This report tries to reflect the management practices used by growers
today. Soil condition, cultivar selection, personal decisions and the
unique meso-climates of Ontario
result in many different grower practices in training systems, pest
management programs and fertilizer rates.grower management.
The four grape cultivars in this document are the same as those used
four years ago. Concord, Vidal, Chardonnay
and Cabernet Franc reflect some of the most significant cultivars in
Ontario.
They represent Labrusca, French Hybrid and Vinifera types of grapes.
Objectives
The grape industry utilizes the cost of establishment and cost
of production models extensively to determine the profitability of the
industry and to help growers with their business decisions and planting
plans. Growers can use the input costs as general guidelines to help
identify strengths and weaknesses in their business.
Methods and procedures
The information used in this report was derived from previous economic
reports, surveys with growers and private consultants, and data from
researchers, extensions and agribusiness.
Input costs were organized into variable and measurable fixed costs.
Variable costs include plants, seed, fertilizers, pesticides, marketing
charges, hired labour, tractor and machine costs and interest on operating
capital.
Measurable fixed costs are interest on investment, depreciation and
other overhead cost items such as a portion of utilities, equipment
storage, insurance, accounting, farm vehicles and general maintenance.
Assumptions
The contribution margin was obtained by subtracting the total variable
costs from the gross income. Contribution margin is the amount of funds
that the crop contributes to cover fixed costs and provide returns for
owner management and investment.
Hired Labour was charged at $10.90 per hour, which includes benefits
(Workers' Compensation, Employment Insurance and Canada Pension Plan).
A blended base price of $10.00 was used to reflect the workforce in
the grape industry, which is made up of both local and offshore labour.
Offshore labour includes an allowance for additional costs such as air
flight, housing, local transportation.
Hired machine operator labour was charged at $ 14.20 per hour (includes
benefits).
Machinery and equipment costs were based on a commercial farm size
of 50 acres.
Machinery costs were calculated based on the purchase price for 2005,
useful life, annual use and trade-in value.
Interest on investment was calculated at 3.0%, which was the average
interest rate paid by chartered banks on Guaranteed Investment Certificates.
The interest rate applied to the operating capital was based on the
average 5 year fixed lending rate of 5.5 %.
Interest on operating capital is compounded annually until the vineyard
generates revenue to first pay down the accumulated interest and then
the outstanding principal. Operating capital includes cost of materials,
fuel, repairs, labour and other cash items but does not include farm
overhead expenses.
Fuel costs were based on the size of each tractor, truck or self-propelled
machine used in production. The following farm-gate fuel prices were
used: gasoline 94.0 cents/litre and diesel 77.0 cents/litre. Fuel costs
are net of all 2005 provincial and federal rebates.
Yields were given as both a low and high range to reflect the wide
differences of commercial production and conditions for each farm.
Yields used were 25% of annual yield for year 3 and 50% for year 4
(high range).
The prices listed were the 2005 payments for each cultivar sold through
the Ontario Grape Growers Marketing Board.
Chardonnay and Cabernet Franc vines were spaced at 9 x 4 feet and 1210
vines per acre. 1 acre = 9 rows with approximately 134 vines per row.
Vidal vines were spaced at 9 x 5 feet and 968 vines per acre. 1 acre
= 9 rows with approximately 108 vines per row.
Labrusca vines were spaced at 10 x 6 feet and 728 vines per acre. 1
acre = 8 rows with approximately 91 vines per row.
The training system for Vinifera is cane pruned to a vertical shoot
position system (i.e. Pendelbogen). The training system for Labrusca
and French Hybrid is cane pruned to four-cane kniffin.
The establishment of the vineyard covers a 4.5 year period: a half-year
for pre-plant preparation, one year for planting and three years for
the vine to grow to full cropping potential. The life of the vineyard
is assumed to be 25 years; 4 establishment and 21 full production years.
The establishment costs will need to be recovered over the productive
life of the vineyard. An estimate of the annual cost to recover establishment
costs is included in the Total Establishment Costs section for each
variety. They are amortized over the 21 years of full production at
a rate of interest of 3.0%.
Due to rounding, figures may not add to total shown.
Items not included in the 2005 Economic
Report
Land costs and carrying charges were not included as part of the establishment
or production costs because of the extreme variance in
land prices.
Land ownership and rental prices vary considerably from farm to farm
depending on road location, services, soil types, access to water, and
potential for urban development or establishing a new winery. For this
reason a space was provided to insert land rental cost in the variable
cost section and land ownership in the fixed cost section. Costs should
be added into vineyard establishment and cost of production.
A management allowance was not included as a cost.
All labour costs were charged to the project whether the owner performs
the task or whether it was hired out.
These assumptions reflect the current practices in the industry and
do not necessarily represent recommendations from the contributors.
Newer plantings of these varieties may involve higher vine densities,
alternative training systems and other innovative cultural practices.
The authors assume no liability or responsibility as a result of the
reader relying or acting upon the information contained herein. Any
use or misuse of the information is the sole responsibility of the reader.
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