share leases just shares the income and the tenant pays all the operating expenses except trellis materials. Installation of posts or wire is usually the responsibility of the tenant. The crop share ratio ranges from 90:10 to 80:20 (tenant: landlord) with 85:15 being most common.

• Variable Rent. This can be of benefit to both parties.
• Sharing of risk. Rewards both parties when crop receipts go up and both parties suffer when crop receipts go down.
• Less likely for poor land use or poor improvement because both parties are interested in the best results possible.

• Variable rent may hurt landowners that depend on land rent for a high percentage of income. A handful of tenants have structured cash share leases with a guaranteed minimum payment to minimize this disadvantage for the landlord.
• Complicated with the income streams from cooperative payments. Crop share leases are simpler with cash market sales.

A longer lease i.e., 3-5 years is often recommended over a 1-year lease. Proper nutritional programs and trellis repair are more likely in the longer-term leases, thus keeping the vineyards in better shape.

Starting in 2003, self-employed persons can deduct 100% of medical premiums up from 70% in 2002. People eligible to be in a subsidized health plan by their employer or their spouse's employer CANNOT use this deduction.

Some managers in the past put their spouse on the payroll. The spouse would then elect to take family coverage and the owners would then be covered by deductible medical premiums. Now this maneuver is not necessary.

1. Cost control - Reduce operating expenses while keeping yields up. Don't cut corners and lose more in production than you save. Keep your soil fertility up! Smaller growers may want to do more of the pruning themselves if possible.
2. Defer capital spending - Develop a capital spending plan. Have a wish list of capital purchases you'd like for the next few years. Then estimate costs and priority ranking for each proposed capital purchases. Most growers won't need to use Sec. 179 expensing for tax purposes this year.
3. Reduce overhead costs - For example, look at insurance costs maybe you can save money by increasing your deductible. Spreading overhead over more acres is another common tactic.
4. Reduce debt! However don't try to prepay mortgages (increasing cash outflow) or other debt.
5. Refinance while interest rates are so low! Whether you reduce the level of debt or reduce the rates you are paying both will reduce your interest cost.
6. Put the time and effort to get your non-bearing vineyards into production!
7. Set financial goals! Prepare a cash flow budget for 2003.
8. Make use of comparative data like LEGFCS - Growers can learn a lot from other growers and from general trends in the industry. You can also learn more about your own farm's production and financial trends.
9. Do the little things right - Focus your attention on the details. Don't just complain about pruners, train and supervise them! Two growers spray the same fungicides, both pay the same for the material, one gets good control because of good coverage, the other farmer doesn't because of poor coverage.
10. Change! Be open-minded and try something new in your operation for 2003. Maybe you should try reducing your nitrogen rates in a block or two for instance.
11. Reduce family living expenditures. A dollar saved for family living is the same as a dollar saved for the farm.

With the large potential crops and mediocre weather this year (2003), many growers have been taking crop estimates. Most of those growers have needed to mechanically thin a portion of their vineyards. Most practitioners of mechanical thinning own their own mechanical harvesters. What if you don't?

I've heard of a handful of harvester operators that are available for custom thinning this year. Harvester operators have been leery to take on the liability of thinning somebody else's vineyards. So custom mechanical thinning has been pretty rare up until this year.

Custom thinning rates are sort of in flux. I've heard that some harvester operator think the custom thinning rate should be the same as the minimum harvest charge per acre say $125. I believe that is high. For thinning you do not need tractors, a loader, and operators for those machines. In fact, the harvester can be cover more acres (faster) thinning compared to harvesting. I think that custom mechanical thinning rates will depend on amount of acreage, frequency of sampling, travel time, etc. but rates per acre should fall into the range of $50-80. This additional charge should be well worth it to have a acceptable brix crop!

1. A standard fertilization program without petiole and/or soil tests.
2. Using foliar fertilizers routinely without indications of nutrient deficiencies.
3. Actual N rates in excess of 100 lbs. actual.
4. Use of spray adjuvants when the spray material label does not call for it.
5. Adding an insecticide to your fungicide spray without a specific pest in mind.
6. Row-middle cultivation every year, in some cases cultivation is needed to smooth out the soil but cultivation does cost more than most row-middle herbicide practices.

You can probably think of other practices that some of your neighbors do that inflate their cost per acre without increasing yields.

When growers make decisions regarding capital purchases, the economic life of the proposed item should be looked at first and the tax implications reviewed later. However many growers buy equipment primarily with tax planning in foremost in mind. What do I mean by this? An example will help explain.

Nick Niagara is looking to buy a new sprayer for $16,000. He believes that the useful life of this sprayer for his operation would be 15 years. He thinks that the sprayer will then be worth $1,000 for salvage value. The economic depreciation for that sprayer would be the purchase price minus salvage value divided by lifetime. So $16,000-$1,000= $15,000/15 years= $1,000 economic depreciation per year. This cost should be considered with other alternatives such as custom spraying, fixing up his old sprayer, or buying a used sprayer with lots of life yet. Nick decides that this sprayer is his best bet and buys it.

Nick has a lot of leeway in depreciation choices for tax purposes. Nick has a big crop and gets his crop in. He also received his crop insurance payment for last year's crop in this tax year. He is looking at a potentially high tax bill. He can use the bonus depreciation and the remaining amount to be depreciated over seven years as one option. Nick decides to be more aggressive and depreciate the entire sprayer's cost in one year using Section 179 expensing. As you can see the tax depreciation in this example is one year compared to 15 years for economic depreciation!

Looking at a four-spray (2 prebloom, 2 postbloom) program, chemical costs are around $75 per acre depending on products and rates applied. While that is a significant amount of money, you need to balance that cost with the potential income you are trying to protect. With juice grapes, income potential can easily be $1,500 or more per acre.

$75 is 5% of $1500. Managers should consider their fungicide program to be insurance to harvest a quality product. Is it worth 5% of the crop proceeds to protect against disease? In this climate, absolutely! For instance, we have heard reports from National Grape field staff of growers losing 3 t/a of grapes to Phomopsis alone for the 2000 crop! Material cost for an early-season Phomopsis spray can be less than $10 an acre. Properly applied, that spray could have saved much more than $10 in fruit! Black rot can decimate a crop under the right circumstances. Disease management is a funny thing; once you can see a problem you do not have many options left!

Most of the disease management breakdowns we see are due to lapses in timing, intervals, and coverage. Rarely do we see lapses due to using the wrong products.

In the real world, fungicide program costs is not a $0 or $75 per acre decision. Labor and equipment costs need to be considered. Most growers would be well served by thinking how they can maximize their existing crop (minimize losses). Most growers routinely put on an immediate prebloom and first postbloom spray. This is wise use of your resources! Research has shown that this time is most critical to protection of the fruit.

Growers' grapple with the timing and/or necessity for the other fungicide applications however. So consider budgeting for the early season sprays. Just plan on spending your fungicide money in the early and mid-season instead of late summer. Do not try to save money on fungicides at the expense of crop losses!

Do not try to save $20 by losing $200 in reduced tonnage! This will increase your cost per ton. Here is an example; a grower has a potential crop of 6 t/a at $250 a ton or $1,500 per acre proceeds. His cost per acre is $1,200. Trying to increase profits, he cut out a second postbloom spray "saving" $25 an acre in crop chemical costs. He then gets increased black rot and loses 1 t/a. His projected cost per ton would have been $1,200/6 t/a= $200. His actual cost per ton turned out to be $1,200-25=1175/5 t/a=$235. Profit per acre was also reduced from $1,500-1,200=$300 to 5 t/a at $250 per ton=1250-1175= $75. Disregarding the reduced quality, the reduced tonnage reduced profits by 75%!

Elderly Pharmaceutical Insurance Coverage (EPIC) Program is a NYS sponsored prescription plan for senior citizens. NYS residents can join EPIC if they are 65 or older, and have an annual income of $35,000 or less if single, or $50,000 or less if married. Seniors who receive full Medicaid benefits or have other prescription coverage that is better than EPIC are not eligible for EPIC benefits.

EPIC is a cost-sharing program. Eligible seniors would be in one of two plans, the Fee Plan or the Deductible Plan depending on income. To learn more about EPIC and how the program saves you money, call the EPIC Helpline at 1-800-332-3742 from 8:30AM to 5:00PM, Monday through Friday. Try this link to learn more http://www.health.state.ny.us/nysdoh/epic/faq.htm.