Friday, April 15, 2016

Are Whiskey Warehouses 'Agricultural'?

Warehouses at the Willett Distillery (Bardstown) back in the day.
The Lexington Herald Leader reported Wednesday that Brown-Forman wants to build twelve bourbon warehouses near Midway on land zoned for agricultural use. This raised the question of whether or not bourbon aging is an agricultural pursuit. The site is in Woodford County and would serve Brown-Forman's Woodford Reserve Distillery. The warehouses will be built over a 12-year period. When completed they will have a capacity of 900,000 barrels.

Before it can go forward, the proposal must be approved by the Woodford County Board of Adjustment, which has forwarded it to the county's Agricultural Advisory Review Committee. Some members have expressed skepticism. “It does seem kind of a stretch to call the making of bourbon an agricultural enterprise,” said one of them.

Bourbon warehouses can be built close together in an industrial park or other places zoned for industry, but a site with lots of land where the buildings can be widely spaced has advantages. It is safer from the standpoint of fires, and good for the whiskey because of better air circulation. A rural site with few neighbors avoids complaints about the inevitable harmless black fungus that always grows near whiskey warehouses. Using land zoned for agricultural use also has tax advantages.

If bourbon aging is not an agricultural activity, it would be equally hard to call it an industrial activity. No processing is done on the whiskey in the warehouses. No machines are involved. There are no moving parts. Rural warehouses, unlike urban ones, have no climate controls beyond opening and closing the windows. Putting new barrels in and taking mature barrels out is just about the only activity.

If bourbon aging is not an agricultural use, it is certainly compatible with such use. At the Four Roses warehousing site at Cox's Creek, cows graze on the grass between buildings.

When Kentucky was a major producer of tobacco, nobody argued that tobacco warehouses were not an agricultural use.

The reality is probably that bourbon aging is a unique land use, not anticipated in normal distinctions between agricultural, industrial and commercial classifications. If any state can sort that out and accommodate it correctly, that state should be Kentucky.

As a footnote, this is another example of the fine job the Lexington Herald-Leader does covering the state's whiskey-making business. They are the best in the state.


Erik Fish said...

One can certainly argue the point, but one can also look for problems where there aren't any. Involving 100 % grain with nothing but water added, it certainly is no stretch to classify the production and storage of whiskey as an agricultural activity, particularly if one remembers the origins of American whiskey production as a way for farmers to handle surplus grain in barn stills.

Red_Dog_in_VA said...

It's a silly discussion. In the end, it's all about tax dollars and jobs versus the NIMBY people. Call it what you want, but just do it, or don't.

Anonymous said...

Even more basic than all this rhetoric, is the fact that it doesn't need to be an issue between agricultural or industrial. All that needs to be done is the submission of a rezoning application to change the property to "commercial" use zoning. Typically, all it takes is money and lobbying. In most jurisdictions, councilmen, mayors, and board of supervisors are ecstatic to have a new commercial tax payer. The debate between agricultural and industrial is a moot point.

Christopher said...

This is an interesting topic to the very small, but growing, group of whiskey distilleries actually engaged in the farming of their own grain or those, particularly in New York, operating under a license class restricting them to the use of some minimum amount of in-state grown grain (in NY that minimum is 75%.)

Certainly, a distillery that is growing its own grain on-site to turn into whiskey on-site can make a very compelling case for pretty much every aspect of their process to fall within any state of local rubric defining "agricultural use." Slightly more challenging to defend in this way, but not by much, would be a distillery using in-state grown grain to conform to a license class requiring them to do so. Such license classes are designed by the state to bolster the agricultural sector, and, as such, should confer some measure of agricultural privilege to the distillers operating within those limitations.

Now consider Brown-Forman, a massive industrial distillery that grows nothing it uses and predominantly utilizes aggregated commodity GMO corn from the grain elevators of the midwest. Is that corn farmed? Of course. But so is all the corn that gets turned into high fructose corn syrup. Does that make the warehouses that store Pepsi "agricultural" facilities? And yes, I realize that warehousing of bourbon adds value, but does that argument really apply? Tobacco, as you mentioned, also gets stored and aged, but that typically happens on the farm it was grown on prior to sale to the giant cigarette manufacturers. That's value added by the farmer and thus agricultural in nature.

The other thing to consider is that if warehousing bourbon is an inherently agricultural process, then wouldn't that imply that every step preceding warehousing is an agricultural process as well, and due all the same agricultural exemptions? The only alternative is that the corn enters the distillery as an agricultural product, transforms into an industrial/commercial product during fermentation and distillation, and then inexplicably transforms back into an agricultural product as soon as it goes into the barrel. That seems like a stretch to me.

Chuck Cowdery said...

Your statement that Brown-Forman is "a massive industrial distillery that grows nothing it uses and predominantly utilizes aggregated commodity GMO corn from the grain elevators of the midwest," is at best an overstatement and at worst a falsehood. All of the Kentucky distilleries buy corn directly from Kentucky farmers to the extent those farmers can supply them. What they can't source from local farmers they buy from elevators, who also buy from local farmers but on a larger scale. Some use GMO, some specify non-GMO, which hardly seems relevant to the agricultural classification question. Whether or not the distillery grows any of its own corn, like Buffalo Trace does, also has no relevance.

All of that said, warehousing is clearly not an agricultural process in any normal sense but I think it should be allowed to take the agricultural tax rate (which is what this is all about) because it is so valuable to Kentucky agriculture and to Kentucky's economy in general.

Chuck Cowdery said...

All of them use #2 dent corn, which is of course a commodity, whether it is purchased directly from the farmer or via an elevator.

Christopher said...

Chuck: mea culpa if I overstated or completely misunderstood the sourcing of corn at Brown Forman or the other Kentucky distilleries. To the extent that these major purchasers of Kentucky grown agricultural product are keeping farmers on the right side of their mortgage lenders, I applaud them.
My primary point was not to question the choice of variety or methodology--an issue equally fascinating and tied up with concerns about sustainability and environmental impact--just the notion that distilleries on this scale, that don't actively farm, can suggest that they are engaged in agriculture. By that logic, Gulden's Mustard could claim to be a farm because, you know...mustard seeds.

Harry said...

"Agricultural activity" means . . .

Years ago, in another incarnation, I was involved in drafting federal banking regulations applicable to banks (and other depository institutions) lending to entities engaged in "agricultural activity". Not being part of the US Dept of Agriculture, we, of course, looked to the USDA for guidance. Bottom line: we learned that the complex nature of "agriculture" in the US of A allowed for no single definition. At least since 2006, the USDA has defined a "farm" for some purposes as any entity that grew one of more of the following: 4 acres of corn, 5.24 cares of soybeans, 8.33 acres of wheat, 1 milk cow, six hogs, or five horses. See -

IN SUM - If the State wants to say B-F is engaged in "agricultural activity" by building rickhouses, who are we to argue? Certainly, the USDA has a definition someplace that covers this.

Chuck Cowdery said...

My point precisely. "Agricultural use," for assessing taxes, is whatever the Commonwealth of Kentucky, in its wisdom, says it is.