Vineyard Establishment: Cost Through Trellis Construction
Kevin Martin, Extension Educator, Business Management
Lake Erie Regional Grape Program
Last Modified: March 19, 2013
Assumptions
- Land: It is assumed that land is already owned by the grower as that is the most common practice. Open land itself may be valued at $1,500 per acre. Open land in Chautauqua County is valued at $800 - $2,000 per acre for agriculture purposes. Annual ROI on this investment could be as little as $45.
- Vineyard layout: Spacing is assumed 7x9 or 658 vines per acre.
- Tile drainage: While tile drainage is not required on soil types most well drained soil already has an established vineyard. A common tile drainage system would include 4" pipes at 18' spacing with an 8" mainline.
- Trellis system: 220 4" pressure treated posts per acre as well as 35 end posts and anchors per acre.
- Wage Rates: Wage rates reflect the actual costs of growers of $12 per hour for unskilled labor. Piece rate wages for pruning are assumed at .3 per vine.
- Harvest and Hauling: Grapes are assumed harvested and hauled by the owner operator at a cost of $120 per acre.
- Machinery: Machinery depreciation was estimated at a discounted rate based on the assumption that economies of scale will reduce per acre depreciation costs for new plantings.
- Overhead: Similar to machinery, overhead costs should rise as the grower expands holdings but per acre costs should fall. The overall savings are captured entirely in the new planting acreage and estimates of new overhead costs are included.
- Cost of Capital: A 2.5% interest rate change on capital investment and operating capital was changed. This rate represents a real rate based on a six percent nominal rate of interest and an expected rate of inflation of 4%.
- Yields & Prices: Revenue is displayed as a matrix as fluctuations in yield and price will continue to be volatile. We could estimate an average, but you will never have an average year. The revenue matrix illustrates the floor, ceiling and expected revenue the planting may have.
The good news is, the cost of vineyard establishment does not impact the cash flow as dramatically as the total cost of the vineyard does. Establishing a vineyard will normally increase unpaid labor costs quite substantially. Most of the establishment labor is either low-skilled labor or completed by grower owners and family.
Even with this competitive advantage, it often makes more sense to purchase an existing vineyard.
Realizing the benefits of a new trellis, new vines, and orderly planting simply take far too long to justify any interest charges. Even any reasonable ROR will likely be greater from purchased vineyards, rather than newly planted vineyards.Tile is a significant variable in vineyard plantings. Growers have experimented with plowing tile in to reduce such high installation costs.These costs clearly illustrate why most well drained soil already has existing plantings. Planting on well drained soil could result in establishment cash outlays as low as $2,600 per acre. Also, at $3,900 per acre this cost should be one specifically targeted by the grower.Negotiate with the installer, entertain more efficient installation methods, and properly assess exactly how much drainage the site requires. Establishment labor and maintenance until cropping begins will increase those costs, but could potentially result in less expense than a well-drained gravel site with an existing planting. Total labor for trellis construction, planting, and fertilizer application is 16 hours. Cash outlay for that labor will vary between $250 per acre and $80 per acre. For a large grower with a salaried employee costs could be lower as much of this additional labor can take place outside of the normal growing season.While planting costs vary, even if expenses are comparable to existing plantings, it can make economic sense to plant. Minimizing unproductive land along with the upkeep and taxes associated with that land improve efficiency.
Macroeconomic conditions make this a particularly interesting time for investment. Money is generally this cheap two or three times a century. Credit requirements are tight but for those with capital a reasonable return on investment (ROR) in a long-term investment is not available. The Federal Reserve continues to manipulate long-term rates to encourage investment. Thirty-year notes currently yield 4.55%, a mere 2% above long-term inflation. Given current inflationary pressure, actual yields could easily average 1%. Ten-year notes currently yield 1.82%. Actual rates could easily fall below 0% if the economy recovers before 2016.
Historically the major concern with expansion was that the grower would use a great deal of capital for a ROR that could just not compete with the market. At this time the ROR in the market looks downright awful. Anticipating negative yields over the next decade is not at all a stretch.
Upcoming Events
LERGP Coffee Pot Meeting #4
May 22, 2024 : LERGP Coffee Pot Meeting
Burt, NY
Come join us for timely and pertinent vineyard discussion, coffee, donuts, camaraderie and pesticide credits.
LERGP Coffee Pot Meeting #5
May 29, 2024 : LERGP Coffee Pot Meeting
Fredonia, NY
Come join us for timely and pertinent vineyard discussion, coffee, donuts, camaraderie and pesticide credits.
LERGP Coffee Pot Meeting #6- LERGREC Field Day
June 5, 2024 : LERGP Coffee Pot Meeting
North East, PA
Come spend the day with us at LERGREC for a day of educational talks including research updates and new project information from Penn State, LERGREC and LERGP.
Announcements
Precision and Digital Viticulture Field Day
Thursday, June 6th, 2024 | 10:00 am - 3:00 pmCornell Lake Erie Research and Extension Laboratory Regional Grape Program
6592 West Main Road
Portland, NY 14769
Agenda
10:00 - 10:10 Welcome - Jennifer Phillips Russo & Dr. Terry Bates
Research Updates
10:10- 10:25 Drone Sensors - Dr. Rob Chancia, Rochester Institute of Technology - Rob is working together to address vineyard nutrition through better monitoring techniques and guidelines for grape production across the nation and all grape markets. He will discuss his research as a part of this collaborative project conducted at the Cornell Lake Erie Research and Extension Laboratory.
10:25 - 10:40 Hyperspectral Sensing Technology - Kathleen Kanaley, Dr, Katie Gold Lab, Cornell University - Kathleen will update on her research with using satellite and drone imagery to develop remote sensing tools for early disease detection.
10:40 - 11:00 Meet PPB & Research Update - Dr. Yu Jiang, Cornell University - Yu will discuss his research utilizing the power of robotics and artificial intelligence to tackle major challenges facing farmers and drive a revolution in agricultural productivity and sustainability.
11:00 - 11:20 Carnegie Mellon University Pruning Robots - Dr. Abhi Silwal, Carnegie Mellon University - Abhi will present the design and field evaluation of a rugged and fully autonomous robot for end-to-end pruning of dormant season grapevines.
11:20 - 11:40 Vision Spraying and Electric Weeding - Dr. Lynn Sosnoskie, Cornell Weed Scientist - Lynn will update us on her research for sustainable programs that investigate other tools and technologies for controlling unwanted vegetation exploring non-chemical strategies for weed suppression including covering crops and mulches and vision-guided and electric weeders.
11:40 - 12:00 Naio Ted Robotic Tool Carrier- Chuck Baresich, Owner of Haggerty Creek - Chuck will be talking about the Naio Ted Robot and the potential use of robots to help improve efficiency in vineyards. Ted is the only autonomous straddle robot for vineyards with Augmented Autonomy. Perfect for mechanical weeding on the row.
12:00 - 1:00 Lunch
1:00 - 3:45 Outdoor Demonstrations of Precision & Digital Tools
3:45 - 4:00 Closing Remarks - Jenn Phillips Russo, Lake Erie Regional Grape Program
This is a FREE event but you must register!
Soil Health & Climate Resiliency Field Day 6/12/24
Come join us for a full day of education on soil health. We have special guest speakers, soil pits, demonstrations and lunch. This program is being hosted by the Betts' Farm. Sponsorship from the LERGP, USDA NRCS, Cornell CALS, New York Soil Health, King's Agriseeds and E & J Gallo Winery have made this program come together and provide lunch for the day.See agenda here:
10:00am-10:20am- Welcome
10:20am-10:40am- Our Soil Health Journey- Bob Betts, Betts Farm
10:40am-11:05am- Soil Health in Perennial Fruit Systems- why it matters?- Debbie Aller, Cornell University
11:05am-11:35am- NYFVI Cover Cropping Trials- Jennifer Phillips Russo
11:35am-Noon- Cover Crop Options for Different Applications- Rod Porter, Kings Agri-Seeds
Noon- 12:45pm- LUNCH
12:45pm-2:15pm- Soil Pit and Soil Health Trailer and Demos- Dan Ufnar (USDS, NRCS), Debbie Aller & Michael Glos(Cornell University)
2:15- Closing Remarks
This is a FREE event but you must register to help us plan for enough food. Thank you!
Welcome Andrew Holden to the LERGP team!
In case you have not heard yet, we have filled the vacant position of Business Management Educator. We are pleased to welcome Andrew Holden to our team. Here is a brief introduction with a little background. Please stop in to say hello and introduce yourself. Bring questions- he is ready to get to know you and your farm operation!The Lake Erie Regional Grape Program welcomed Andrew Holden, LERGP's Business Management Specialist, to our team on March 1, 2024, filling the vacancy since May 2023. Andrew pursued his education at Ohio State University, earning a B.S. in Agribusiness and Applied Economics and later obtaining an M.S. in Agricultural and Extension Education. In his previous role he served as the Ashtabula County Agricultural Extension Educator with Ohio State University Extension for the past 5 years. Andrew is eager to bring his passion for agriculture, grapes, and wine along with his economic knowledge to this new position and to the growers in the Lake Erie Grape Region. He is looking forward to engaging with growers to help him understand their needs to ensure that his role equips them with the tools needed for success. His office is located at the Cornell AgriTech campus in Portland, NY (CLEREL).
Commercial Vehicle Awareness slide presentation
NYS Trooper, Matt Luft, presented on Commercial Vehicle Awareness at CLEREL on Thursday, August 2nd. He has given us the permission to share his slides for you to reference at your convenience to share with others or to review. Please reference this link.LERGP Podcasts- check them out!
LERGP POD CASTS
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