What a “light crop” means for a winery
The 2011 grape harvest in San Luis Obispo County has been the topic of discussion this fall as yields are lower than many growers would want them to be. Each year vineyard owners budget their farming expenses so they can profit from their crop. The budgets include labor, fertilizers, pruning, repairing the trellis system, cover crops, and much more. Most vineyard owners and vineyard managers think of their budget on a “per-acre” basis. The cost per acre to farm a vineyard can vary dramatically depending on the farming practices.
As the growing season nears harvest vineyard owners often estimate their expected yield, in other words, how many tons of grapes they will pick from the vines. The yield is impacted by several factors, including the weather. This year San Luis Obispo county was hit with freezes, a cool summer, and early rain causing many vineyards to have less fruit per acre. Most vineyards in this area see yields between two to five tons per acre.
When most people hear about the impact the weather has had on the vines they think about how much wine simply won’t exist because there was less fruit. We find ourselves thinking about the impact on cost of goods sold. If a vineyard spends $3,000 per acre per year to grow grapes and gets a yield of 3 tons per acre the average cost per ton is $1,000. If that same vineyard suffers a small crop due to weather and only yields 2 tons per acre the average cost per ton jumps to $1,500. The 50% increase in cost per ton is significant for the winery who is trying to earn a profit on each bottle of wine.
As the 2011 harvest wraps up we have heard moans, groans, and sighs as the cost per acre and the yields get tallied up. In the next couple of years, when you are reaching for that 2011 vintage wine, appreciate that you are drinking some unusually expensive juice, courtesy of mother nature, made beautiful by the talented winemakers in our county.
November 2011
Pursuant to IRS Circular 230, the Internal Revenue Service requires us to inform you that any tax advice included herein is not intended or written to be used, and it cannot be used by any taxpayer for the purpose of avoiding penalties that may be imposed by the IRS on the taxpayer. That said, please do not hesitate to contact us if you have any further questions regarding this matter.
