An Arkansas Study Forecasts Costs and ROI on Southcentral Vineyards

Wine grapes are grown in several locations in Arkansas. At least 720 acres of wine grape cultivars are planted in the Franklin county area. The Washington-Benton county area has about 300 acres of wine type grapes. In addition some quantities of the production from acreage of Niagara and Concord juice grapes in Washington and Benton counties are utilized for wine. To provide reference points for plans and decisions for continuing or expanding vineyards, enterprise budgets were presented in a series showing production costs for the vinifera, French-American Hybrids, labrusca, and Vitis aestivalis. For cost analysis, species were grouped by similarity of cultural practices and resource requirements. Vitis labrusca and Vitis aestivalis are considered together because they have the same production requirements. When the market price changed between different cultivars, the estimates illustrated the contrasts in returns. The budgets were organized so that each entry of the value calculated from the research data was followed by space for "Your Estimate" or the user's forecast of the cost and/or price. Table 1 gives a summary of the cumulative investment and establishment costs per acre that were developed for the fourteen cultivars considered most adaptable to Arkansas conditions. The calculations were made by a computer-driven budget generator program using 1987 resource prices. Although annual production input requirements and some costs were the same within the three species groupings, there was a range of differences in cumulative investments at the end of years 1 and 2. These variations in costs extended through the end of year 4 and were translated into the amortized establishment costs shown in Table 1. The variations between groups were due primarily to differences in Year 1's costs of grape plants while most variations within groups could be traced to the market value of the grapes harvested in Years 3 and 4. Within the four species of grapes groupings, vinifera, French-American Hybrids, Vitis labrusca and aestivalis, the cultural practices and resource requirements are the same. That is, the materials and structures, field operations, hours of nonharvest labor, and applications of chemicals and fertilizers would be identical among cultivars within each of the three groups. This results in an equality in all nonplant costs for Years 1 and 2 within each of the three divisions. Also, operational costs would be equal for (1) preharvest variable costs (Years 1, 2, 3, and 5) and (2). fixed costs (Years 1, 2, 3, and 4). In this way, the budgets reflect many costs that are equal for cultivars within a group, especially the uniformity of totals including cumulative costs for Years 1 and 2. The exceptions to equal operations/equal cost, that is, Year 4 preharvest costs and Year 5 fixed costs, are explained at the footnote at the bottom of this page. Table 2 gives the projected market prices, yields, costs, returns, and breakeven points for all cultivars. Many of the greatest income potentials outlined for Group 1 must be viewed as being applicable for only a limited number of area locations and vineyard sites because of climate risks. For example, the major differences in topography and climate across Arkansas can cause temperatures to fluctuate from mild to extremely cold resulting in serious injury to Group 1(vinifera) cultivars. The relatively high revenue potentials for this group must be viewed with the awareness that only the hardiest of these vinifera cultivars can be successfully grown in even the best microclimates. The majority of the suitable microclimates are located in foothills of the Ozarks and other similarly protected areas in the state. The establishment charge was allocated as an annual fixed cost for all cultivars in Years 5 through 30. For Pinot Chardonnay grapes (Group 1) the cumulative investment was reduced to $2,663 per acre, the smallest for all in the 14 cultivar group (Table 1). This was because at a market value of $1,000/ton, the yields of 1.8 and 3.6 tons/acre harvest in years 3 and 4 of the establishment period would reduce the total cumulative cost. The lower cumulative and establishment costs were in spite of the relatively large estimated expense for Group 1 of $3 each for 623 grafted grape plants ($1,869 per acre) in year 1. Estimates of grape plant costs for the other cultivar groups are also footnoted in Table 1.