Grape growers are up against some serious challenges as consumer trends evolve and the market for wine flattens. Declines in wine consumption, driven in part by evolving consumer demographics, competition from other alcoholic beverage options and lifestyle shifts toward non-alcoholic options, will require winegrape growers to be extremely diligent with their finances to protect themselves against financial pressures and the potential for a downturn.
The ag market in general is volatile. Farm income was down in 2024 for the second year in a row, with profitability also declining for the third straight year. In their February forecast, USDA projected farm income to rebound a bit in 2025, but many growers have used up their financial reserves carrying themselves through the last few years. Financial institutions are responding to the market with tighter credit thresholds, so growers will have a harder time accessing capital this year than in recent history.
All this is setting the stage for a tough year. To respond, here are tips to help leverage every dollar and minimize the impact of a downturn on your financial position.
Be Strategic in How You Manage Your Capital to Maximize Cash Flow
Growers need access to capital throughout the year for a variety of things, including bill pay, operating expenses, land purchases, equipment costs and vineyard nutrition and protection products. Financially minded growers take advantage of various forms of capital such as cash, prepay, bank lines of credit (LOCs) and financing programs offered by retailers. Each offers unique benefits to pay for things they need in the most profitable way. You can create more financial flexibility by using diversified sources of capital to cash flow your vineyard.
In a lot of cases, you can pay for operational expenses with a combination of both a bank LOC and financing offers from retailers. For example, using retailer financing to pay for crop nutrition and protection products frees up your bank LOC to help cover other expenses like labor and fuel, which are not as easily financed. With interest rates from retailers varying between 1.9% to 4.9% APR and payment due dates in late 2025, you incur nominal interest expense to access other benefits. These include financing aligned with your crop schedule, cash preservation and improved cash flow throughout the season. More financial flexibility to leverage your budget on a variety of expenses is a tremendous advantage when times are tough.
Pay Attention to Details in Your Financial Plan to Boost Profitability
When times are good, growers have a little more latitude when it comes to counting their pennies, but when the market softens, you must tighten up your financial plan and be smart about where your budget is going. The financial details involved in running a successful vineyard can be complex, but it’s important to spend your time and energy there to reach your profitability goals.
The following are a few areas where the details can really affect your bottom line if you don’t pay attention.
Financing terms
Look closely at the terms of any financing offers you use and work to align your payment schedule so bills come due when you have revenue to pay for them. It’s very common for growers to hone in on interest rates and shop for the lowest possible rate on a loan, but in many cases the terms of a loan can have a greater impact on your bottom line. For example, you might see an attractive offer for 0% APR, but if you look closely at the fine print that 0% might be a marketing tactic to use a promotional rate for a set period of time. After that period, the trailing rate jumps way up above double digits. If you calculate total interest expenses for the entire term of the loan, you’re probably netting out somewhere in the 9%- to 10%-APR range, which is much higher than if you went with a still-low 4% fixed APR rate.
Contract status
2025 may be a good year to think about adding more certainty to your budget and securing contracts early to stay focused on cost savings, which can improve your profitability ratio. Most growers operate with a processor contract, which is a good practice to help solidify a marketing plan and provide clarity on your breakeven point. Locking in those contracts early will give you more time for budget strategy and assessing cost-controlling measures to cushion that breakeven point.
Expense reduction
Look at your options to reduce expenses and manage operational costs, which are still trending higher because of the economic climate and inflationary pressures of the last few years. Even small savings will compound quickly, which can support contingency plans and provide a financial cushion to carry you through periods of decline.
Stay the Course with Optimism and Resolve
Grape growers are at the mercy of many variables beyond their control this year, but don’t forget all the things you can do to directly impact your odds for success in 2025. It comes down to your perspective and staying optimistic by focusing on things you can control like your finances and the expectations you set for yourself. Market conditions may not be favorable, but you can plan for that and adapt your response. With smart money management and strategic use of capital, your vineyard can still be profitable in a down market.
Jacquelyn Fernandes is a territory manager with Nutrien Financial. She provides financing expertise to growers throughout California and Arizona to increase their buying power and maximize every opportunity for success. Learn more at NutrienFinancial.com
Resources
State of the U.S. Wine Industry Report 2025: svb.com/trends-insights/reports/wine-report/
Farm Sector Income & Finances – Farm Sector Income Forecast: ers.usda.gov/topics/farm-economy/farm-sector-income-finances/farm-sector-income-forecast
