Cost of Establishment and Production of Vinifera Grapes in the Finger Lakes Region of New York, 2001

In recent years there has been increased interest in the Finger Lakes, as well as in other producing regions in New York state, in planting Vitis vinifera grapes for premium wine production. Red varieties such as Pinot Noir, Cabernet Sauvignon, and Cabernet Franc all experienced increased acreage in the most recent orchard and vineyard survey compiled by The New York Agricultural Statistics Service. Several factors are affecting the interest in new V. vinifera plantings. First is the declining real prices (adjusted for inflation) or in some cases, declining nominal prices for traditional American wine varieties and some French American hybrid varieties (e.g. Aurore, Catawba, DeChaunac, Delaware, and Dutchess). A second factor has been an increase in consumer demand for quality wines (roughly defined as French American hybrid or V. vinifera varietals or appellation wines). Wine consumption in the United States has increased during the last seven years, driven by good news regarding the health benefits of moderate wine consumption. A third factor is that most Finger Lakes wineries are reporting increased winery visitation by tourists as well as local area repeat purchasers. Well-managed wineries in the Finger Lakes are reporting annual sales increases of ten to as high as 25 per cent over the last several years. In addition to the increase in the number of tourists resulting from promotional efforts that have been made by several local agencies, New York is gaining stature as a producer of high quality wines that command premium prices. Growers who are considering planting additional V. vinifera acreage need to carefully weigh the cost of planting and establishing a vineyard, the cost of production of a mature vineyard, and the expected yields and prices in order to determine whether the investment of $13,000 per acre or more required to bring a V. vinifera vineyard into production will result in a profitable return on investment. This question is complicated by the long-run nature of the investment (payback periods are in excess of ten years and can be even much longer), as well as the risk from an over supply from significant plantings of wine grapes worldwide that could lead to price cutting at the retail level. There has been a great increase in new plantings of V. vinifera in California. By some estimates, nonbearing or not yet mature acreage in California is now 100,000 acres (Wines and Vines). Although the New York industry is somewhat insulated by a market structure of the premium wine sector that is based on most wineries selling over 50 per cent of their wine (volume) through direct sales, wineries cannot expect to be completely unaffected if national supply outstrips demand in the future. The acreage of V. vinifera varieties in the Finger Lakes is still quite limited. For example, the two most widely planted V. vinifera varieties, Chardonnay and Riesling, accounted for just 314 acres and 231 acres, respectively, in the most recent survey of acreage by New York Agricultural Statistics. Given the limited area planted, a small increase in planted acreage can have a large impact on supply when the new acreage begins bearing. The objective of this project was to determine the cost of producing V. vinifera grapes in the Finger Lakes region in a commercial sized operation. Estimates of the total investment in land, machinery, vineyard establishment and development costs, and annual operating costs were developed. These estimates may be used by growers and potential investors to compute and analyze the costs and profit potential for their own situations. The estimates are not necessarily representative of average costs for grape production in the Finger Lakes, but rather are typical costs for well-managed vineyards using recommended practices. The yield estimates used for estimation of typical returns assume better sites (well-drained, productive soils with appropriate slopes for air drainage). We also assumed that vineyard practices were used which would result in premium quality grapes. Practices such as leaf pulling and cluster thinning of certain varieties, would limit yields and contribute to higher quality wine. Poorer sites and/or failure to follow optimal management practices can have a significant negative impact on the earnings estimates presented in this publication.