Introduction

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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