College - Author 1
College of Agriculture, Food and Environmental Sciences
Department - Author 1
Degree Name - Author 1
BS in Agricultural Business
James Ahern, College of Agricultural, Food, and Environmental Sciences, Agribusiness Department
This study was undertaken to determine whether farming premium wine grapes can generate profit on a 10 acre site in Napa County, and if farming wine grapes can be a profitable long term investment.
The report utilizes two techniques for analysis of the data. The break-even analysis will be used to determine whether the operation is potentially profitable. Vineyard establishment costs were outlined in and production costs (from year 3 forward) defined. Production costs and grape revenues are weighed to determine net revenues above total costs. Monthly per acre break down of costs demonstrates how vineyard production costs fluctuate during dormancy, the growing season and harvest in the fall. A ranging analysis of grape revenue weighted against costs at varying prices and yields provides possible levels of profitability. Depreciation for all equipment purchased for the operation is used to calculate capital recovery. To determine the different levels of profitability of the operation based on various levels of yield and price, marginal cost and marginal revenue criterion was used to find various break even points and to observe points where revenue exceeds cost.
The vineyard operation was profitable over the long term on an annual basis. The establishment costs have been spread over twenty years in the analysis to make the operation feasible. After the third year the vines reach full production and annual cost was exceeded by annual grape revenues.