BrightFarms stated that each of the new greenhouses would employee 55 people. Based on a 280,000 square foot greenhouse, the total cost to grow would be just over $3.0 million per year for 2 million pounds of greens or $1.52 per pound. Growing Costs ($1.52 / lb.): Per AmHydro, a leading consulting firm to the agriculture industry, it costs $31,244 per year to grow crops in a 2,880 square foot greenhouse, or $10.85 per square foot. Based on $1.22 million of annual depreciation and 2 million pounds of annual growth, depreciation of total upfront costs is allocated at $0.61 per pound of production. For analytic purposes, a 15-year straight-line depreciation of the upfront costs is used, with no remaining residual value, or $1.22 million of annual depreciation. Upfront Costs ($0.61 / lb.): In June 2018, BrightFarms raised $55 million to build three greenhouses ($18.3 million per greenhouse), each of which will be 280,000 square feet and grow 2 million pounds of greens annually. Due in large part to advancements in technology, my research ended up showing something different than my hypothesis.Ĭost of a commercial greenhouse (further outlined in Appendix A) Prior to my research on the two farm types, I hypothesized that vertical farms had a higher upfront cost and a lower ongoing growing cost compared to greenhouses. Greenhouses and vertical farms each have different benefits that should be prioritized based on location, product type, access to capital, human resources and other requirements. What is preferable – greenhouse or vertical Farm? Therefore, the lettuce can be grown in a greenhouse or vertical farm and sold at retail for $2 to $3 per head.Īlthough greenhouse or vertical farming is three to five times more expensive than growing on a conventional outdoor farm, it still allows for competitive pricing to the consumer with other vegetables and sides. A typical head of bibb or butter lettuce weighs less than half a pound. My research indicates the following costs per pound to grow and deliver greens grown in each of the following formats (including depreciation): Conventional outdoor farmĪssuming a 40-45% gross margin for a typical supermarket produce department, retail prices for greens would need to be approximately $1 a pound for conventional, $4 a pound for greenhouse, $5 a pound for vertical, and $12 a pound for container-grown. Per AeroFarms website, this vertical farm is the largest in the world in terms of annual capacity. AeroFarms operates a 70,000 square foot vertical farm in Newark, NJ which can also produce in the range of 2 million pounds of greens per year. Each of these greenhouses will be 280,000 square feet and produce in the range of 2 million pounds of greens per year. Efficient deployment of further technology and capital into each of these growing structures will allow the farms to get ever closer to fulfilling consumer demands.Īs illustrated below, I researched a prominent domestic greenhouse grower, BrightFarms, and a prominent domestic vertical farm grower, AeroFarms.Ĭurrently, BrightFarms has several greenhouses and recently announced it is building additional greenhouses in Massachusetts, New York and California. If conventional and container farming are on opposite sides of the spectrum in price versus quality, what alternative forms of growing can meet the demand of today’s consumer?īased on my research, greenhouse or vertical farm growing, or a combination of the two, can get farmers close to meeting the needs of today’s consumer. My research concludes that today’s consumer would like to buy produce with the following attributes: competitively priced locally grown tastes fresh and is healthy available at same location where other shopping is currently done – “one-stop shopping” and year-round availability. Unless the industry can change the consumer mindset to pay the significant differential (much like what Starbucks did to the brewed coffee market), container farming is likely to remain a niche industry. However, it will be approximately 10 times more costly to grow and deliver. My conclusion was that the consumer can get both a hyper-local and superior product from a container farm. In February 2019, I published an article comparing the cost of growing and delivering greens on a conventional farm, to growing them in a container farm. He was also an investment banker for over 10 years. Editor’s note: Peter Tasgal is an agriculture consultant with former experience as CFO and board member of a $100 million CPG business headquartered in Montreal, Canada.
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