Economics of growing grapes topic at convention

AFP Correspondent

ATLANTIC CITY, N.J. (March 14, 2016) — The economics of growing grapes and making wine was a topic for discussion at the recent New Jersey Ag Convention.
“We have some really knowledgeable folks here if you’re interested in getting into this business,” said Daniel Ward, Rutgers Agricultural Extension specialist and grape growing expert, acknowledging several prominent Atlantic and Cape May county winery owners in the audience, as well as Rutgers’ Atlantic County Ag Extension agent and grape growing expert, Gary Pavlis.
A key point to consider, Ward said at the outset, “is that this is an industry that is growing and the demand for grapes exceeds the supply,” at least, here in the Garden State.
“We need more grapes to be grown, but grape growing is capital intensive,” he told the convention attendees, noting most grape growers end up spending about $20,000 an acre in variable costs and closer to $30,000 per acre of grapes in total costs.
“Once you’re into full production, that’s a lot of capital to put out there and the first significant harvest is usually the third year, we sometimes refer to that as the third leaf,” Ward said. He further cautioned, for people who haven’t grown grapes before, it may take up to five years before seeing a real yield from the vineyard.
“When people are estimating these budgets for vineyards – vineyards, not wineries — they usually express them in a per acre cost. But they’re based on a 50-acre vineyard and that doesn’t exactly scale down to a five-acre vineyard that you may be starting out with,” he noted.
Most of the estimated costs Ward related were based on the assumption that the farmer has 20 acres on which to grow grapes, yet, here in New Jersey, such expansive tracts of land are often few and far between.
“These estimated costs also don’t account for years when you could have significant problems with crop loss,” Ward said, noting just a couple of years ago, there was hail storm in June in several southern New Jersey counties, “so there went all the flowers and there went all the grapes for that year.”
Such weather events as hail and wind storms and late frosts in spring as well as periods of extreme cold in winter months can significantly affect yields of grapes.
“We had a year when we had 15 inches of rain in eight hours. It was so much rain that the grapes couldn’t handle it,” Ward said.
“Any time you evaluate a budget for a vineyard, you have to evaluate it with respect to costs, both fixed and variable, the returns, how much we can make and how long,” he said, “and the time to break even is something we can use as a guide to make decisions.”
“If you’re 30 years old you have a little bit different take on time to break even than if you’re 70 years old,” he noted.
Would-be grape growers need to consider site and soil preparation, fertilization, weed control, pruning costs and pest control costs for the first, second and third growing seasons keeping in mind the payoff won’t be available — barring any unforeseen weather events — until the third season.
“The first year you don’t have any fruit so you don’t have to worry about protecting it. You may have to invest money in specialized equipment and a hoeing instrument attached to your tractor to do it cheaply,” he said, and once a farmer has grapes growing on vines and up trellises, bird control becomes a cost to consider as well.
Ward noted in an ideal situation the farmer wants to produce between 3.5 and 4.5 tons of grapes per acre.
“Once you’ve established yourself as a quality grape producer, you can look at a higher price per ton, but the average price is the thing to focus on,” he said, “depending on how important the grapes are here, that will dictate dollar yield per ton.”
“If I have four acres of grapes and I’m selling for $2,000 per ton, I get $8,000. For any agricultural commodity, that’s a good return.”
Ward pointed out that Virginia is in front of New Jersey and other Eastern states in its grape production efforts, “as they have organizations and help from the state, so I have a feeling they do a better job of getting the prices they deserve.”
Ward cautioned that weather setbacks may have grape growers waiting five to eight or even more years to break even on their investment.
“Lose one crop, it costs two years for the break-even time and that’s the point I really want to make today: you can easily get a hailstorm or some other unforeseen problem. That has led me to this saying: ‘You must control everything you can control to the best of your abilities, because some things you won’t be able to control. If you haven’t controlled the things you can, the things you can’t control will kill you.
“If you have controlled the things you can, the things you can’t control will merely hurt you.’”