Online Calculator Helps Growers Do The Math When Establishing A Vineyard

With costs of $10,000 to $15,000 an acre to establish a vineyard, there’s a lot riding on the decision to produce grapes for wine or juice. That same level of investment also raises the stakes when making management decisions once the vineyard is up and going.

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To reduce these financial risks, Washington grape growers have pioneered development of an online calculator to improve their ability to identify and analyze the numerous costs of starting a new vineyard or operating an existing one. This cost of production calculator offers an easier, faster way to identify and update production expenses, compare costs of different methods of growing grapes, and keep financial records rather than using printed forms and hand calculations.

Had this online risk management tool been available when Tom Waliser was planning to venture into the business of growing grapes near Walla Walla, WA, it would have simplified his cost analysis. What’s more, it would also have increased his confidence in the information he used to make his decision. “The cost of production calculator provides a great framework for getting started in grape production and makes it easy to plug in all necessary information to make sure you’re covering all your costs, ” explains the manager of Pepperbridge Vineyard. “This calculator gives you a much better feel for what your inputs will be and what they’ll actually cost you. It’s also valuable if you’ve been in the business for a while, because you can compare how you’re doing with others in the industry. That information can help you spot any costs that are out of line and correct them.”

A Team Approach

Funds for developing the cost of production calculator were provided by a USDA Risk Management Agency (RMA) partnership program. The agreements fund projects to develop new risk management tools to help strengthen the economic stability of farmers and ranchers throughout the U.S. The Washington growers’ success in using these funds to enhance their risk management abilities illustrates how agricultural producers in other areas of the country can team up with RMA to improve their profit prospects.

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In this case, the cost of production calculator for grapes was one of five risk management tools that Washington grape growers developed or evaluated over a three-year period as part of a $743,050 partnership agreement between RMA and the Washington Wine Industry Foundation. The Washington Growers Clearing House Association also participated in the partnership, using some of the funds to improve an already-existing online calculator for apples, pears, and cherries.

“We applied for the grant to provide growers with information critical for making basic decisions aimed at mitigating and managing financial, production, and price risks,” says Vicky Scharlau, executive director of the Foundation, which facilitates education, outreach, and research opportunities for the industry. “At the same time, we wanted to make it easy for growers to access and use this data. The cost of production calculator contributes to a grower’s understanding of financial records, enhances their ability to analyze production and business practices, and facilitates business planning.”

This risk management tool went online in early 2007 and is serving about 1,200 wine and juice grape growers in Washington as well as Idaho and Oregon.

Instant Results

The cost of production calculator for wine and juice grapes was developed by Trent Ball and Ray Folwell of Agri-Business Consultants in Prosser, WA. It guides growers in gathering and analyzing costs of production for conventionally grown or organically produced grapes by intended market (juice or wine) for each of the first four years of production. Growers can use it to compare their costs by category with industry averages. The calculator also allows growers to automatically compute current and future break-even cost of production figures and to compare costs of different management practices.

“The calculator is designed to help those contemplating the establishment of a vineyard or existing growers to make better decisions,” says Folwell, a retired Washington State University agricultural economist and administrator. “It helps you enter the business with your eyes wide open by laying out your investment costs, operating expenses, and revenues for each year.”

“If you’re new to grape production, this calculator gives you a starting point for including all costs associated with a vineyard,” Ball adds. “You can instantly see how changing a production practice, like row spacing or type of trellis system, will affect your break-even point. You can easily tailor the calculator to fit your own unique vineyard and run a variety of ‘what if’ scenarios to see how they will affect your operation.”

All of the activities involved with the various types of production practices included in the calculator are based on information provided by growers. That’s a key feature, notes Waliser. “You can feel comfortable with the results of the calculator because they are based on the real-world experiences of growers who follow these practices,” he says.

It’s also very user friendly. “This is a pretty straight forward tool,” he says. “It’s very simple to use.”

The calculator is available online at www.nwgrapecalculators.org. Plans are to create a similar cost of production calculator for wineries. Based on bottle or case units rather than acreage, it would include both red and white varieties and organic and conventional production methods.

Partners in Managing Risks

The project to develop the cost of production calculator is one example of how farmers can benefit by teaming up with USDA’s Risk Management Agency (RMA) to improve revenue and reduce risks. RMA uses funds authorized by the Federal Crop Insurance Act to partner with public and private organizations and provide producers information and resources to make informed decisions about crop insurance and other risk management strategies.

“In our case, the partnership produced a variety of information and techniques to help growers make better decisions about production, expansion, or consolidation of their operations and even whether to enter or leave the grape or tree fruit production business,” says Vicky Scharlau, executive director of the Washington Wine Industry Foundation.

Since the RMA partnership programs began in 2001, the agency has funded a total of $150 million in partnership agreements, which have benefited about 1,000 grape producers, 700 wineries, and six juice processors in Washington, Oregon, and Idaho, and some 4,000 apple, pear, and cherry growers and 80 warehouses in the region’s tree fruit industry.

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