Wine Grape Production and Marketing Risks in Washington

Abstract

Abstract Producing wine grapes in Washington involves production and marketing risks as a result of the low winter-time temperatures that can kill fruiting buds. A financial analysis of a ‘Cabernet Sauvig-non’ vineyard was conducted which accounts for such risks. With average prices and weather conditions, the net present value per acre was $15,816 after 19 years, the internal rate of return was 32.27%, and the payback period was 4 years and 8 months. Increased production risk associated with higher critical temperatures at which fruiting buds are killed reduced the net present value of the average net returns by approximately $2,343 per acre and the internal rate of return by almost 4%. The payback period was lengthened by 3 months. When the price was lowered one standard deviation, the net present value of the discounted future average net returns were reduced by approximately $3,000 per acre per year, the internal rate of return was decreased by almost 5%, and the payback period was longer by almost 4 ...