Title: Developing Economic and Financial Benchmarks for Mechanizing Northwest Vineyards
Final Report: 2018-2019
Primary Investigator(s): Clark F. Seavert
Organization: Department of Applied Economics, Oregon State University
Cooperators: Richard Hoff, Mercer Ranches; Russ Smithyman, St Michelle Wine Estates; Dr. Qin Zhang, WSU; Grant DeVries, Vine Tech Equipment; Daniel Fey, Results Partners; Joel Myers, Vinetenders, LLS.
Summary of Research:
The project estimated the profitability of four vineyard tasks that could be mechanized and determine the financial feasibility to purchase these machines by farm size. The four vineyard tasks chosen were spur pruning, shoot thinning and desuckering, leaf pulling, and harvest. Each investment was evaluated on two sizes of vineyard operations – a 100-acre and 500-acre vineyard operation. The 100-acre vineyard used existing tractors to pull the equipment. The 500-acre vineyard used existing tractors as well but only for the shoot thinning and desuckering, and leaf pulling. A Pellenc power-unit was purchased with the accompanying precision pruner and harvester built for that power-unit.
The expected returns and costs to establish a wine grape vineyard in Oregon provided the basis for several of the assumptions used in this study. Most assumptions, however, were modified to reflect differences between states, growing regions, and size of the operation. Industry interviews also provided valuable information for labor hours by size and location of the vineyard and current harvest rates. Enterprise budgets for Washington state wine grapes were
developed, showing the expected yields, prices received, and out-of-pocket expenses paid to grow and harvest the crop. To adjust for future increases to prices received and input costs paid, inflation rates were applied to income and expense items each year.
There are significant returns to vineyard owners for mechanizing these four tasks. A 100-acre operation could increase net profits by $436, $52, $194, and $1,120 per acre per year by mechanizing spur pruning, shoot thinning and desuckering, leaf pulling, and harvest, respectively. A 500-acre operation could increase net returns by $403, $84, $216, and $1,230 per acre per year by mechanizing spur pruning, shoot thinning and desuckering, leaf pulling and
Custom hiring an entity to spur prune proved to be more profitable for both size of vineyard operations, $455 per acre per year compared to owning a pruning machine of $436 and $403 for a 100-acre and 500-acre respectively. Custom hiring the leaf pulling task was also more profitable but only for the 100-acre operation – $206 per acre per year compared to $194 of owning the machine. Owning the harvesting machine generated the highest net present value of
returns with $1,120 and $1,230 per acre per year.
The results of the purchasing the leaf puller and harvester and financing it with a loan generated more liquidity without increasing long-term debt. The shoot thinner and desuckering machine is an exception in that it did not increase liquidity as the other machines due to a smaller reduction in labor hours. The decline in labor costs overtime was a toss-up when considering the up-front investment of mechanization. Although profitable, the advantage of purchasing this machine was negligible to improving the financial position of the business.
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