Sherman;
The figure most growers I've talked to use is 150 gal of
wine per ton of grapes. This works out to closer to 167 tons of grapes to
give 25000 gal of wine at about 13% ABV (depending on Brix).
I don't know the average yield per acre in KY, but 4 tons/acre would require a bit over
40 acres of vines. This may make your figures look a bit more attractive to
farmers.
Again, I don't know the cost of lower quality grapes there, but at
$800-$1200/ton, the total value in grapes is about $132,800-$199,200.
That works out to be $5-$8/gallon of wine (cost of goods). The winery also needs to make
a profit, so buying wine would cost a bit more.
The most recent study in CA (2008, UC Davis) suggest that the profitability per acre is poor right now, something like $1-2K/acre if I remember correctly (for average yield and price). This is roughly half the value of the grapes. Not sure what it's like in your area, or if that's enough to get anyone excited. I'm still trying to figure out the total costs in my area, but the rule-of thumb I've heard here is also half the sales price (after the initial investment), or about $2K/acre plus a bit.
At $1200/ton and 4tons/acre = $4800/acre, you can see how this works out close to the $2K/acre given by the recent UC Davis analysis. Vineyards smaller than 40 acres better be making wine (or brandy) to sell at 5x the cost if they want to make a profit!
As you can see, lower cost grapes would make the profitability even worse for the grower.
These are just some quick figures, your mileage may vary. :-)
Brett