Economic Feasibility of Wine Grape Production in the Arid US: A Northwest Nevada Example

Abstract

AbstractAs competition for water resources increases and water availability in arid regions declines, agricultural producers are encouraged to adopt water-conserving strategies. This study examines the economic feasibility of implementing wine grapes in northwest Nevada as a diversification and water conservation strategy. Results show profit potential when vitis interspecific wine grape varieties are produced in the region. Net returns based upon point estimates from two separate analyses show per-acre net returns at $1,065 and $3,022, respectively. However, the large variation in potential net returns shown in the risk analysis, combined with a high capital investment cost of more than $17,000 per acre, may preclude producers from exercising their option to adopt wine grape production. Also, including wine grapes in the on-farm crop portfolio will affect its risk and return characteristics, likely impacting producer preferred level of wine grape adoption. (JEL Classification: Q11, Q15, Q25, Q54)