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October 2017 WINES&VINES 59 PRACTICAL WINERY & VINEYARD BARRELS quires fewer dollars to buy one euro. This cre- ates a counter-effect in terms of costs over time: Although the barrel price in euros has increased, the dollar is stronger, and thus total costs for wineries could potentially have decreased over time. The question, therefore, is does the dollar follow a predictable pattern in relation to the timing options for purchasing wine barrels? It is important to note that, unlike other goods and services, the price of barrels does not change throughout the year: The "catalog" price and quoted discount are constant during a given year. In discussions of purchasing, especially for wine barrels, storage costs are significant. How- ever, in some options we consider storage costs do not differ by taking the early order discount, and for simplicity we do not consider additional storage costs for the others. The 15-year history of wine barrel costs by purchasing decision (this page) depicts the an- nual costs to a hypothetical winery that pur- chased 100 Taransaud Ref 102 oak barrels at Tim Mondavi's price. Note that no single strategy is always optimal from year to year, however, the discounted price tends to be significantly lower than other options—sometimes with payment in September being better overall and in others early payments in April. This is likely easier to see in chart form, as presented in the table on page 60. Late payment in October provided a better outcome only one year out of the 15 years, while overall savings compared to the standard delivery and payment option for both early dis- count options was more than $78,000. It is worth recasting the entire question. When purchasing euro-denominated barrels, a winery that does not take the early discount is betting that the exchange rate will fall (it will require fewer dollars to purchase one euro) more than the cost impact of the early purchase dis- count. The graph "Fifteen-Year History of Winery Barrel Costs by Purchasing Decision" shows that, historically, this belief has been a bad bet. There is real value in the certainty of the early discount. One can cite the 1546 proverb: "Better one byrde in hande than 10 in the wood." Thousands $120 $100 $80 $60 $40 $20 $0 FIFTEEN-YEAR HISTORY OF WINE BARREL COSTS BY PURCHASING DECISION 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 The lines indicate each scenario for barrel ordering and payment analyzed in the text. n Discounted Paid April n Discounted Paid September n Due Sept. 1 n Due Oct. 1 Year