Written by Riyana Razalee
This is a 3-part article series on the topic of farm economics for soilless (hydroponic) farms
Research and reports have consistently shown that consumers today are looking for local, fresh, healthy, and sustainably grown food. An additional aspect that is equally as important is ensuring that the food is competitively priced. Farms, therefore, are not only challenged to fill a growing need for food supply but to do so while taking into consideration their own farm economics and pricing strategies. With a range of variables to consider, ranging from nutrient management to water and energy utilization, soilless farmers need to plan for a comprehensive analysis when planning their business. However, there are other aspects which can be analyzed fairly easily when it comes to soilless farming/hydroponic costs, which we have detailed below.
For the purpose of this article, we have used CropKing’s hydroponic business plan and combined it with our own analysis.
Case Study: Lettuce & Tomato Production for a 11,264 square foot Soilless (Hydroponic) Farm
Making the Shift to Organic
Based on the table above, a typical greenhouse farm can expect gross profit margins that range from 50% - 65% for lettuce and tomatoes. However, if a farm employs organic farming techniques, their gross profit margins immediately increase to 60%, on average, as the image below indicates. An evident opportunity to increase net income presents itself to soilless (greenhouse) farmers as they analyze their operational economics and consider ways to maximize their gross profit margins.
Our farms have considered growing organically for the following reasons. Perhaps, you can agree:
- The interest in operating a more profitable farming enterprise
- To produce a highly differentiated product and brand
- To operate a carbon-neutral farm
- To produce a product that may receive organic and sustainable brand recognition without the costly USDA organic certification and compliance
- To operate closed-loop while lowering costs and having better control of their growing ecosystem
What We’ll Cover In Part 2: Fertilizers and Its Impact on Soilless (Hydroponic) Costs
It is important to note however that this analysis is based on conventional farm economics whereby the main goal is to focus on profit maximization. The driving principle is that higher profit leads to higher economic standards of living and levels of satisfaction stemming from the optimum allocation of scarce resources. Items that inherently do not hold economic value however are not considered when analyzing efficient farm economics. Examples of this range from soil health to responsible water management. These examples unfortunately are subject to external agriculture inputs that have not been considered in this economic analysis, such as the usage of synthetic mineral salts as fertilizers.
In our following article, we will address how farms can consider using water-soluble, organic hydroponic nutrient alternatives to synthetic mineral salts, and to compare what this may look like from an economic perspective for soilless farms. We will explore how Re-Nuble has achieved this and how we significantly decrease the cost of goods for soilless farms while improving their gross margins for the production of more profitable organic, closed-loop produce.
We, of course, review the above assessment with the lens of our experience in creating an organic hydroponic nutrient that will not increase soilless (hydroponic) farming costs. Rather, our technology can demonstrate a potential increase to the net income of soilless farms given that our fertilizers are more cost-effective than mineral salts. For farms that believe this may be of benefit to their operations, we invite you to connect with us here.
Written by Riyana Razalee & Tinia Pina