Embed Size (px)
Citation preview
1
THE FINANCIAL SUSTAINABILITY OF PRIMARY GRAPE PRODUCERS IMPACTED NEGATIVELY BY THE INITIATION OF THE DROUGHT CONDITIONS, WITH POSITIVE SHORT TERM
PROSPECT AS WORLD WINE SUPPLY TIGHTEN.
ACCORDING TO THE LATEST VINPRO PRODUCTION PLAN SURVEY, PRIMARY WINE GRAPE PRODUCERS’ ARE STILL UNDER FINANCIAL PRESSURE AS THE DROUGHT
SPREADS AND PRODUCTION COST INFLATION GRIPS FIRMLY ON ALREADY DWINDLING MARGINS. BY ANDRIES VAN ZYL & PIETER VAN NIEKERK
VINPRO PRODUCTION PLAN SURVEY
The 2017 vintage
In 2017 the Vinpro Production Plan survey was conducted for the 14th consecutive year in the wine industry. The findings show that although the average producer are still not on sustainable income levels, the most profitable
producers are gaining margin in all 10 producing regions, however the unprofitable bottom third are increasing for the third consecutive year, a further increase is expected if the current drought conditions prolong.
With tightening global wine supply there is an opportunity for Brand SA to re-position itself in the market, ensuring a much needed structural correction along the wine value chain.
PIC
TUR
E: W
OS
A L
IBR
AR
Y.
2 3
FIGURE 1. Tonnes harvested mechanically per district.
FIGURE 2. Total industry average production cost.
FIGURE 3. Movement of direct cost – industry average.
INTRODUCTION
In 2017 Vinpro Agricultural Economics conducted a comprehensive analysis across all 10 wine districts. The project is financially supported by Winetech, the National Agricultural Marketing Council (NAMC), Standard Bank, Absa, Land Bank, FNB and Nedbank, this ensures a free of charge financial management analysis for any primary wine grape producer. The primary objective is to provide an on-farm financial analysis of each participant’s farming unit, benchmarking it with the regional average, breaking down the report in: the production structure, cost structure and profitability per enterprise and cultivar.
Altogether 249 (an 6% increase year on year) farming units from all 10 wine districts participated in the 2017 Production Plan survey. In 2017 the sample consisted of 22 550 ha (24% of the total South African area planted to wine grapes in 2016), producing 370 022 tons (26% of the total South African crop in 2017). The sample consisted of 65% white- and 35% were red wine grapes, of the total 63% was harvested mechanically, a slight decrease year on year (YoY), with the smaller harvest directly impacting towards this trend.
The analysis applies to overall grapevine production (bearing, as well as non-bearing hectares) and the cost analysis makes no distinction between cultivars and specific blocks. Regarding income, distinction is made between different wine grape cultivars. The greater majority of participants are diversified and varies with regard to production size. The report represents industry average figures, calculated by determining the weighted average of all participants. The Swartland district is always evaluated separately, as this study group cultivates a large component of its vineyards dry land (without irrigation) and/or with only supplementary irrigation. This requires an alternative production, cost and capital structure.
THE 2017 HARVEST
The South African wine grape harvest was slightly larger following a dry
season and consumers can look forward to exceptional wines from the 2017 vintage. The total harvest was at 1 434 328 tonnes, 2.1% larger YoY and was initially expected to be smaller. “A decrease was expected due to the second consecutive very dry, hot season. However, cooler nights throughout the growing season and the absence of significant heatwaves during harvest time buffered the effect of the drought to some extent,” says Francois Viljoen, manager of Vinpro’s Viticulture Consultation Service.
The Swartland and Paarl regions obtained much larger crops following sharp declines in 2016. Robertson’s production was close to the record harvest, while Olifants River and Breedekloof increased somewhat following small crops during the previous year. Slightly smaller yields were noted in the Northern Cape, Stellenbosch and Worcester and a much smaller harvest in the Klein Karoo.
The total vintage – juice and concentrate for non-alcoholic purposes, wine for brandy and distilling wine included – is expected to amount to 1 112 million litres, calculated at an average recovery of 775 litres per ton of grapes.
THE COST OF WINE GRAPE PRODUCTION
The annual financial capacity needed in preparation for the 2017 vintage comprised of cash items and provision for renewal, excluding all tax, interest and entrepeneurial obligations. In comparison to the 2016 the industry average total production cost (excluding dry land vineyards – Swartland) increased by 7% to R47 513/ha YoY. As the biggest trend driving unsustainable income the last decade, primary grape producers absorbed a doubling of production cost, for the period from 2008 to 2017.
CASH EXPENDITURE
Cash expenditure is specified as direct cost, labour, mechanisation, fixed improvements and general expenses. Total cash expenditure had an above inflation increase to
R36 554/ha in the 2017 production year.
The increase is driven mainly by the direct costs – fertilisers, pesticides and herbicides, with a 13% increase year on year. This can be attributed to the weakening of the rand during this period, due to the fact that many of the direct inputs for vine cultivation are imported. Secondly the 9% year on year increase in administration cost, is concerning as primary producers have limited influence in these cost items. In many instances high capital outlays are needed to negate a cost saving component.
The cost component differs among the 10 production regions areas due to terroir and production practice differences. Precision cost management, with a balance between consumer demand and input requirement for each block, aligned with product quality, remains critical in cycles of above-inflationary increases in costs. Once again wine grape production cost inflation was higher than the average South African economy inflation.
PROVISION FOR RENEWAL
Annual production cost is not only limited to cash expenditure; capital items are also depleted over time, with the renewal of such items deemed critical to ensure long term sustainable production. By calculating relevant replacement values of tractors, tools, other means of production, vineyards and buildings, a realistic and practical non cash flow provision is indicated. By using the principle ‘provision for renewal’, a larger amount is recovered than in the case of ‘depreciation’. To a certain extent this addresses the problem of linear depreciation in value for tax purposes.
When calculating provision for renewal, capital items are written off over different periods at renewal value:
Fixed improvements (excluding the main dwelling) – 60 years
Vineyards and other long term crops – 20 years
Moveable assets/production means – 7 - 15 years
FIGURE 1. Tonnes harvested mechanically per district.
FIGURE 2. Total industry average production cost.
FIGURE 3. Movement of direct cost - industry average.
FIGURE 4. Movement of labour cost - industry average.
95%
81% 78%74%
69%63%
58%
40%
23% 18%
%
MECHANICALLY HARVESTED
16 702 19 039 20 648 22 442 23 812 26 659 29 235 31 944 34 047 36 5546 876
7 5417 937
8 1398 605
9 0809 439
9 69110 344
10 959
23 57826 580
28 58530 581
32 41735 739
38 67441 635
44 39047 513
0
5 000
10 000
15 000
20 000
25 000
30 000
35 000
40 000
45 000
50 000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Rand
/ h
a
TOTAL PRODUCTION COST
Cash Expenditure Provision for Renewal Total Production Cost
1 0121 172
1 327 1 3821 570
1 8311 981 2 061
2 273
2 576
1 2571 506
1 758 1 655 1 6391 839
2 2302 428 2 388
2 795
424549 544 592 548 589
788929 957 925
0
500
1 000
1 500
2 000
2 500
3 000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Rand
/ h
a
DIRECT COST
Fertiliser Pest & Disease Control Herbicide Control
4 097 4 4594 920 5 272 5 616
6 0766 828
7 860
9 051 9 321
5 000
6 000
7 000
8 000
9 000
10 000
d /
ha
LABOUR COST
FIGURE 1. Tonnes harvested mechanically per district.
FIGURE 2. Total industry average production cost.
FIGURE 3. Movement of direct cost - industry average.
FIGURE 4. Movement of labour cost - industry average.
95%
81% 78%74%
69%63%
58%
40%
23% 18%
%
MECHANICALLY HARVESTED
16 702 19 039 20 648 22 442 23 812 26 659 29 235 31 944 34 047 36 5546 876
7 5417 937
8 1398 605
9 0809 439
9 69110 344
10 959
23 57826 580
28 58530 581
32 41735 739
38 67441 635
44 39047 513
0
5 000
10 000
15 000
20 000
25 000
30 000
35 000
40 000
45 000
50 000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Rand
/ h
a
TOTAL PRODUCTION COST
Cash Expenditure Provision for Renewal Total Production Cost
1 0121 172
1 327 1 3821 570
1 8311 981 2 061
2 273
2 576
1 2571 506
1 758 1 655 1 6391 839
2 2302 428 2 388
2 795
424549 544 592 548 589
788929 957 925
0
500
1 000
1 500
2 000
2 500
3 000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Rand
/ h
a
DIRECT COST
Fertiliser Pest & Disease Control Herbicide Control
4 097 4 4594 920 5 272 5 616
6 0766 828
7 860
9 051 9 321
5 000
6 000
7 000
8 000
9 000
10 000
d /
ha
LABOUR COST
FIGURE 1. Tonnes harvested mechanically per district.
FIGURE 2. Total industry average production cost.
FIGURE 3. Movement of direct cost - industry average.
FIGURE 4. Movement of labour cost - industry average.
95%
81% 78%74%
69%63%
58%
40%
23% 18%
%
MECHANICALLY HARVESTED
16 702 19 039 20 648 22 442 23 812 26 659 29 235 31 944 34 047 36 5546 876
7 5417 937
8 1398 605
9 0809 439
9 69110 344
10 959
23 57826 580
28 58530 581
32 41735 739
38 67441 635
44 39047 513
0
5 000
10 000
15 000
20 000
25 000
30 000
35 000
40 000
45 000
50 000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Rand
/ h
a
TOTAL PRODUCTION COST
Cash Expenditure Provision for Renewal Total Production Cost
1 0121 172
1 327 1 3821 570
1 8311 981 2 061
2 273
2 576
1 2571 506
1 758 1 655 1 6391 839
2 2302 428 2 388
2 795
424549 544 592 548 589
788929 957 925
0
500
1 000
1 500
2 000
2 500
3 000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Rand
/ h
a
DIRECT COST
Fertiliser Pest & Disease Control Herbicide Control
4 097 4 4594 920 5 272 5 616
6 0766 828
7 860
9 051 9 321
5 000
6 000
7 000
8 000
9 000
10 000
d /
ha
LABOUR COST
2 3
FIGURE 1. Tonnes harvested mechanically per district.
FIGURE 2. Total industry average production cost.
FIGURE 3. Movement of direct cost – industry average.
INTRODUCTION
In 2017 Vinpro Agricultural Economics conducted a comprehensive analysis across all 10 wine districts. The project is financially supported by Winetech, the National Agricultural Marketing Council (NAMC), Standard Bank, Absa, Land Bank, FNB and Nedbank, this ensures a free of charge financial management analysis for any primary wine grape producer. The primary objective is to provide an on-farm financial analysis of each participant’s farming unit, benchmarking it with the regional average, breaking down the report in: the production structure, cost structure and profitability per enterprise and cultivar.
Altogether 249 (an 6% increase year on year) farming units from all 10 wine districts participated in the 2017 Production Plan survey. In 2017 the sample consisted of 22 550 ha (24% of the total South African area planted to wine grapes in 2016), producing 370 022 tons (26% of the total South African crop in 2017). The sample consisted of 65% white- and 35% were red wine grapes, of the total 63% was harvested mechanically, a slight decrease year on year (YoY), with the smaller harvest directly impacting towards this trend.
The analysis applies to overall grapevine production (bearing, as well as non-bearing hectares) and the cost analysis makes no distinction between cultivars and specific blocks. Regarding income, distinction is made between different wine grape cultivars. The greater majority of participants are diversified and varies with regard to production size. The report represents industry average figures, calculated by determining the weighted average of all participants. The Swartland district is always evaluated separately, as this study group cultivates a large component of its vineyards dry land (without irrigation) and/or with only supplementary irrigation. This requires an alternative production, cost and capital structure.
THE 2017 HARVEST
The South African wine grape harvest was slightly larger following a dry
season and consumers can look forward to exceptional wines from the 2017 vintage. The total harvest was at 1 434 328 tonnes, 2.1% larger YoY and was initially expected to be smaller. “A decrease was expected due to the second consecutive very dry, hot season. However, cooler nights throughout the growing season and the absence of significant heatwaves during harvest time buffered the effect of the drought to some extent,” says Francois Viljoen, manager of Vinpro’s Viticulture Consultation Service.
The Swartland and Paarl regions obtained much larger crops following sharp declines in 2016. Robertson’s production was close to the record harvest, while Olifants River and Breedekloof increased somewhat following small crops during the previous year. Slightly smaller yields were noted in the Northern Cape, Stellenbosch and Worcester and a much smaller harvest in the Klein Karoo.
The total vintage – juice and concentrate for non-alcoholic purposes, wine for brandy and distilling wine included – is expected to amount to 1 112 million litres, calculated at an average recovery of 775 litres per ton of grapes.
THE COST OF WINE GRAPE PRODUCTION
The annual financial capacity needed in preparation for the 2017 vintage comprised of cash items and provision for renewal, excluding all tax, interest and entrepeneurial obligations. In comparison to the 2016 the industry average total production cost (excluding dry land vineyards – Swartland) increased by 7% to R47 513/ha YoY. As the biggest trend driving unsustainable income the last decade, primary grape producers absorbed a doubling of production cost, for the period from 2008 to 2017.
CASH EXPENDITURE
Cash expenditure is specified as direct cost, labour, mechanisation, fixed improvements and general expenses. Total cash expenditure had an above inflation increase to
R36 554/ha in the 2017 production year.
The increase is driven mainly by the direct costs – fertilisers, pesticides and herbicides, with a 13% increase year on year. This can be attributed to the weakening of the rand during this period, due to the fact that many of the direct inputs for vine cultivation are imported. Secondly the 9% year on year increase in administration cost, is concerning as primary producers have limited influence in these cost items. In many instances high capital outlays are needed to negate a cost saving component.
The cost component differs among the 10 production regions areas due to terroir and production practice differences. Precision cost management, with a balance between consumer demand and input requirement for each block, aligned with product quality, remains critical in cycles of above-inflationary increases in costs. Once again wine grape production cost inflation was higher than the average South African economy inflation.
PROVISION FOR RENEWAL
Annual production cost is not only limited to cash expenditure; capital items are also depleted over time, with the renewal of such items deemed critical to ensure long term sustainable production. By calculating relevant replacement values of tractors, tools, other means of production, vineyards and buildings, a realistic and practical non cash flow provision is indicated. By using the principle ‘provision for renewal’, a larger amount is recovered than in the case of ‘depreciation’. To a certain extent this addresses the problem of linear depreciation in value for tax purposes.
When calculating provision for renewal, capital items are written off over different periods at renewal value:
Fixed improvements (excluding the main dwelling) – 60 years
Vineyards and other long term crops – 20 years
Moveable assets/production means – 7 - 15 years
FIGURE 1. Tonnes harvested mechanically per district.
FIGURE 2. Total industry average production cost.
FIGURE 3. Movement of direct cost - industry average.
FIGURE 4. Movement of labour cost - industry average.
95%
81% 78%74%
69%63%
58%
40%
23% 18%
%
MECHANICALLY HARVESTED
16 702 19 039 20 648 22 442 23 812 26 659 29 235 31 944 34 047 36 5546 876
7 5417 937
8 1398 605
9 0809 439
9 69110 344
10 959
23 57826 580
28 58530 581
32 41735 739
38 67441 635
44 39047 513
0
5 000
10 000
15 000
20 000
25 000
30 000
35 000
40 000
45 000
50 000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Rand
/ h
a
TOTAL PRODUCTION COST
Cash Expenditure Provision for Renewal Total Production Cost
1 0121 172
1 327 1 3821 570
1 8311 981 2 061
2 273
2 576
1 2571 506
1 758 1 655 1 6391 839
2 2302 428 2 388
2 795
424549 544 592 548 589
788929 957 925
0
500
1 000
1 500
2 000
2 500
3 000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Rand
/ h
a
DIRECT COST
Fertiliser Pest & Disease Control Herbicide Control
4 097 4 4594 920 5 272 5 616
6 0766 828
7 860
9 051 9 321
5 000
6 000
7 000
8 000
9 000
10 000
d /
ha
LABOUR COST
FIGURE 1. Tonnes harvested mechanically per district.
FIGURE 2. Total industry average production cost.
FIGURE 3. Movement of direct cost - industry average.
FIGURE 4. Movement of labour cost - industry average.
95%
81% 78%74%
69%63%
58%
40%
23% 18%
%
MECHANICALLY HARVESTED
16 702 19 039 20 648 22 442 23 812 26 659 29 235 31 944 34 047 36 5546 876
7 5417 937
8 1398 605
9 0809 439
9 69110 344
10 959
23 57826 580
28 58530 581
32 41735 739
38 67441 635
44 39047 513
0
5 000
10 000
15 000
20 000
25 000
30 000
35 000
40 000
45 000
50 000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Rand
/ h
a
TOTAL PRODUCTION COST
Cash Expenditure Provision for Renewal Total Production Cost
1 0121 172
1 327 1 3821 570
1 8311 981 2 061
2 273
2 576
1 2571 506
1 758 1 655 1 6391 839
2 2302 428 2 388
2 795
424549 544 592 548 589
788929 957 925
0
500
1 000
1 500
2 000
2 500
3 000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Rand
/ h
a
DIRECT COST
Fertiliser Pest & Disease Control Herbicide Control
4 097 4 4594 920 5 272 5 616
6 0766 828
7 860
9 051 9 321
5 000
6 000
7 000
8 000
9 000
10 000
d /
ha
LABOUR COST
FIGURE 1. Tonnes harvested mechanically per district.
FIGURE 2. Total industry average production cost.
FIGURE 3. Movement of direct cost - industry average.
FIGURE 4. Movement of labour cost - industry average.
95%
81% 78%74%
69%63%
58%
40%
23% 18%
%
MECHANICALLY HARVESTED
16 702 19 039 20 648 22 442 23 812 26 659 29 235 31 944 34 047 36 5546 876
7 5417 937
8 1398 605
9 0809 439
9 69110 344
10 959
23 57826 580
28 58530 581
32 41735 739
38 67441 635
44 39047 513
0
5 000
10 000
15 000
20 000
25 000
30 000
35 000
40 000
45 000
50 000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Rand
/ h
a
TOTAL PRODUCTION COST
Cash Expenditure Provision for Renewal Total Production Cost
1 0121 172
1 327 1 3821 570
1 8311 981 2 061
2 273
2 576
1 2571 506
1 758 1 655 1 6391 839
2 2302 428 2 388
2 795
424549 544 592 548 589
788929 957 925
0
500
1 000
1 500
2 000
2 500
3 000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Rand
/ h
a
DIRECT COST
Fertiliser Pest & Disease Control Herbicide Control
4 097 4 4594 920 5 272 5 616
6 0766 828
7 860
9 051 9 321
5 000
6 000
7 000
8 000
9 000
10 000
d /
ha
LABOUR COST
4 5
TABLE 1. Production cost of wine grapes per district – 2017 harvest.
Industry average Stellenbosch Paarl Robertson Breedekloof Olifants River Worcester Orange River Klein KarooCape South
CoastDurbanville Industry Average Swartland
COST STRUCTURE
DIRECT COST
SEED 226 144 56 101 10 158 62 97 299 449 123 203
FERTILISER 1 004 1 440 3 136 2 354 2 643 2 896 2 924 2 142 913 1 376 2 116 1 229
ORGANIC MATERIAL 60 24 125 1 066 609 286 113 360 701 – 337 44
PESTICIDE CONTROL 3 223 2 144 3 468 3 089 2 120 2 600 1 649 2 100 4 855 2 679 2 795 2 207
HERBICIDE CONTROL 1 124 807 1 242 949 460 1 147 683 363 871 2 038 925 691
REPAIR AND BINDING MATERIAL 562 316 601 463 229 919 321 294 112 448 461 123
Subtotal 6 198 4 875 8 629 8 022 6 071 8 006 5 752 5 355 7 750 6 990 6 757 4 497
LABOUR
SUPERVISION 2 515 1 225 1 955 2 992 1 795 1 992 2 317 703 2 659 826 2 074 1 061
PERMANENT LABOUR 11 898 8 713 7 426 9 244 8 361 9 604 10 635 7 640 10 045 12 559 9 321 5 416
SEASONAL LABOUR AND CONTRACT WORK 5 246 4 289 4 081 1 398 1 354 1 677 8 720 422 8 902 7 101 3 686 4 185
Subtotal 19 659 14 227 13 462 13 634 11 511 13 273 21 672 8 766 21 606 20 485 15 081 10 662
MECHANISATION
FUEL 2 216 1 829 2 332 2 320 3 502 2 378 3 303 2 673 4 192 3 510 2 482 1 778
REPAIR, PARTS AND MAINTENANCE 3 687 2 309 4 335 2 970 4 012 2 783 2 644 3 532 3 921 3 694 3 340 1 909
LISENCES AND INSURANCE 624 650 558 778 1 155 737 1 001 627 1 330 1 064 758 543
TRANSPORT HIRED 271 522 790 182 471 357 288 119 902 – 434 1 072
Subtotal 6 797 5 310 8 015 6 250 9 140 6 255 7 236 6 951 10 345 8 268 7 014 5 303
FIXED IMPROVEMENTS
REPAIR AND MAINTENANCE 1 637 523 808 1 217 436 851 1 203 624 1 207 685 959 683
INSURANCE 386 345 192 374 490 367 330 242 213 232 344 283
Subtotal 2 023 867 1 000 1 590 926 1 217 1 533 866 1 420 917 1 303 966
GENERAL EXPENDITURE -
ELECTRICITY 2 036 2 057 3 943 3 837 3 917 3 680 2 418 2 303 2 749 2 038 3 034 831
WATER COSTS 912 983 1 046 292 2 719 1 750 1 339 2 264 287 1 837 1 178 589
LAND-, PROPERTY- AND MUNICIPAL TAXES 413 474 424 212 499 291 281 183 329 684 379 144
ADMINISTRATION 2 898 1 184 1 448 1 214 1 984 1 355 2 207 1 215 4 164 4 404 1 809 708
Subtotal 6 258 4 698 6 862 5 555 9 119 7 076 6 244 5 966 7 529 8 964 6 400 2 272
TOTAL CASH EXPENDITURE 40 935 29 977 37 968 35 051 36 767 35 828 42 437 27 904 48 651 45 624 36 554 23 700
PROVISION FOR RENEWAL 10 477 9 438 10 969 10 962 12 711 11 587 10 319 11 088 15 200 11 648 10 959 8 678
VINEYARDS 5 973 6 111 5 933 6 233 5 719 6 265 6 214 6 254 6 178 5 733 6 052 5 435
FIXED IMPROVEMENTS 1 165 788 975 992 1 318 1 714 678 718 2 858 795 1 116 741
LOOSE ASSETS OR PRODUCTION MEANS 3 340 2 539 4 061 3 737 5 674 3 609 3 427 4 115 6 163 5 119 3 791 2 503
TOTAL EXPENDITURE 51 411 39 415 48 937 46 013 49 477 47 414 52 755 38 991 63 850 57 272 47 513 32 378
AVERAGE AREA PLANTED (HA) 105 101 99 121 64 87 22 55 34 119 91 161
AREA IRRIGATED (%) 90% 90% 100% 100% 100% 100% 100% 100% 89% 60% 96% 40%
AVERAGE AGE COMPOSITION (%)
3 YEARS AND YOUNGER 6.71 9.45 14.76 11.11 9.08 17.03 22.44 19.37 4.17 6.17 11.42 6.51
BETWEEN 4 AND 7 YEARS 8.70 14.42 19.16 17.81 13.91 19.73 9.89 19.51 3.92 9.59 14.58 7.42
BETWEEN 8 AND 15 YEARS 32.65 38.57 34.04 30.71 32.40 33.84 26.09 33.90 61.26 34.67 34.34 40.25
BETWEEN 16 AND 20 YEARS 27.10 26.37 20.28 20.28 23.71 17.60 23.66 19.09 29.96 28.54 23.32 28.25
OLDER THAN 20 YEARS 24.38 11.12 11.79 20.08 22.09 11.79 18.32 8.93 0.70 21.03 16.44 16.37
AVERAGE YIELD (TON PER HA) 8.78 11.07 21.61 20.45 26.98 21.25 28.73 21.64 8.47 8.96 17.68 7.18
CASH EXPENDITURE (RAND PER TON) 4 662 2 708 1 757 1 714 1 363 1 686 1 477 1 289 5 744 5 092 2 067 3 301
TOTAL EXPENDITURE (RAND PER TON) 5 856 3 561 2 265 2 250 1 834 2 231 1 836 1 802 7 538 6 392 2 687 4 509
RAND PER HARAND PER HA
4 5
TABLE 1. Production cost of wine grapes per district – 2017 harvest.
Industry average Stellenbosch Paarl Robertson Breedekloof Olifants River Worcester Orange River Klein KarooCape South
CoastDurbanville Industry Average Swartland
COST STRUCTURE
DIRECT COST
SEED 226 144 56 101 10 158 62 97 299 449 123 203
FERTILISER 1 004 1 440 3 136 2 354 2 643 2 896 2 924 2 142 913 1 376 2 116 1 229
ORGANIC MATERIAL 60 24 125 1 066 609 286 113 360 701 – 337 44
PESTICIDE CONTROL 3 223 2 144 3 468 3 089 2 120 2 600 1 649 2 100 4 855 2 679 2 795 2 207
HERBICIDE CONTROL 1 124 807 1 242 949 460 1 147 683 363 871 2 038 925 691
REPAIR AND BINDING MATERIAL 562 316 601 463 229 919 321 294 112 448 461 123
Subtotal 6 198 4 875 8 629 8 022 6 071 8 006 5 752 5 355 7 750 6 990 6 757 4 497
LABOUR
SUPERVISION 2 515 1 225 1 955 2 992 1 795 1 992 2 317 703 2 659 826 2 074 1 061
PERMANENT LABOUR 11 898 8 713 7 426 9 244 8 361 9 604 10 635 7 640 10 045 12 559 9 321 5 416
SEASONAL LABOUR AND CONTRACT WORK 5 246 4 289 4 081 1 398 1 354 1 677 8 720 422 8 902 7 101 3 686 4 185
Subtotal 19 659 14 227 13 462 13 634 11 511 13 273 21 672 8 766 21 606 20 485 15 081 10 662
MECHANISATION
FUEL 2 216 1 829 2 332 2 320 3 502 2 378 3 303 2 673 4 192 3 510 2 482 1 778
REPAIR, PARTS AND MAINTENANCE 3 687 2 309 4 335 2 970 4 012 2 783 2 644 3 532 3 921 3 694 3 340 1 909
LISENCES AND INSURANCE 624 650 558 778 1 155 737 1 001 627 1 330 1 064 758 543
TRANSPORT HIRED 271 522 790 182 471 357 288 119 902 – 434 1 072
Subtotal 6 797 5 310 8 015 6 250 9 140 6 255 7 236 6 951 10 345 8 268 7 014 5 303
FIXED IMPROVEMENTS
REPAIR AND MAINTENANCE 1 637 523 808 1 217 436 851 1 203 624 1 207 685 959 683
INSURANCE 386 345 192 374 490 367 330 242 213 232 344 283
Subtotal 2 023 867 1 000 1 590 926 1 217 1 533 866 1 420 917 1 303 966
GENERAL EXPENDITURE -
ELECTRICITY 2 036 2 057 3 943 3 837 3 917 3 680 2 418 2 303 2 749 2 038 3 034 831
WATER COSTS 912 983 1 046 292 2 719 1 750 1 339 2 264 287 1 837 1 178 589
LAND-, PROPERTY- AND MUNICIPAL TAXES 413 474 424 212 499 291 281 183 329 684 379 144
ADMINISTRATION 2 898 1 184 1 448 1 214 1 984 1 355 2 207 1 215 4 164 4 404 1 809 708
Subtotal 6 258 4 698 6 862 5 555 9 119 7 076 6 244 5 966 7 529 8 964 6 400 2 272
TOTAL CASH EXPENDITURE 40 935 29 977 37 968 35 051 36 767 35 828 42 437 27 904 48 651 45 624 36 554 23 700
PROVISION FOR RENEWAL 10 477 9 438 10 969 10 962 12 711 11 587 10 319 11 088 15 200 11 648 10 959 8 678
VINEYARDS 5 973 6 111 5 933 6 233 5 719 6 265 6 214 6 254 6 178 5 733 6 052 5 435
FIXED IMPROVEMENTS 1 165 788 975 992 1 318 1 714 678 718 2 858 795 1 116 741
LOOSE ASSETS OR PRODUCTION MEANS 3 340 2 539 4 061 3 737 5 674 3 609 3 427 4 115 6 163 5 119 3 791 2 503
TOTAL EXPENDITURE 51 411 39 415 48 937 46 013 49 477 47 414 52 755 38 991 63 850 57 272 47 513 32 378
AVERAGE AREA PLANTED (HA) 105 101 99 121 64 87 22 55 34 119 91 161
AREA IRRIGATED (%) 90% 90% 100% 100% 100% 100% 100% 100% 89% 60% 96% 40%
AVERAGE AGE COMPOSITION (%)
3 YEARS AND YOUNGER 6.71 9.45 14.76 11.11 9.08 17.03 22.44 19.37 4.17 6.17 11.42 6.51
BETWEEN 4 AND 7 YEARS 8.70 14.42 19.16 17.81 13.91 19.73 9.89 19.51 3.92 9.59 14.58 7.42
BETWEEN 8 AND 15 YEARS 32.65 38.57 34.04 30.71 32.40 33.84 26.09 33.90 61.26 34.67 34.34 40.25
BETWEEN 16 AND 20 YEARS 27.10 26.37 20.28 20.28 23.71 17.60 23.66 19.09 29.96 28.54 23.32 28.25
OLDER THAN 20 YEARS 24.38 11.12 11.79 20.08 22.09 11.79 18.32 8.93 0.70 21.03 16.44 16.37
AVERAGE YIELD (TON PER HA) 8.78 11.07 21.61 20.45 26.98 21.25 28.73 21.64 8.47 8.96 17.68 7.18
CASH EXPENDITURE (RAND PER TON) 4 662 2 708 1 757 1 714 1 363 1 686 1 477 1 289 5 744 5 092 2 067 3 301
TOTAL EXPENDITURE (RAND PER TON) 5 856 3 561 2 265 2 250 1 834 2 231 1 836 1 802 7 538 6 392 2 687 4 509
RAND PER HARAND PER HA
6 7
FIGURE 7. Percentage composition of annual cash expenditure – industry average.
FIGURE 8. Hectares planted to grapevines per participant (bearing and non-bearing hectares) – industry average.
FIGURE 9. Average yield (bearing and non-bearing hectares) – industry average.
Total provision for renewal amounted to R10 959/ha in the 2017 production year – a 6% increase from 2016. It is positive to see that participants still have the means to replace capital items, however the ageing vineyard status is concerning, an indication of how rapidly producers are diversifying away from wine grape production towards more profitable agricultural crops.
More than 16% of the plantings are older than 20 years and 11% of the grapevines in the survey are three years
and younger. The general norm is that 15% of grapevines should be three years and younger and the component older than 20 years should not be more than 15%.
PRODUCTION STRUCTURE
The average surface planted to wine grapes was 91 ha – the other enterprises are not taken into account. Economies of scale have been impacting on many agriculture commodities, depending on where producers
FIGURE 4. Movement of labour cost – industry average.
FIGURE 5. Movement of mechanisation cost – industry average.
FIGURE 6. Movement of general expenditure – industry average.
FIGURE 4. Movement of labour cost - industry average.
FIGURE 5. Movement of mechanisation cost - industry average.
1 0121 172
1 327 1 3821 570
1 8311 981 2 061
2 273
2 576
1 2571 506
1 758 1 655 1 6391 839
2 2302 428 2 388
2 795
424549 544 592 548 589
788929 957 925
0
500
1 000
1 500
2 000
2 500
3 000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Rand
/ h
a
Fertiliser Pest & Disease Control Herbicide Control
4 097 4 4594 920 5 272 5 616
6 0766 828
7 860
9 051 9 321
1 7192 137 2 132 2 246 2 325
2 755 3 134 3 342 3 2193 686
0
1 000
2 000
3 000
4 000
5 000
6 000
7 000
8 000
9 000
10 000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Rand
/ h
a
LABOUR COST
Permanent Labour Seasonal- and Contract Labour
1 5861 842 1 983
2 243 2 1362 352
2 5942 949
3 177 3 340
1 4641 639 1 533
1 7262 040
2 3582 613 2 646 2 592 2 482
0
500
1 000
1 500
2 000
2 500
3 000
3 500
4 000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Rand
/ h
a
MECHANISATION COST
Repair,Parts & Maintenace Fuel
FIGURE 4. Movement of labour cost - industry average.
FIGURE 5. Movement of mechanisation cost - industry average.
1 0121 172
1 327 1 3821 570
1 8311 981 2 061
2 273
2 576
1 2571 506
1 758 1 655 1 6391 839
2 2302 428 2 388
2 795
424549 544 592 548 589
788929 957 925
0
500
1 000
1 500
2 000
2 500
3 000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017Ra
nd /
ha
Fertiliser Pest & Disease Control Herbicide Control
4 097 4 4594 920 5 272 5 616
6 0766 828
7 860
9 051 9 321
1 7192 137 2 132 2 246 2 325
2 755 3 134 3 342 3 2193 686
0
1 000
2 000
3 000
4 000
5 000
6 000
7 000
8 000
9 000
10 000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Rand
/ h
a
LABOUR COST
Permanent Labour Seasonal- and Contract Labour
1 5861 842 1 983
2 243 2 1362 352
2 5942 949
3 177 3 340
1 4641 639 1 533
1 7262 040
2 3582 613 2 646 2 592 2 482
0
500
1 000
1 500
2 000
2 500
3 000
3 500
4 000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Rand
/ h
a
MECHANISATION COST
Repair,Parts & Maintenace Fuel
FIGURE 5. Movement of mechanisation cost - industry average.
FIGURE 6. Movement of general expenditure - industry average.
FIGURE 7. Percentage composition of annual cash expenditure - industry average.
FIGURE 8. Hectares planted to grapevines per participant (bearing and non-bearing hectares) - industry average.
17% 18% 19% 18% 17% 18% 18% 18% 18% 18%
42% 42% 41% 41% 40% 40% 41% 42% 42% 41%
21% 21% 20% 21% 20% 21% 20% 20% 20% 19%
4% 4% 4% 3% 3% 3% 3% 4% 4% 4%
16% 15% 16% 18% 19% 19% 17% 17% 17% 18%
2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6 2 0 1 7
%
COMPOSITION OF ANNUAL CASH EXPENDITURE
Direct Cost Labour Mechanisation Fixed Improvements General Expenditure
77 79 7984 86 87 92
97 95 91
40
60
80
100
120
a w
ine
gra
pes
AREA UNDER VINES PER PARTICIPANTS
4 097 4 459
1 7192 137 2 132 2 246 2 325
2 755 3 134 3 342 3 2193 686
0
1 000
2 000
3 000
4 000
5 000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Rand
Permanent Labour Seasonal- and Contract Labour
1 5861 842 1 983
2 243 2 1362 352
2 5942 949
3 177 3 340
1 4641 639 1 533
1 7262 040
2 3582 613 2 646 2 592 2 482
0
500
1 000
1 500
2 000
2 500
3 000
3 500
4 000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Rand
/ h
a
MECHANISATION COST
Repair,Parts & Maintenace Fuel
1 768
2 063 2 287 2 3022 498
2 7963 034
652 681 720846 931 971 926 1 034 1 099 1 178
1 119 1 072 1 176 1 2541 421 1 427 1 541
1 6641 809
0
500
1 000
1 500
2 000
2 500
3 000
3 500
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Rand
/ h
a
GENERAL EXPENDITURE
Electricity Water Cost Administration
FIGURE 5. Movement of mechanisation cost - industry average.
FIGURE 6. Movement of general expenditure - industry average.
FIGURE 7. Percentage composition of annual cash expenditure - industry average.
FIGURE 8. Hectares planted to grapevines per participant (bearing and non-bearing hectares) - industry average.
17% 18% 19% 18% 17% 18% 18% 18% 18% 18%
42% 42% 41% 41% 40% 40% 41% 42% 42% 41%
21% 21% 20% 21% 20% 21% 20% 20% 20% 19%
4% 4% 4% 3% 3% 3% 3% 4% 4% 4%
16% 15% 16% 18% 19% 19% 17% 17% 17% 18%
2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6 2 0 1 7
%
COMPOSITION OF ANNUAL CASH EXPENDITURE
Direct Cost Labour Mechanisation Fixed Improvements General Expenditure
77 79 7984 86 87 92
97 95 91
40
60
80
100
120
a w
ine
gra
pes
AREA UNDER VINES PER PARTICIPANTS
4 097 4 459
1 7192 137 2 132 2 246 2 325
2 755 3 134 3 342 3 2193 686
0
1 000
2 000
3 000
4 000
5 000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Rand
Permanent Labour Seasonal- and Contract Labour
1 5861 842 1 983
2 243 2 1362 352
2 5942 949
3 177 3 340
1 4641 639 1 533
1 7262 040
2 3582 613 2 646 2 592 2 482
0
500
1 000
1 500
2 000
2 500
3 000
3 500
4 000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Rand
/ h
a
MECHANISATION COST
Repair,Parts & Maintenace Fuel
1 768
2 063 2 287 2 3022 498
2 7963 034
652 681 720846 931 971 926 1 034 1 099 1 178
1 119 1 072 1 176 1 2541 421 1 427 1 541
1 6641 809
0
500
1 000
1 500
2 000
2 500
3 000
3 500
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Rand
/ h
a
GENERAL EXPENDITURE
Electricity Water Cost Administration
FIGURE 9. Average yield (bearing and non-bearing hectares) - industry average.
FIGURE 10. Average yield white (bearing and non-bearing hectares) - industry average.
FIGURE 11. Average yield red (bearing and non-bearing hectares) - industry average.
FIGURE 12. Influence of production on break-even of total production cost - industry average.
0
20
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Ha
16,31 15,55 14,73 15,0816,46 16,98 17,69 17,48 17,56 17,68
02468
101214161820
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Ton
/ H
a
TON / HA
19.5422.17
14.34 13.28 13.13 12.82 13.6815.68
0
5
10
15
20
25
CHENIN BLANC COLOMBAR SAUVINGNONBLANC
CHARDONNAY MUSCAT DALEXANDRIE
SÉMILLON VIOGNIER OTHER WHITE
Ton
/ H
a
AVERAGE YIELDS: WHITE CULTIVARS
12.03
14.70
17.27
13.2714.41
13.3411.87
14.42
02468
101214161820
CABERNETSAUVIGNON
SHIRAZ PINOTAGE MERLOT RUBY CABERNET CINSAUT PINOT NOIR OTHER RED
Ton
/ H
a
AVERAGE YIELDS: RED CULTIVARS
16,3
1
15,5
5
14,7
3
15,0
8
16,9
8
17,5
0
17,6
9
17,4
8
17,5
6
17,6
8
1 446
1 709
1 9412 028
1 9102 042
2 1862 382
2 5272 687
0
500
1 000
1 500
2 000
2 500
3 000
0
5
10
15
20
25
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
R/to
n
Ton
/ ha
BREAK-EVEN PER TON
Yield (Ton/Ha) Production Cost in R/Ton
77 79 7984 86 87 92
97 95 91
0
20
40
60
80
100
120
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Ha
win
e gr
ap
es
AREA UNDER VINES PER PARTICIPANTS
6 7
FIGURE 7. Percentage composition of annual cash expenditure – industry average.
FIGURE 8. Hectares planted to grapevines per participant (bearing and non-bearing hectares) – industry average.
FIGURE 9. Average yield (bearing and non-bearing hectares) – industry average.
Total provision for renewal amounted to R10 959/ha in the 2017 production year – a 6% increase from 2016. It is positive to see that participants still have the means to replace capital items, however the ageing vineyard status is concerning, an indication of how rapidly producers are diversifying away from wine grape production towards more profitable agricultural crops.
More than 16% of the plantings are older than 20 years and 11% of the grapevines in the survey are three years
and younger. The general norm is that 15% of grapevines should be three years and younger and the component older than 20 years should not be more than 15%.
PRODUCTION STRUCTURE
The average surface planted to wine grapes was 91 ha – the other enterprises are not taken into account. Economies of scale have been impacting on many agriculture commodities, depending on where producers
FIGURE 4. Movement of labour cost – industry average.
FIGURE 5. Movement of mechanisation cost – industry average.
FIGURE 6. Movement of general expenditure – industry average.
FIGURE 4. Movement of labour cost - industry average.
FIGURE 5. Movement of mechanisation cost - industry average.
1 0121 172
1 327 1 3821 570
1 8311 981 2 061
2 273
2 576
1 2571 506
1 758 1 655 1 6391 839
2 2302 428 2 388
2 795
424549 544 592 548 589
788929 957 925
0
500
1 000
1 500
2 000
2 500
3 000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Rand
/ h
a
Fertiliser Pest & Disease Control Herbicide Control
4 097 4 4594 920 5 272 5 616
6 0766 828
7 860
9 051 9 321
1 7192 137 2 132 2 246 2 325
2 755 3 134 3 342 3 2193 686
0
1 000
2 000
3 000
4 000
5 000
6 000
7 000
8 000
9 000
10 000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Rand
/ h
a
LABOUR COST
Permanent Labour Seasonal- and Contract Labour
1 5861 842 1 983
2 243 2 1362 352
2 5942 949
3 177 3 340
1 4641 639 1 533
1 7262 040
2 3582 613 2 646 2 592 2 482
0
500
1 000
1 500
2 000
2 500
3 000
3 500
4 000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Rand
/ h
a
MECHANISATION COST
Repair,Parts & Maintenace Fuel
FIGURE 4. Movement of labour cost - industry average.
FIGURE 5. Movement of mechanisation cost - industry average.
1 0121 172
1 327 1 3821 570
1 8311 981 2 061
2 273
2 576
1 2571 506
1 758 1 655 1 6391 839
2 2302 428 2 388
2 795
424549 544 592 548 589
788929 957 925
0
500
1 000
1 500
2 000
2 500
3 000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Rand
/ h
a
Fertiliser Pest & Disease Control Herbicide Control
4 097 4 4594 920 5 272 5 616
6 0766 828
7 860
9 051 9 321
1 7192 137 2 132 2 246 2 325
2 755 3 134 3 342 3 2193 686
0
1 000
2 000
3 000
4 000
5 000
6 000
7 000
8 000
9 000
10 000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Rand
/ h
a
LABOUR COST
Permanent Labour Seasonal- and Contract Labour
1 5861 842 1 983
2 243 2 1362 352
2 5942 949
3 177 3 340
1 4641 639 1 533
1 7262 040
2 3582 613 2 646 2 592 2 482
0
500
1 000
1 500
2 000
2 500
3 000
3 500
4 000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Rand
/ h
a
MECHANISATION COST
Repair,Parts & Maintenace Fuel
FIGURE 5. Movement of mechanisation cost - industry average.
FIGURE 6. Movement of general expenditure - industry average.
FIGURE 7. Percentage composition of annual cash expenditure - industry average.
FIGURE 8. Hectares planted to grapevines per participant (bearing and non-bearing hectares) - industry average.
17% 18% 19% 18% 17% 18% 18% 18% 18% 18%
42% 42% 41% 41% 40% 40% 41% 42% 42% 41%
21% 21% 20% 21% 20% 21% 20% 20% 20% 19%
4% 4% 4% 3% 3% 3% 3% 4% 4% 4%
16% 15% 16% 18% 19% 19% 17% 17% 17% 18%
2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6 2 0 1 7
%
COMPOSITION OF ANNUAL CASH EXPENDITURE
Direct Cost Labour Mechanisation Fixed Improvements General Expenditure
77 79 7984 86 87 92
97 95 91
40
60
80
100
120
a w
ine
gra
pes
AREA UNDER VINES PER PARTICIPANTS
4 097 4 459
1 7192 137 2 132 2 246 2 325
2 755 3 134 3 342 3 2193 686
0
1 000
2 000
3 000
4 000
5 000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Rand
Permanent Labour Seasonal- and Contract Labour
1 5861 842 1 983
2 243 2 1362 352
2 5942 949
3 177 3 340
1 4641 639 1 533
1 7262 040
2 3582 613 2 646 2 592 2 482
0
500
1 000
1 500
2 000
2 500
3 000
3 500
4 000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Rand
/ h
a
MECHANISATION COST
Repair,Parts & Maintenace Fuel
1 768
2 063 2 287 2 3022 498
2 7963 034
652 681 720846 931 971 926 1 034 1 099 1 178
1 119 1 072 1 176 1 2541 421 1 427 1 541
1 6641 809
0
500
1 000
1 500
2 000
2 500
3 000
3 500
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Rand
/ h
a
GENERAL EXPENDITURE
Electricity Water Cost Administration
FIGURE 5. Movement of mechanisation cost - industry average.
FIGURE 6. Movement of general expenditure - industry average.
FIGURE 7. Percentage composition of annual cash expenditure - industry average.
FIGURE 8. Hectares planted to grapevines per participant (bearing and non-bearing hectares) - industry average.
17% 18% 19% 18% 17% 18% 18% 18% 18% 18%
42% 42% 41% 41% 40% 40% 41% 42% 42% 41%
21% 21% 20% 21% 20% 21% 20% 20% 20% 19%
4% 4% 4% 3% 3% 3% 3% 4% 4% 4%
16% 15% 16% 18% 19% 19% 17% 17% 17% 18%
2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6 2 0 1 7
%
COMPOSITION OF ANNUAL CASH EXPENDITURE
Direct Cost Labour Mechanisation Fixed Improvements General Expenditure
77 79 7984 86 87 92
97 95 91
40
60
80
100
120
a w
ine
gra
pes
AREA UNDER VINES PER PARTICIPANTS
4 097 4 459
1 7192 137 2 132 2 246 2 325
2 755 3 134 3 342 3 2193 686
0
1 000
2 000
3 000
4 000
5 000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Rand
Permanent Labour Seasonal- and Contract Labour
1 5861 842 1 983
2 243 2 1362 352
2 5942 949
3 177 3 340
1 4641 639 1 533
1 7262 040
2 3582 613 2 646 2 592 2 482
0
500
1 000
1 500
2 000
2 500
3 000
3 500
4 000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Rand
/ h
a
MECHANISATION COST
Repair,Parts & Maintenace Fuel
1 768
2 063 2 287 2 3022 498
2 7963 034
652 681 720846 931 971 926 1 034 1 099 1 178
1 119 1 072 1 176 1 2541 421 1 427 1 541
1 6641 809
0
500
1 000
1 500
2 000
2 500
3 000
3 500
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017Ra
nd /
ha
GENERAL EXPENDITURE
Electricity Water Cost Administration
FIGURE 9. Average yield (bearing and non-bearing hectares) - industry average.
FIGURE 10. Average yield white (bearing and non-bearing hectares) - industry average.
FIGURE 11. Average yield red (bearing and non-bearing hectares) - industry average.
FIGURE 12. Influence of production on break-even of total production cost - industry average.
0
20
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Ha
16,31 15,55 14,73 15,0816,46 16,98 17,69 17,48 17,56 17,68
02468
101214161820
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Ton
/ H
a
TON / HA
19.5422.17
14.34 13.28 13.13 12.82 13.6815.68
0
5
10
15
20
25
CHENIN BLANC COLOMBAR SAUVINGNONBLANC
CHARDONNAY MUSCAT DALEXANDRIE
SÉMILLON VIOGNIER OTHER WHITE
Ton
/ H
a
AVERAGE YIELDS: WHITE CULTIVARS
12.03
14.70
17.27
13.2714.41
13.3411.87
14.42
02468
101214161820
CABERNETSAUVIGNON
SHIRAZ PINOTAGE MERLOT RUBY CABERNET CINSAUT PINOT NOIR OTHER RED
Ton
/ H
a
AVERAGE YIELDS: RED CULTIVARS
16,3
1
15,5
5
14,7
3
15,0
8
16,9
8
17,5
0
17,6
9
17,4
8
17,5
6
17,6
8
1 446
1 709
1 9412 028
1 9102 042
2 1862 382
2 5272 687
0
500
1 000
1 500
2 000
2 500
3 000
0
5
10
15
20
25
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
R/to
n
Ton
/ ha
BREAK-EVEN PER TON
Yield (Ton/Ha) Production Cost in R/Ton
77 79 7984 86 87 92
97 95 91
0
20
40
60
80
100
120
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Ha
win
e gr
ap
es
AREA UNDER VINES PER PARTICIPANTS
8 9
FIGURE 13. Age composition – industry average.
FIGURE 14. Profitability analysis (2013 - 2017) – industry average.
FIGURE 15. Profitability – industry average.
FIGURE 10. Average yield white (bearing and non-bearing hectares) – industry average.
FIGURE 11. Average yield red (bearing and non-bearing hectares) – industry average.
FIGURE 12. Influence of production on break-even of total production cost – industry average.
are locked into the value chain. This may differ in rationale from business to business and districts. In many cases the increased bargaining power with higher turnover are more common than the traditional cost saving effect on overheads. It should be well noted that many larger units actually produce wine grapes more costly than smaller very efficient units.
In the 2017 production year yields varied greatly among the different regions. The average production for bearing and
non-bearing grapevines for the 2017 production year was 17.68 ton/ha.
CULTIVAR STRUCTURE
During the 2014 production year a cultivar analysis was also conducted to indicate the production variance between the most planted white and red cultivars. This will assist producers with precision farming in the coming years by showing how the cultivars in their enterprise differ and
FIGURE 9. Average yield (bearing and non-bearing hectares) - industry average.
FIGURE 10. Average yield white (bearing and non-bearing hectares) - industry average.
FIGURE 11. Average yield red (bearing and non-bearing hectares) - industry average.
FIGURE 12. Influence of production on break-even of total production cost - industry average.
0
20
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Ha
16,31 15,55 14,73 15,0816,46 16,98 17,69 17,48 17,56 17,68
02468
101214161820
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017To
n /
Ha
TON / HA
19.5422.17
14.34 13.28 13.13 12.82 13.6815.68
0
5
10
15
20
25
CHENIN BLANC COLOMBAR SAUVINGNONBLANC
CHARDONNAY MUSCAT DALEXANDRIE
SÉMILLON VIOGNIER OTHER WHITE
Ton
/ H
a
AVERAGE YIELDS: WHITE CULTIVARS
12.03
14.70
17.27
13.2714.41
13.3411.87
14.42
02468
101214161820
CABERNETSAUVIGNON
SHIRAZ PINOTAGE MERLOT RUBY CABERNET CINSAUT PINOT NOIR OTHER RED
Ton
/ H
a
AVERAGE YIELDS: RED CULTIVARS
16,3
1
15,5
5
14,7
3
15,0
8
16,9
8
17,5
0
17,6
9
17,4
8
17,5
6
17,6
8
1 446
1 709
1 9412 028
1 9102 042
2 1862 382
2 5272 687
0
500
1 000
1 500
2 000
2 500
3 000
0
5
10
15
20
25
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
R/to
n
Ton
/ ha
BREAK-EVEN PER TON
Yield (Ton/Ha) Production Cost in R/Ton
FIGURE 9. Average yield (bearing and non-bearing hectares) - industry average.
FIGURE 10. Average yield white (bearing and non-bearing hectares) - industry average.
FIGURE 11. Average yield red (bearing and non-bearing hectares) - industry average.
FIGURE 12. Influence of production on break-even of total production cost - industry average.
0
20
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Ha
16,31 15,55 14,73 15,0816,46 16,98 17,69 17,48 17,56 17,68
02468
101214161820
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017To
n /
Ha
TON / HA
19.5422.17
14.34 13.28 13.13 12.82 13.6815.68
0
5
10
15
20
25
CHENIN BLANC COLOMBAR SAUVINGNONBLANC
CHARDONNAY MUSCAT DALEXANDRIE
SÉMILLON VIOGNIER OTHER WHITE
Ton
/ H
a
AVERAGE YIELDS: WHITE CULTIVARS
12.03
14.70
17.27
13.2714.41
13.3411.87
14.42
02468
101214161820
CABERNETSAUVIGNON
SHIRAZ PINOTAGE MERLOT RUBY CABERNET CINSAUT PINOT NOIR OTHER RED
Ton
/ H
a
AVERAGE YIELDS: RED CULTIVARS
16,3
1
15,5
5
14,7
3
15,0
8
16,9
8
17,5
0
17,6
9
17,4
8
17,5
6
17,6
8
1 446
1 709
1 9412 028
1 9102 042
2 1862 382
2 5272 687
0
500
1 000
1 500
2 000
2 500
3 000
0
5
10
15
20
25
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
R/to
n
Ton
/ ha
BREAK-EVEN PER TON
Yield (Ton/Ha) Production Cost in R/Ton
FIGURE 9. Average yield (bearing and non-bearing hectares) - industry average.
FIGURE 10. Average yield white (bearing and non-bearing hectares) - industry average.
FIGURE 11. Average yield red (bearing and non-bearing hectares) - industry average.
FIGURE 12. Influence of production on break-even of total production cost - industry average.
0
20
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Ha
16,31 15,55 14,73 15,0816,46 16,98 17,69 17,48 17,56 17,68
02468
101214161820
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Ton
/ H
a
TON / HA
19.5422.17
14.34 13.28 13.13 12.82 13.6815.68
0
5
10
15
20
25
CHENIN BLANC COLOMBAR SAUVINGNONBLANC
CHARDONNAY MUSCAT DALEXANDRIE
SÉMILLON VIOGNIER OTHER WHITE
Ton
/ H
a
AVERAGE YIELDS: WHITE CULTIVARS
12.03
14.70
17.27
13.2714.41
13.3411.87
14.42
02468
101214161820
CABERNETSAUVIGNON
SHIRAZ PINOTAGE MERLOT RUBY CABERNET CINSAUT PINOT NOIR OTHER RED
Ton
/ H
a
AVERAGE YIELDS: RED CULTIVARS
16,3
1
15,5
5
14,7
3
15,0
8
16,9
8
17,5
0
17,6
9
17,4
8
17,5
6
17,6
8
1 446
1 709
1 9412 028
1 9102 042
2 1862 382
2 5272 687
0
500
1 000
1 500
2 000
2 500
3 000
0
5
10
15
20
25
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
R/to
n
Ton
/ ha
BREAK-EVEN PER TON
Yield (Ton/Ha) Production Cost in R/Ton
FIGURE 12. Influence of production on break-even of total production cost - industry average.
FIGURE 13. Age composition - industry average.
FIGURE 14. Profitability analysis (2013 - 2017) - industry average.
0CABERNET
SAUVIGNONSHIRAZ PINOTAGE MERLOT RUBY CABERNET CINSAUT PINOT NOIR OTHER RED
16,3
1
15,5
5
14,7
3
15,0
8
16,9
8
17,5
0
17,6
9
17,4
8
17,5
6
17,6
8
1 446
1 709
1 9412 028
1 9102 042
2 1862 382
2 5272 687
0
500
1 000
1 500
2 000
2 500
3 000
0
5
10
15
20
25
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
R/to
n
Ton
/ ha
BREAK-EVEN PER TON
Yield (Ton/Ha) Production Cost in R/Ton
13% 12% 11% 11% 12% 12% 12% 11% 11% 11%
24% 22% 21% 19% 17% 17% 16% 16% 15% 15%
37% 39% 42% 42% 41% 41% 39% 39% 36% 34%
14% 13% 13% 14% 15% 16% 18% 20% 22% 23%
12% 13% 14% 13% 15% 14% 15% 14% 16% 16%
2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6 2 0 1 7
%
AGE DISTRIBUTION
Under 3 years (%) 4 - 7 years (%) 8 - 15 years (%) 16 -20 years (%) Older than 20 years (%)
24% 30% 30%40% 37%
PROFITABILITY ANALYSIS
FIGURE 13. Age composition - industry average.
FIGURE 14. Profitability analysis (2013 - 2017) - industry average.
FIGURE 15. Profitability - industry average.
( / ) /
13% 12% 11% 11% 12% 12% 12% 11% 11% 11%
24% 22% 21% 19% 17% 17% 16% 16% 15% 15%
37% 39% 42% 42% 41% 41% 39% 39% 36% 34%
14% 13% 13% 14% 15% 16% 18% 20% 22% 23%
12% 13% 14% 13% 15% 14% 15% 14% 16% 16%
2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6 2 0 1 7
%
AGE DISTRIBUTION
Under 3 years (%) 4 - 7 years (%) 8 - 15 years (%) 16 -20 years (%) Older than 20 years (%)
16% 12% 15% 12% 14%
55%57% 49%
45% 47%
4%2% 6%
3%2%
24% 30% 30%40% 37%
2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6 2 0 1 7
%
PROFITABILITY ANALYSIS
Profitable (> R27 000 NFI) Low profit (R1 000 - R27 000 NFI) Breakeven (R0 - R1 000 NFI) Loss making
2947
9
3285
1
3228
1
3594
3 4102
3
4417
1
4745
6
4910
8
5109
2
5415
8
1277
7
1381
2
1163
3
1350
0
1718
9
1751
2
1822
1
1716
4
1704
5
1760
4
590
1
627
1
369
6
536
0 858
3
843
2
878
1
747
3
670
2
664
4
0
10 000
20 000
30 000
40 000
50 000
60 000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
R /
ha
PROFITABILITY
Gross Income (R/ha) Gross margin (R/ha) Net farm income (R/ha)
FIGURE 13. Age composition - industry average.
FIGURE 14. Profitability analysis (2013 - 2017) - industry average.
FIGURE 15. Profitability - industry average.
( / ) /
13% 12% 11% 11% 12% 12% 12% 11% 11% 11%
24% 22% 21% 19% 17% 17% 16% 16% 15% 15%
37% 39% 42% 42% 41% 41% 39% 39% 36% 34%
14% 13% 13% 14% 15% 16% 18% 20% 22% 23%
12% 13% 14% 13% 15% 14% 15% 14% 16% 16%
2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6 2 0 1 7
%
AGE DISTRIBUTION
Under 3 years (%) 4 - 7 years (%) 8 - 15 years (%) 16 -20 years (%) Older than 20 years (%)
16% 12% 15% 12% 14%
55%57% 49%
45% 47%
4%2% 6%
3%2%
24% 30% 30%40% 37%
2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6 2 0 1 7
%
PROFITABILITY ANALYSIS
Profitable (> R27 000 NFI) Low profit (R1 000 - R27 000 NFI) Breakeven (R0 - R1 000 NFI) Loss making
2947
9
3285
1
3228
1
3594
3 4102
3
4417
1
4745
6
4910
8
5109
2
5415
8
1277
7
1381
2
1163
3
1350
0
1718
9
1751
2
1822
1
1716
4
1704
5
1760
4
590
1
627
1
369
6
536
0 858
3
843
2
878
1
747
3
670
2
664
4
0
10 000
20 000
30 000
40 000
50 000
60 000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
R /
ha
PROFITABILITY
Gross Income (R/ha) Gross margin (R/ha) Net farm income (R/ha)
8 9
FIGURE 13. Age composition – industry average.
FIGURE 14. Profitability analysis (2013 - 2017) – industry average.
FIGURE 15. Profitability – industry average.
FIGURE 10. Average yield white (bearing and non-bearing hectares) – industry average.
FIGURE 11. Average yield red (bearing and non-bearing hectares) – industry average.
FIGURE 12. Influence of production on break-even of total production cost – industry average.
are locked into the value chain. This may differ in rationale from business to business and districts. In many cases the increased bargaining power with higher turnover are more common than the traditional cost saving effect on overheads. It should be well noted that many larger units actually produce wine grapes more costly than smaller very efficient units.
In the 2017 production year yields varied greatly among the different regions. The average production for bearing and
non-bearing grapevines for the 2017 production year was 17.68 ton/ha.
CULTIVAR STRUCTURE
During the 2014 production year a cultivar analysis was also conducted to indicate the production variance between the most planted white and red cultivars. This will assist producers with precision farming in the coming years by showing how the cultivars in their enterprise differ and
FIGURE 9. Average yield (bearing and non-bearing hectares) - industry average.
FIGURE 10. Average yield white (bearing and non-bearing hectares) - industry average.
FIGURE 11. Average yield red (bearing and non-bearing hectares) - industry average.
FIGURE 12. Influence of production on break-even of total production cost - industry average.
0
20
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Ha
16,31 15,55 14,73 15,0816,46 16,98 17,69 17,48 17,56 17,68
02468
101214161820
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Ton
/ H
a
TON / HA
19.5422.17
14.34 13.28 13.13 12.82 13.6815.68
0
5
10
15
20
25
CHENIN BLANC COLOMBAR SAUVINGNONBLANC
CHARDONNAY MUSCAT DALEXANDRIE
SÉMILLON VIOGNIER OTHER WHITE
Ton
/ H
a
AVERAGE YIELDS: WHITE CULTIVARS
12.03
14.70
17.27
13.2714.41
13.3411.87
14.42
02468
101214161820
CABERNETSAUVIGNON
SHIRAZ PINOTAGE MERLOT RUBY CABERNET CINSAUT PINOT NOIR OTHER RED
Ton
/ H
a
AVERAGE YIELDS: RED CULTIVARS
16,3
1
15,5
5
14,7
3
15,0
8
16,9
8
17,5
0
17,6
9
17,4
8
17,5
6
17,6
8
1 446
1 709
1 9412 028
1 9102 042
2 1862 382
2 5272 687
0
500
1 000
1 500
2 000
2 500
3 000
0
5
10
15
20
25
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
R/to
n
Ton
/ ha
BREAK-EVEN PER TON
Yield (Ton/Ha) Production Cost in R/Ton
FIGURE 9. Average yield (bearing and non-bearing hectares) - industry average.
FIGURE 10. Average yield white (bearing and non-bearing hectares) - industry average.
FIGURE 11. Average yield red (bearing and non-bearing hectares) - industry average.
FIGURE 12. Influence of production on break-even of total production cost - industry average.
0
20
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Ha
16,31 15,55 14,73 15,0816,46 16,98 17,69 17,48 17,56 17,68
02468
101214161820
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Ton
/ H
a
TON / HA
19.5422.17
14.34 13.28 13.13 12.82 13.6815.68
0
5
10
15
20
25
CHENIN BLANC COLOMBAR SAUVINGNONBLANC
CHARDONNAY MUSCAT DALEXANDRIE
SÉMILLON VIOGNIER OTHER WHITE
Ton
/ H
a
AVERAGE YIELDS: WHITE CULTIVARS
12.03
14.70
17.27
13.2714.41
13.3411.87
14.42
02468
101214161820
CABERNETSAUVIGNON
SHIRAZ PINOTAGE MERLOT RUBY CABERNET CINSAUT PINOT NOIR OTHER RED
Ton
/ H
a
AVERAGE YIELDS: RED CULTIVARS
16,3
1
15,5
5
14,7
3
15,0
8
16,9
8
17,5
0
17,6
9
17,4
8
17,5
6
17,6
8
1 446
1 709
1 9412 028
1 9102 042
2 1862 382
2 5272 687
0
500
1 000
1 500
2 000
2 500
3 000
0
5
10
15
20
25
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
R/to
n
Ton
/ ha
BREAK-EVEN PER TON
Yield (Ton/Ha) Production Cost in R/Ton
FIGURE 9. Average yield (bearing and non-bearing hectares) - industry average.
FIGURE 10. Average yield white (bearing and non-bearing hectares) - industry average.
FIGURE 11. Average yield red (bearing and non-bearing hectares) - industry average.
FIGURE 12. Influence of production on break-even of total production cost - industry average.
0
20
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Ha
16,31 15,55 14,73 15,0816,46 16,98 17,69 17,48 17,56 17,68
02468
101214161820
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Ton
/ H
a
TON / HA
19.5422.17
14.34 13.28 13.13 12.82 13.6815.68
0
5
10
15
20
25
CHENIN BLANC COLOMBAR SAUVINGNONBLANC
CHARDONNAY MUSCAT DALEXANDRIE
SÉMILLON VIOGNIER OTHER WHITE
Ton
/ H
a
AVERAGE YIELDS: WHITE CULTIVARS
12.03
14.70
17.27
13.2714.41
13.3411.87
14.42
02468
101214161820
CABERNETSAUVIGNON
SHIRAZ PINOTAGE MERLOT RUBY CABERNET CINSAUT PINOT NOIR OTHER RED
Ton
/ H
a
AVERAGE YIELDS: RED CULTIVARS
16,3
1
15,5
5
14,7
3
15,0
8
16,9
8
17,5
0
17,6
9
17,4
8
17,5
6
17,6
8
1 446
1 709
1 9412 028
1 9102 042
2 1862 382
2 5272 687
0
500
1 000
1 500
2 000
2 500
3 000
0
5
10
15
20
25
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
R/to
n
Ton
/ ha
BREAK-EVEN PER TON
Yield (Ton/Ha) Production Cost in R/Ton
FIGURE 12. Influence of production on break-even of total production cost - industry average.
FIGURE 13. Age composition - industry average.
FIGURE 14. Profitability analysis (2013 - 2017) - industry average.
0CABERNET
SAUVIGNONSHIRAZ PINOTAGE MERLOT RUBY CABERNET CINSAUT PINOT NOIR OTHER RED
16,3
1
15,5
5
14,7
3
15,0
8
16,9
8
17,5
0
17,6
9
17,4
8
17,5
6
17,6
8
1 446
1 709
1 9412 028
1 9102 042
2 1862 382
2 5272 687
0
500
1 000
1 500
2 000
2 500
3 000
0
5
10
15
20
25
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
R/to
n
Ton
/ ha
BREAK-EVEN PER TON
Yield (Ton/Ha) Production Cost in R/Ton
13% 12% 11% 11% 12% 12% 12% 11% 11% 11%
24% 22% 21% 19% 17% 17% 16% 16% 15% 15%
37% 39% 42% 42% 41% 41% 39% 39% 36% 34%
14% 13% 13% 14% 15% 16% 18% 20% 22% 23%
12% 13% 14% 13% 15% 14% 15% 14% 16% 16%
2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6 2 0 1 7
%
AGE DISTRIBUTION
Under 3 years (%) 4 - 7 years (%) 8 - 15 years (%) 16 -20 years (%) Older than 20 years (%)
24% 30% 30%40% 37%
PROFITABILITY ANALYSIS
FIGURE 13. Age composition - industry average.
FIGURE 14. Profitability analysis (2013 - 2017) - industry average.
FIGURE 15. Profitability - industry average.
( / ) /
13% 12% 11% 11% 12% 12% 12% 11% 11% 11%
24% 22% 21% 19% 17% 17% 16% 16% 15% 15%
37% 39% 42% 42% 41% 41% 39% 39% 36% 34%
14% 13% 13% 14% 15% 16% 18% 20% 22% 23%
12% 13% 14% 13% 15% 14% 15% 14% 16% 16%
2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6 2 0 1 7
%
AGE DISTRIBUTION
Under 3 years (%) 4 - 7 years (%) 8 - 15 years (%) 16 -20 years (%) Older than 20 years (%)
16% 12% 15% 12% 14%
55%57% 49%
45% 47%
4%2% 6%
3%2%
24% 30% 30%40% 37%
2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6 2 0 1 7
%
PROFITABILITY ANALYSIS
Profitable (> R27 000 NFI) Low profit (R1 000 - R27 000 NFI) Breakeven (R0 - R1 000 NFI) Loss making
2947
9
3285
1
3228
1
3594
3 4102
3
4417
1
4745
6
4910
8
5109
2
5415
8
1277
7
1381
2
1163
3
1350
0
1718
9
1751
2
1822
1
1716
4
1704
5
1760
4
590
1
627
1
369
6
536
0 858
3
843
2
878
1
747
3
670
2
664
4
0
10 000
20 000
30 000
40 000
50 000
60 000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
R /
ha
PROFITABILITY
Gross Income (R/ha) Gross margin (R/ha) Net farm income (R/ha)
FIGURE 13. Age composition - industry average.
FIGURE 14. Profitability analysis (2013 - 2017) - industry average.
FIGURE 15. Profitability - industry average.
( / ) /
13% 12% 11% 11% 12% 12% 12% 11% 11% 11%
24% 22% 21% 19% 17% 17% 16% 16% 15% 15%
37% 39% 42% 42% 41% 41% 39% 39% 36% 34%
14% 13% 13% 14% 15% 16% 18% 20% 22% 23%
12% 13% 14% 13% 15% 14% 15% 14% 16% 16%
2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6 2 0 1 7
%
AGE DISTRIBUTION
Under 3 years (%) 4 - 7 years (%) 8 - 15 years (%) 16 -20 years (%) Older than 20 years (%)
16% 12% 15% 12% 14%
55%57% 49%
45% 47%
4%2% 6%
3%2%
24% 30% 30%40% 37%
2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6 2 0 1 7
%
PROFITABILITY ANALYSIS
Profitable (> R27 000 NFI) Low profit (R1 000 - R27 000 NFI) Breakeven (R0 - R1 000 NFI) Loss making
2947
9
3285
1
3228
1
3594
3 4102
3
4417
1
4745
6
4910
8
5109
2
5415
8
1277
7
1381
2
1163
3
1350
0
1718
9
1751
2
1822
1
1716
4
1704
5
1760
4
590
1
627
1
369
6
536
0 858
3
843
2
878
1
747
3
670
2
664
4
0
10 000
20 000
30 000
40 000
50 000
60 000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
R /
ha
PROFITABILITY
Gross Income (R/ha) Gross margin (R/ha) Net farm income (R/ha)
10
may contribute to greater profitability. Net profit per block calculations are critical in drought conditions, ensuring the culling of non- and low profitable blocks, producers are advised not to base financial decisions on turnover or just yield, ensure proper financial management principles are used when determining profitability.
BREAK-EVEN
In most cases agricultural commodities experiencing cycles of over supply are under pressure of cost increases with stagnant income, the majority of grape producers were coping with rising input costs and decreasing grape prices (in real terms) by increasing yields.
This ensured that the break-even price did not increase substantually, it even decreased in 2012, however with rising costs and stable average yields we have seen a year on year increase of 6% to R2 687/ton.
In other words: the first R2 687 for a ton of grapes received by the producer during the 2017 harvest, should be applied for total production cost – no entrepreneurial remuneration, interest or tax has been taken into account yet.
The average yields differ considerably among the districts, as well as
among the various cultivars, while the production cost does not differ to the same extent. This gives rise to large differences in break-even price in terms of total production cost in the respective district and among the various cultivars.
Over the past 10 years it has been an obvious trend that producers attempt to increase average yields to counter the effect of rising costs, as well as to increase profitability, but the drought will make it very difficult in 2018.
PROFITABILITY
The profitability, in other words net farming income (NFI), is calculated as gross income (R/ton x ton/ha) minus total production cost. The latter consists of cash expenditure and provision for renewal, but excludes entrepreneurial remuneration, interest obligations and tax. The total income is calculated for a specific vintage and although the majority of producers realise their income at different stages over the financial year, depending on their business model, no time value of money is taken into account.
It is very positive to see how the gross income per hectare has increased in the last decade, predominantly driven by increasing yields, but in some cases to a less
extent by rising grape prices. For the 2017 harvest the gross income amounted to R54 158 per hectare (the average for bearing- and non-bearing vineyards in total), a 6% increase year on year. The gross margin, i.e. the cash flow effect per hectare was R17 604, only 3% more than 2016, indicating the deminishing effect of rising input costs as the cost-prize squeeze is still hampering the wine grape growers.
After provision is made for renewal, a decrease of 1% in NFI of R6 644 per hectare was achieved.
As a guideline for economically sustainable production, the average income and NFI for the 2017 production year for a 40 hectare unit should in fact have realised R71 670 and R27 280 per hectare respectively, and for a 100 hectare unit R63 750/ha and R19 360/ha. This is seen as a minimum sustainable requirement, included additionally in this calculation is opportunity cost and entrepreneurial remuneration.
Unsustainable average gross income limits producers to implement sufficient capital replacement. Consequently grapevines, buildings and moveables are beginning to exceed accepted industry norms lifespans. Alternatively resources are allocated to crops with higher NFI.
With global wine supply tightening and the increased pressure of the drought, many producers will remember 2017 as a game changer, it may be either positive or negative. With the ageing and decreasing vineyard status, a sure sign of a structural shift is imminent, as local supply adjusts to meet global and local demand.
SUMMARY
– For more information, contact Andries van Zyl at [email protected] or Pieter van Niekerk at [email protected].
