Abstract
Background and goals The manipulation of supplemental light and environmental conditions in greenhouses has been shown to increase grapevine size and fruiting capacity prior to transplanting and presents an opportunity for advanced starter plant material. The goal of this study was to conduct an economic analysis on Precise Indoor Vine Conditioning (PIVC) as a proof-of-concept system to optimize nursery production of grapevines.
Methods and key findings Research costs from a PIVC study were organized into a crop budget. Using net present value (NPV) and data from existing commercial crop budgets, we modeled the grower profitability of establishing a new vineyard with PIVC vines in three grape production systems in the United States. In addition, we calculated the price premium for a PIVC vine beyond the cost of a conventional starter vine and used sensitivity analysis (with research costs as an input) to identify the most promising avenues for increasing profitability of PIVC vine production for a nursery. NPV analysis revealed that variety and region have a strong impact on production system profitability and the use of PIVC vines can be more profitable than conventional systems for Cabernet Sauvignon in the San Joaquin and Napa Valleys, CA. The price premium a grower may be willing to pay for a PIVC vine beyond the cost of a conventional vine was $0.52 to $7.43 for Cabernet Sauvignon in the San Joaquin Valley and $6.92 to $31.18 in the Napa Valley.
Conclusions and significance PIVC vines have the potential to reduce costs and increase returns for growers during the early years of vine establishment, thereby increasing profit. The PIVC system can also be profitable for grapevine nurseries with reductions in production costs that come at commercial scale and increased vine density.
Introduction
Establishment of new vineyards or replanting of grapevines in existing vineyards requires young vines grown by nurseries. These plants are commonly sold as 1-yr-old dormant bare root vines that have been grafted with specific rootstock and scion combinations based on a grower’s preference and are rooted out for a single season in the ground before being dug up and shipped to growers during dormancy. Other alternatives of commercially available plant material include green potted vines that can be rooted later in the season and shipped to growers with active root and shoot growth in containers. In addition, tall vines that make use of a longer rootstock when grafting have recently become available, assisting growers in reducing labor associated with trellis training (Kiely et al. 2021).
When starting a new vineyard or managing an existing vineyard, high upfront costs during establishment can be a major challenge. Grapevines take between 3 and 5 yr to produce full yield (Wolf 2008, Julian et al. 2009) and establishing young grapevines during this time requires high labor costs that include weed and pest management, training the vine up to a trellis wire to form a trunk, suckering, pruning, fertilization, and irrigation. A grower’s investment in the management of these vines during the initial 3 to 5 yr often results in negative net annual returns, making initial vineyard establishment unprofitable, with returns coming in later years (Wolf 2008, Davis et al. 2020).
Shortening the establishment period of newly planted grapevines by producing larger transplants at the nursery that can bear fruit faster could provide earlier returns. A recent proof-of-concept study has found that growing 1-yr-old bare root vines with the use of supplemental light in a controlled environment greenhouse increases both vine size and early fruiting, enabling vines to be planted and harvested in a single season (Freedman 2024). This proof-of-concept system, called Precise Indoor Vine Conditioning (PIVC), utilizes optimal environmental conditions to enhance growth and increases a vine’s ability to produce fruit faster than conventional vines. Compared to conventional 1-yr-old bare root vines, PIVC vines are larger, with an established trunk and a single cordon that can be trained to a trellis (Figure 1). This process could be used as a new nursery production system, providing grapegrowers with enhanced plant material. Previous research has shown that high light intensity and temperature applied to grapevines in one season increases bud fruitfulness (the number of clusters each bud produces) in the following season, ultimately increasing yield (May and Ancliff 1963, May 1965, Buttrose 1970, Perez and Kliewer 1990, Sanchez and Dokoozlian 2005).
Comparison of A) a 1-yr-old conventional bare root vine after planting and B) a 1-yr-old conventional bare root vine with 1 yr of Precise Indoor Vine Conditioning (PIVC) greenhouse treatments utilizing supplemental light after planting and attached to the trellis. Both vines were planted at FireClay Cellars in Siler City, North Carolina.
Intentionally manipulating environmental conditions such as light intensity and temperature to promote increased vegetative and reproductive growth is practiced with several other crops. Production of grafted tomato seedlings has incorporated the use of artificial light to increase growth and number of plants per area (Kubota et al. 2008). Temperature manipulation is frequently used in Europe and Canada to produce strawberry transplants capable of fruiting faster (Smeets 1982, Bish et al. 2002, Durner 2018). In Europe and the United States, long-cane blackberry plants are grown under controlled environmental conditions so they can be planted and cropped in the same year (Heijerman et al. 2020, Dickson et al. 2023).
Compared to conventional grapevines, PIVC vines require additional resources to enhance nursery production of young grapevines. Such resources include climate controlled greenhouse space, supplemental lighting, larger containers, soilless substrate, consistent water and nutrients, a trellis structure, and additional pruning. The lack of technological integration into nursery production of grapevines, combined with the prolonged establishment time to achieve adequate yields, presents the opportunity for PIVC to create a new type of vine for growers. Here, we conducted an economic analysis of the PIVC system from both grower and nursery perspectives to establish a better understanding of the types of costs associated with PIVC and the potential pathways to optimize PIVC for economic performance. The objectives of this study were to apply a net present value (NPV) model to assess a grower’s potential change in profitability between conventional and PIVC vines when starting a new vineyard; to quantify the experimental costs of the initial PIVC research using an enterprise crop budget model; and to determine if a market for PIVC vines exists, and in what way the economic performance of PIVC can be improved for nursery production.
Materials and Methods
Crop budget and PIVC model scenarios
Existing data from published grape cost and return studies were used to determine costs to establish and manage vineyards for growers. Three different crop budgets from different parts of the U.S. were used to reflect various types of grapes and growing regions, as these factors have a significant impact on the profitability of vineyard operations due to yield and market price differences. The budgets included the prominent commercial juice grape variety Concord of Lake Erie, NY in 2020, which reflects a lower cost and a less management-intensive system (Davis et al. 2020). Cabernet Sauvignon from the North Coast region of the Napa Valley, CA in 2020 and from the Northern San Joaquin Valley of CA in 2021 (Kurtural et al. 2020, Murdock et al. 2021) were also selected to represent higher cost, more management-intensive systems. The San Joaquin Valley (SJV) is known for producing lower cost wines at scale, while Napa Valley produces some of the highest value wines in the U.S. Different vine type and vineyard production system assumptions were used for each of these cost-and-return studies, forming the basis of our analysis (Table 1).
Summary of main vine type and production system assumptions from selected commercial grape cost and return studiesa used to conduct grower net present value and price premium analyses.
These three crop budgets are some of the only detailed grapevine crop budgets that are published; they were therefore selected for our study as they represent diverse combinations of production region and grape type, which can influence costs of production as well as revenue potential. Each cost study is referred to hereafter as “base cases”. Costs and returns for each base case show detailed costs for years 1 to 3 for establishment and operations, and years 4+ were used to represent when vines mature and reach full yield potential. Each case included site preparation and planting during years 1 to 2, along with cultural or management costs and overhead costs. Partial yields began in year 3, with full yields in years 4+.
To compare each base case to the adoption of PIVC grapevines as starter plants, three PIVC model scenarios were created for each grape variety and region combination (Table 2). Each base case cost study was reviewed and relevant costs for site preparation, planting, and management during years 1 to 3 that would apply to any vineyard establishment and operation, regardless of the starting grapevine plant material, were held constant. Several costs were suppressed, including the costs of plant material and costs that PIVC would eliminate due to the larger size of the vines. These costs included reduced fertilizer and herbicide applications, pruning and brush removal, suckering, and fruit thinning. PIVC vines can be planted and harvested in the same year, therefore, we included varying estimates of yield for each scenario in years 1 to 3. Further research is needed to determine PIVC yields after transplanting through improved vineyard management practices.
Summary of base case cost scenarios from published cost studies and hypothetical Precise Indoor Vine Conditioning (PIVC) scenarios with varying yield estimates. Each PIVC scenario is grouped with each base case to compare different PIVC yield estimates under each variety and region combination.
NPV model
An NPV model was constructed to compare PIVC scenarios to each base case to determine the potential profit differential of a grower switching between production systems. A similar approach was used to compare the use of tall vines as starter plant material to conventional system cost studies in California (Kiely et al. 2021). The NPV model included costs and returns for each base case from the years they were published, not adjusted for inflation. The use of an NPV model was appropriate as it enabled evaluation of growers’ potential maximum willingness-to-pay (WTP) per vine by comparing the differences in base case and PIVC scenario NPVs, divided by the density of vines per hectare. This helped to assess the potential maximum price of a PIVC vine to estimate the magnitude of potential production cost reductions necessary for profitable PIVC vine production in nurseries, which is a performance indicator useful for potential adoption by grapevine nurseries.
An annual discount rate of 5.36% was assumed, which represents the average projected discount rate from 2022 to 2033 in the USDA Agricultural Projections 2033 (Dohlman et al. 2024). We included total costs per ha per year from each base case and PIVC scenarios. Total costs included variable and fixed costs. Variable costs included site preparation, planting, and cultural management, and fixed costs included depreciation of buildings and equipment, taxes, land opportunity cost, office supplies, insurance, and management. Fixed costs were incorporated in the year incurred and discounted over time. Vine establishment costs were excluded from all scenarios to allow estimation of a grower’s maximum WTP for PIVC vines, as detailed later. Returns were based off the reported yields per year and price per tonne, with all base cases producing partial yields in year 3 and a full yield in years 4+. A time horizon of 25 yr was used, with year 1 representing the age of the new vine and year 25 as the estimated lifespan before replanting is needed. Costs and returns for years 4 to 25 were assumed to remain the same for all scenarios as constructed in the published enterprise crop budgets. The NPV model function is shown in Equation 1:
where i is the scenario (Base, 1,2,3), T = total number of years, t = year,
Enterprise budgeting
Production costs of the PIVC system from an initial proof-of-concept research study (Freedman 2024) are reported (Table 3) to better understand potential production costs that a nursery adopting PIVC may incur. Research into PIVC systems was conducted at the North Carolina State University Horticultural Field Lab in a glass greenhouse measuring 17.46 m2. The greenhouse production phase research, used to calculate costs for the enterprise budget, was conducted from 27 May 2021 to 7 Oct 2021, lasting 133 days. Dormancy and vineyard production research was conducted from 8 Oct 2021 to 19 Aug 2022. Costs included in the enterprise budget reflect measured costs from the PIVC research. Given that there is no existing market for PIVC vines, we modeled potential revenue by calculating the maximum a risk-neutral grower would be willing to pay for PIVC vines under different scenarios.
Cost structure for Precise Indoor Vine Conditioning (PIVC) using 1-yr-old bare root grapevines (48 vines, 38-L grow bags) in a glass greenhouse at North Carolina State University.
Variable costs
Materials and services
Costs associated with operating a greenhouse using PIVC were broken down into 21 different cost categories (Table 3). Sources of costs came from actual costs of materials and services used during the research as well as from published commercial sources. For example, costs of the grapevines, materials to construct the trellis, and lab sample processing fees represent actual costs. The costs for products such as containers, substrate, bamboo stakes, fertilizer, fungicides, and insecticides were determined using published costs on the internet.
Electricity
Electricity costs to power the LED lights for supplemental lighting were based on published rates from the U.S. Energy Information Agency for 2021 in North Carolina under the commercial end-use sector. Electrical power consumption was calculated using a previously-outlined formula (Hernández and Kubota 2015).
Labor costs
Labor costs were divided into two main categories: skilled and unskilled. Skilled labor was used primarily to install and calibrate LED lights, as well as to conduct chemical analysis of substrate pH and electrical conductivity. Unskilled labor was used for general establishment of the production system, including building trellises, potting vines, and general management such as pruning and pest management. Labor rates were applied using the 2021 U.S. Bureau of Labor Statistics Occupational Employment and Labor Statistics database, including a mean hourly wage of $16.49 for unskilled labor (NAICS code 45-2092 Farmworkers and Laborers, Crop, Nursery and Greenhouse) and $21.94 for skilled labor (NAICS code 19-4012 Agricultural Technician). Labor rates represent mean hourly wages and are not inclusive of overhead costs like taxes and workers compensation. Labor hours were calculated based on each individual task throughout the entire PIVC research production sequence.
Fixed costs
Depreciation
Costs for LED light fixtures, quantum sensors, and temperature and relative humidity sensors were considered capital equipment, which are goods that are not consumed over a single period and allow for repeated use over time without losing their material identity (AAEA 2000). Capital recovery costs were calculated using the annuity method, accounting for depreciation and the opportunity cost of capital. Total ownership includes the capital recovery cost, as well as the insurance and taxes on the average capital value:
where:
We assumed that the capital specific to the PIVC study had zero salvage value at the end of its productive life. The Capital Recovery Factor (CRF) simultaneously captures both asset depreciation and the time value of money, placing more weight on depreciation occurring earlier in the asset’s lifespan.
Overhead
The largest category of costs in this study came from overhead costs, which were broken down into the rental cost of greenhouse space, electricity for supplemental lighting, and other overhead costs covering administrative needs such as printing and office supplies. Greenhouse rental rate was estimated from actual costs during PIVC research, combined with published university rates throughout the U.S. to establish a cost per m2 per month (as found on the websites https://astate-prod-2310.dotcms.cloud/a/abi/files/new/coreequipmentlistsfeesASULabs.pdf, https://sebs.rutgers.edu/njaes-research-greenhouse/rental, and https://sites.cns.utexas.edu/greenhouse/pricing). The greenhouse rental rate covers existing greenhouse space which includes benches, water for irrigation and evaporative cooling, electricity for evaporative cooling, fans and general management (excludes LED lighting), a standard drip fertigation system, land opportunity cost, and shade cloth. No commercially available rates were found as the market for leasing greenhouse space is limited and rates vary widely. Because our costs were based on university research operations, in practice, these rental rates likely represent the upper bound of commercial greenhouse rental rates.
Grower maximum WTP for PIVC transplants
To quantify the potential maximum price a grower would be willing to pay for PIVC vines, we constructed a model that takes the profit differential between the base case and PIVC scenario NPVs and factors in the vine density per ha. To allow interpretation of NPV as a price premium growers could pay for vines above base case vine prices, vine costs were excluded from all scenarios, including the base cases. This establishes a cost ceiling for how much a grower could expect to pay for a PIVC vine if they made the switch from a conventional bare root or green potted vine. The model function for the maximum PIVC vine premium is shown in Equation 3:
where Pi = maximum vine premium and Vine density = number of vines per ha.
PIVC sensitivity analysis
The grower maximum WTP for PIVC vines was used as an input to conduct sensitivity analysis to determine the profit differential between a nursery’s cost and the price paid by the grower. The aim was to understand the market potential for PIVC vines, where the difference between a nursery’s cost of producing a PIVC vine and the price a grower is willing to pay represents profit. Having established a maximum price a grower may be willing to pay for PIVC vines, a production cost-per-vine per area metric from the PIVC enterprise budget was used as the variable of interest. This enabled us to look at how changing vine density under the assumed PIVC research production costs could increase profit-per-vine. Results from this analysis can show the impact that vine density during production can have on a nursery’s potential profit.
The maximum cost per vine represents the total premium a vineyard manager would be willing to pay to have PIVC vines delivered to their farm, compared to conventional vines. This maximum WTP reflects the NPV of all future benefits from PIVC adoption and represents the maximum extra production cost attributable to each PIVC vine while remaining as profitable as, or more profitable than, standard vines. This maximum extra production cost is independent of the distribution of costs between different components of the upstream supply chain. Whether the premium arises from higher nursery production costs, additional nursery profit margins, delivery and transportation costs, or any combination thereof, does not affect the vineyard manager’s economic calculus. For example, if the maximum cost per vine is $15, this could represent a vine with $12 production cost plus $3 profit/delivery, or a vine with $14 production cost plus $1 profit/delivery. The total delivered cost to the grower is what determines whether the product is adopted. For a given WTP for PIVC vines, each additional $1 of delivery costs reduces the maximum profitable PIVC nursery production cost by $1.
Results
NPV comparison
NPV varied greatly by variety and region (Figure 2). NPV was positive for Cabernet Sauvignon–Napa Valley, but all base and PIVC scenarios for Concord–Lake Erie and for Cabernet Sauvignon–SJV had negative NPVs. In Napa Valley, the initial base case NPV was $21,716.98. Napa Valley PIVC scenarios 1 to 3 resulted in positive NPVs of $48,310.47, $73,775.28, and $141,532.37, respectively. The positive annual net return of $16,385.20 in years 4+ for the base Napa Valley case contributed greatly to the increase in NPV when switching to PIVC vines, as the vines shifted returns to years 1 to 3, increasing annual net returns.
Net present value (NPV) per hectare of base case variety and region combinations compared to Precise Indoor Vine Conditioning (PIVC) adoption scenarios. Three base cases are shown (light green bars): Concord in Lake Erie, NY; Cabernet Sauvignon in the San Joaquin Valley (SJV), CA; and Cabernet Sauvignon in the Napa Valley, CA. For each base case, three PIVC scenarios are presented, representing different yield timing assumptions: PIVC 1 (25% of partial yield in year 2, full yield in year 3); PIVC 2 (50% of partial yield in year 1, full yield in year 3); and PIVC 3 (50% of mature yield in year 1, full yield in year 2). NPVs were calculated over 25 yr with a 5.36% annual discount rate. Vine purchase costs were excluded from all scenarios to allow calculation of maximum willingness-to-pay for PIVC vines.
Under all scenarios, NPV was negative for Concord–Lake Erie, primarily due to the lack of profitability in producing Concord grapes in this region under the outlined assumptions. Years 4+ through the life of the vine exhibit annual net returns of -$6471.50. While the use of PIVC vines in Napa Valley can increase NPV with early yields, PIVC under the Concord–Lake Erie case shifted returns earlier but also increased costs. The Concord base case has lower costs in years 2 and 3 compared to years 4+ in a mature vineyard, as vines are still in establishment and do not require additional management. When PIVC vines are added, costs are shifted earlier, making PIVC scenarios more negative compared to the base case. This was unique to Concord–Lake Erie, as both Cabernet Sauvignon cases had costs in years 2 to 3 comparable to mature vines in years 4+. While still negative, annual net returns under the base Concord scenario were lower than for other PIVC scenarios, indicating that returns are too low in comparison to the higher costs of PIVC vines to have a positive impact in this variety and region system.
Similarly to Concord–Lake Erie, Cabernet Sauvignon–SJV exhibited a highly negative NPV in the baseline scenario, due to negative annual net returns of -$3931.36 for Year 4+. However, by starting production with PIVC vines, the NPV is increased by 1, 5, and 8.6% for PIVC scenarios 1, 2, and 3, respectively, making economic performance less negative.
PIVC price premium
Like NPV, the price premium (or potential price above what current vines cost) per vine varies by variety and region combination (Figure 3). All PIVC scenarios were negative for Concord–Lake Erie. The vine density in this scenario was 1594 vines/ha and negative NPV with this density could not achieve a vine price that would be suitable for PIVC. Under the Cabernet Sauvignon–SJV case, vine premiums ranged from $0.52 to $7.43 per vine. While NPVs in these scenarios were also negative, a lower negative NPV combined with the higher density of 1957 vines/ha provided a positive range of vine price. Price premium per vine in the Cabernet Sauvignon–Napa Valley scenario was the highest, ranging from $6.92 to $31.18. This scenario used a vine density of 3842 vines/ha, as it is common practice to use cane pruning (versus spur pruning), which enables a higher density system to be adopted (Kurtural et al. 2020). The initial NPV of the Cabernet Sauvignon–Napa Valley scenario (net of vine cost) was the least negative of all cases at $21,716.98, and when combined with early yields for all PIVC scenarios, the high density per ha provided a wider range of maximum vine price for PIVC. The change in vine premiums for all three PIVC scenarios followed a similar pattern for each variety and region case. Shifting yields earlier in vineyard establishment and increasing the yield per vine contributes to the higher price above base case vines that a grower could potentially pay for a PIVC vine.
Maximum potential price premium ($) per Precise Indoor Vine Conditioning (PIVC) vine that growers would be willing to pay above conventional vine costs. Results are shown for three variety and region combinations: Concord in Lake Erie, NY (1594 vines/ha); Cabernet Sauvignon in the San Joaquin Valley (SJV), CA (1957 vines/ha); and Cabernet Sauvignon in the Napa Valley, CA (3842 vines/ha). Three PIVC scenarios are shown for each region: PIVC 1 (25% of partial yield in year 2, full yield in year 3); PIVC 2 (50% of partial yield in year 1, full yield in year 3); and PIVC 3 (50% of mature yield in year 1, full yield in year 2). Negative values indicate scenarios where PIVC adoption reduces profitability relative to conventional vines; positive values indicate the maximum premium growers could pay while maintaining economic viability. Price premium calculated as: (NPV_PIVC - NPV_base) / vines per hectare.
When comparing the range of potential PIVC vine prices under each scenario to the base cases, prices for PIVC vines were higher. Base case vine cost for Concord was the lowest at $1.75 per dormant bare root vine. The Concord case also assumed a density of 1594 vines/ha. With negative maximum WTP per PIVC vines, there is no potential for these vineyards to adopt PIVC vines. Cabernet Sauvignon–SJV used $4 per green potted vine, with a vineyard density of 1957 vines/ha. The maximum PIVC price premiums for this variety and region in PIVC scenarios 1, 2, and 3 represented 13, 78, and 186% increases over the baseline vine price, respectively. The highest range of vine price for each of the three base cases was Cabernet Sauvignon–Napa Valley, with a vine price of $6.50 for green potted vines in a 5 cm × 5 cm container at a density of 3842 vines/ha. Dormant bare root vines are a lower price compared to green potted vines, as additional labor and added value are characteristic of green potted vines. The maximum PIVC price premiums for Cabernet Sauvignon–Napa Valley in PIVC scenarios 1, 2, and 3 represented 106, 208, and 480% increases over the baseline vine price, respectively.
PIVC enterprise budget sensitivity analysis
Using the PIVC enterprise budget and calculated costs to produce these vines, we evaluated the profitability of producing PIVC vines in a greenhouse (Table 4). We compared the maximum premium a grower would pay from the NPV analysis for each PIVC scenario with the nursery’s cost to produce PIVC vines, to determine the profit differential between the cost to produce PIVC vines that a nursery would incur and the price at which they could sell them. To determine the production cost per vine under the PIVC greenhouse system, we used the total cost of PIVC from the enterprise budget (Table 3) and divided that into the total area (m2) used during the PIVC research (2.75 vines/m2 density, which served as a minimum density). We then evaluated densities up to 32 vines/m2 to identify the density needed during greenhouse production, using the measured research costs for positive net profit. Density is an important variable to analyze, as nurseries have limited space and seek to maximize their production. In addition, PIVC requires more resources and management during nursery production which can limit the vine density, and thus, revenue potential. The following model function was used:
Sensitivity analysis showing how net profit per vine for Precise Indoor Vine Conditioning (PIVC) nursery production varies with greenhouse vine density. Columns show net profit per vine at densities ranging from 2.75 vines/m2 (research study density) to 32 vines/m2 across three variety and region combinations: Concord in Lake Erie, NY; Cabernet Sauvignon in the San Joaquin Valley (SJV), CA; and Cabernet Sauvignon in the Napa Valley, CA. Three PIVC scenarios are shown for each region: PIVC 1 (25% of partial yield in year 2, full yield in year 3); PIVC 2 (50% of partial yield in year 1, full yield in year 3); and PIVC 3 (50% of mature yield in year 1, full yield in year 2). Net profit per vine calculated as: [maximum vine premium growers would pay] - [nursery production cost per vine] = [(NPV_PIVC - NPV_base) / vineyard vines per ha] - [(PIVC cost per m2) / (greenhouse vines per m2)]. Negative values indicate scenarios where nursery production costs exceed maximum grower willingness-to-pay; positive values indicate potentially profitable nursery production scenarios. Shading is used to visually emphasize economic feasibility: green, economically viable nursery production; yellow, marginal or break-even outcomes; red, economically infeasible outcomes under the given density and scenario assumptions.
where NPVi = the selected PIVC scenario per ha, NPVbase = the selected NPV base scenario per ha, PIVC cost/m2 = the total cost/m2 from Table 3, and x = vine density in PIVC greenhouse production.
Total PIVC cost/m2 was $780.94, based on the enterprise budget. With the 2.75 vines/m2 density used in the research study and the maximum premium per vine from each PIVC scenario, net profit was highly negative. Net profit increased for all variety and region and PIVC scenario combinations as density increased, but was negative for all scenarios except PIVC scenario 3 for Cabernet Sauvignon–Napa Valley. Under this system, net profit became positive between 22 and 24 vines/m2.
Sensitivity analysis of PIVC vineyard NPV and maximum WTP per vine
Given the uncertainties inherent in evaluating a novel production system, we conducted sensitivity analyses to assess how the economic viability of PIVC adoption is affected by variations in two parameters: mature vineyard yields for PIVC vines and PIVC vineyard production costs. To examine how NPV changes with these parameters, Table 5 shows NPVs calculated when mature PIVC vineyard yields vary from 85 to 100% of baseline yields and when PIVC production costs range from 100 to 115% of estimated costs. Our baseline scenarios assumed PIVC vines achieve the same mature yields as conventional vines, but this assumption is not yet validated by long-term field studies. The NPV for each variety and region combination and PIVC scenario under both yield and cost scaling factors is also presented.
Sensitivity analysis presenting variance in net present value (NPV) according to changes in baseline mature Precise Indoor Vine Conditioning (PIVC) vineyard yields and PIVC production costs. Data are presented across three variety and region combinations: Concord in Lake Erie, NY; Cabernet Sauvignon in the San Joaquin Valley (SJV), CA; and Cabernet Sauvignon in the Napa Valley, CA. Three PIVC scenarios are shown for each region: PIVC 1 (25% of partial yield in year 2, full yield in year 3); PIVC 2 (50% of partial yield in year 1, full yield in year 3); and PIVC 3 (50% of mature yield in year 1, full yield in year 2). Vine costs are excluded from all scenarios. All values are in dollars per ha over a 25-yr time horizon with a 5.36% discount rate. Shading is used to visually emphasize economic feasibility: green, economically viable returns; yellow, marginal or break-even returns; red, economically infeasible returns.
The NPV results are sensitive to both parameters, but the relative importance depends on the variety and region. For Cabernet Sauvignon–Napa Valley PIVC 3, NPV declines from $141,532.37 at 100% yield to -$1306.25 at 85% yield, a reduction of $142,838.62. This sensitivity reflects the high value of Napa winegrapes ($9039/tonne); even modest yield reductions significantly affect profitability. Cost variations affect profitability less dramatically than yield variations, but the effects remain substantial. For Napa Valley PIVC 3, a 15% cost increase reduces NPV from $141,532.37 to $3202.36. The Concord–Lake Erie and Cabernet Sauvignon–SJV scenarios, which begin with negative base NPVs, become increasingly negative as PIVC yields decline. Increases in PIVC vineyard production showed a similar pattern.
Table 6 translates the NPV results into maximum price premiums per vine that growers would be willing to pay for PIVC vines above conventional vine costs, showing how yield and cost uncertainties affect the viable price range for PIVC nursery production. The maximum WTP per vine is calculated by dividing the NPV differential by vineyard density, providing nurseries with market price targets.
Sensitivity analysis presenting variance in maximum cost per vine (the price premium growers would be willing to pay for Precise Indoor Vine Conditioning [PIVC] vines above conventional vine costs) according to changes in mature PIVC vineyard yields and PIVC production costs. Data are presented across three variety and region combinations: Concord in Lake Erie, NY; Cabernet Sauvignon in the San Joaquin Valley (SJV), CA; and Cabernet Sauvignon in the Napa Valley, CA. Three PIVC scenarios are shown for each region: PIVC 1 (25% of partial yield in year 2, full yield in year 3); PIVC 2 (50% of partial yield in year 1, full yield in year 3); and PIVC 3 (50% of mature yield in year 1, full yield in year 2). Negative values indicate scenarios where PIVC adoption would reduce grower profitability; positive values indicate viable price premiums. Shading is used to visually emphasize economic feasibility: green, positive premium, market possible; yellow, marginal or break-even outcomes; orange to red, negative premiums, market impossible under these assumptions.
Under baseline assumptions (100% yield, 100% costs), maximum WTP ranges from negative values for all Concord scenarios, to between $0.52 to $7.43 per vine for Cabernet Sauvignon–SJV and between $6.92 to $31.18 per vine for Cabernet Sauvignon–Napa Valley. A 15% yield reduction for mature PIVC vines eliminates the positive WTP for Cabernet Sauvignon–Napa Valley, dropping $31.18 at 100% yield to -$5.99 at 85% yield, a $37.17 decline. Cost increases of 15% have a similar effect. Cabernet Sauvignon–SJV scenarios show positive maximum WTP only under baseline yield or cost assumptions for PIVC 1 and 2, while PIVC remains positive under a 5% yield reduction or cost increase. Concord scenarios are negative under the baseline assumptions and become increasingly negative as yields decline or costs increase.
Discussion
Potential profitability using PIVC as starter plants
Our results indicate that the use of PIVC vines can be more profitable than conventional vines, however this is highly dependent on the variety and region combination and will require substantial reductions in production costs for a commercial operation, compared to the cost per vine calculated in a research setting. The influence of variety and region has also been previously reported when comparing tall vines to conventional vines in California (Kiely et al. 2021). This study surveyed three distinct growing regions and two varieties, representing the broad range of vineyard systems and associated costs of establishment and management in the U.S. Compared to Concord–Lake Erie and Cabernet Sauvignon–SJV, Cabernet Sauvignon–Napa Valley commands a much higher price per tonne and production systems use a higher density of vines per ha, resulting in higher profits for vineyard operations.
NPV analysis revealed that early yields using PIVC vines did not have a strong enough effect on net annual returns for Concord, as costs to manage these vines are also shifted to earlier years, which are greater for more mature vines like PIVC. In addition, the market price of $308/tonne used in the published Concord–Lake Erie cost study was much lower than for winegrapes. NPV was negative for all Cabernet Sauvignon–SJV scenarios, but was less negative for all scenarios when starting with PIVC vines. This suggests that the use of PIVC vines in this type of system could reduce the negative net returns exhibited, and opportunities to reduce other costs could lead to greater profitability. NPV of Napa Valley was positive across all PIVC scenarios, where a high market price per tonne combined with greater vine density than in the other two cases resulted in positive net annual returns. The higher price for winegrapes coming from Napa Valley and the affect that PIVC can have on such high value systems leads us to believe that the use of PIVC vines can be most beneficial in premium grapegrowing regions both in the U.S. and globally.
Limitations include the assumptions related to PIVC yields. We used conservative estimates of PIVC yields in years 1 to 2, however further research is needed to validate expected yields for PIVC vines in different vineyard environments. While growers have expressed concern over harvesting grapevines too early, research supporting this is limited and additional studies on the effect of harvesting fruit from young grapevines, and subsequent growth and yield in future seasons, is needed (Kiely et al. 2021). We also assumed that while PIVC vines are larger than conventional starter vines, they would not result in much higher costs for initial planting. Machinery (such as tractors) used to plant conventional vines is assumed to be the same for PIVC vines, with a potentially larger auger for digging holes. Any extra time or labor to plant PIVC vines that have a larger root system extrapolated over the planting area would not result in significantly higher costs. While the production of nursery vines from a nursery perspective would require some changes in technology, growers choosing between conventional vines and PIVC vines would not need to implement more advanced technology or practices. However, additional data comparing planting and other management costs of PIVC to conventional vines is needed. In addition, the larger root system and overall size of PIVC vines may present a challenge in shipment and transportation to growers. Dormant bare root and green potted vines are small, making it easier to maximize space during shipment. PIVC vines, with a larger root system, trunk, and cordons, naturally require more space and are heavier. Optimizing PIVC vine production to support transportation efficiencies to minimize cost to growers will be necessary and requires further investigation.
Optimizing the nursery production of PIVC vines
The development of a PIVC enterprise budget enabled evaluation of key cost categories to determine areas for optimization of the nursery production of PIVC vines as starter plants for growers. Because costs were based on research conducted at a university, economies of scale available to a commercial grape nursery were not incorporated. For example, material costs were based on actual and published costs of low quantities. Price discounts are often applied when order volumes are high, an aspect not utilized in the research. Labor rates reflected market averages for the time the research was conducted in 2021; current rates would likely be higher. However, labor hours associated with each task could be accomplished in less time with more experienced labor and when tasks are conducted repetitively. Labor hours calculated from the PIVC research were likely conservative and tasks were performed slowly to ensure accurate documentation of our research methods for future replication. In addition, fixed costs represented the highest cost category in conducting the PIVC research, mainly attributed to greenhouse rental costs. Most commercial greenhouses are owned, and depreciation and other overhead costs related to operation of an owned building could be less for larger production areas.
Combined with potential costs expected in a commercial enterprise, sensitivity analysis revealed that vine density during PIVC greenhouse production affects profitability. Vine density under the PIVC research was extremely low and profitability in commercial greenhouse production requires maximizing cost per area (Amundson et al. 2012). This is especially true when supplemental lighting is used, maximizing light interception and reducing the cost per plant. Increasing vine density under all scenarios for each variety and region combination contributed to increasing potential unit profitability. Under the current assumptions, using costs from the PIVC research and maximum vine premiums, Napa Valley was the only potentially profitable system, requiring a minimum PIVC greenhouse production density of 21 vines/m2, or, equivalently, an 85 to 90% reduction in cost per vine. If previously outlined production costs were optimized for a commercial size enterprise combined with increased vine density, PIVC may be more profitable across a wider range of production systems. It is important to note that increasing vine density during PIVC greenhouse production may affect vine size and fruiting capability; additional research is needed to determine optimal density.
Transitioning from nursery production of conventional vines to PIVC vines requires additional automation and environmental controls. For example, many greenhouses that produce green potted vines lack air conditioning to maintain uniform temperatures, utilize mist irrigation versus precise drip irrigation, and do not use supplemental lighting. While the adoption of these technologies requires additional resources to retrofit existing greenhouse structures, their use can deliver earlier yielding grapevines. Several examples exist where the integration of advanced technology in young plant production can enhance available plant material or reduce costs for growers.
Automated grafting nurseries provide a useful, though imperfect, analog to the PIVC system. In both cases, additional inputs at the nursery stage deliver a more advanced, higher-performing plant to the field. Case studies of small-scale, hand-grafted tomato transplant production report costs ranging from $0.59 to $1.25 per plant (Rivard et al. 2010, Barrett et al. 2012). In contrast, another study estimated that a fully automated, high-throughput grafting facility could produce grafted plants for just $0.09 to $0.12 per plant, implying potential cost reductions of 80 to 90% through commercialization and scaling (Lewis et al. 2014).
In addition to the outlined potential economic benefits, PIVC can enhance disease screening, as grapevine transplants can be symptomless carriers of systemic diseases (e.g., a range of grapevine virus diseases). Pre-plant controlled environment agriculture transplant development can further serve as an additional screening tool for early disease symptoms, which can improve longevity of grapevines.
Conclusion
The use of PIVC vines as starter plant material for new vineyard establishment or transplants has the potential to increase profitability, depending on the variety and region. Where production systems are already profitable, PIVC vines can shift returns from year 3 to years 1 to 2, increasing annual net returns. Based on NPV analysis and outlined assumptions, we established the maximum a risk-neutral grower would be willing to pay for PIVC vines. Construction of an enterprise crop budget combined with sensitivity analysis was used to identify areas for optimization of the PIVC system, indicating that materials, labor, and overhead costs could be reduced for commercial nursery production enterprises. Moreover, profitable nursery production requires increased density relative to the research setting. Further research is needed to validate PIVC yields as well as optimize vine density during greenhouse production. With limited value-added starter plants and transplants available to vineyards, PIVC may serve as a new nursery production system, providing vineyards with earlier yields and increased profits.
Data Availability
The data underlying this study are available on request from the corresponding author.
Footnotes
We thank the U.S. Department of Agriculture, National Institute of Food and Agriculture, Hatch project number 1024582 for partial support of this research. In addition, thank you to Dr. Ricardo Hernández and Sam Humphrey for support with electricity calculations related to PIVC lighting use.
Freedman KA, Hoffmann M and Tregeagle D. 2026. Conditioning preplant grapevines using controlled environment agriculture can reduce vineyard establishment time. Am J Enol Vitic 77:0770004. DOI: 10.5344/ajev.2025.25012
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- Received November 2024.
- Accepted October 2025.
- Published online February 2026
This is an open access article distributed under the CC BY 4.0 license.
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