How much can I make growing grapes in Oregon?


This question is first and foremost a question of how much does it cost to grow grapes in Oregonís Willamette Valley. The answer is: it depends. Secondly, itís a question of how you chose to account for all your costs. Do you amortize your land costs? Do you factor in the time value of money? Do you account for appreciation of your land?

Letís make some assumptions.

  1. You own forty acres of prime hillside land.

  2. You grow high quality grapes.

  3. You run all your own equipment, worth approximately $40,000 new.

  4. You plant 20 acres of Pinot noir, all good clones.

  5. You plan a moderate density of vines, say 1245  per acre

  6. Your vineyard development cost was $20,000 per acre (you did a lot of the work yourself, and you were frugal with materials). Thus, not including land costs, you have $440,000 invested in your vineyard.

  7. Your vineyard is now in full production.

Annual cost of production is also highly variable, but for the purposes of this exercise, weíll assume an annual production cost of $4,500 per acre.  This is the entire annual, variable expense, including harvest and delivery of your fruit. Actual costs might run as low as $3,500 to a high of $6,000 per acre.  

What price will you get for your fruit? For the purposes of this exercise, weíll assume youíre growing only Pinot noir (or at least a high demand varietal that will recover $1800 or more a ton). The National Ag Statistics report listed an average of $2100 per ton for Pinot noir in 2005.

Most wineries prefer a low yield of 2 to 2.5 tons per acre, and they pay a fixed amount per ton. At $2,100 per ton, and 2.5 tons per acre, your gross income per acre will be $5250.  Many wineries, with well established relationships with their growers, prefer to pay a fixed amount per acre, rather than on a per ton arrangement.

Financial analysis on a per acre basis:

Annual variable expense: $4,500

Depreciation of equipment:  $286 ($40,000 on a 7 year schedule, divided over 20 acres)

Total cost per acre: $4786 *

Income per acre: $5250

Net income, before tax, per acre: $464

* Not calculated in the scenario is the time value of the invested money; an important consideration.

Suffice it to say, this isnít a lucrative endeavor, certainly given the magnitude of the investment required and the risks assumed. Nevertheless, if we assume substantial appreciation of the land value, the return improves dramatically.

For more help or information, call us at 1-800-653-2216 or email us at solutions@ovs.com.
 

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