Is That Opportunity Knocking? Every year New Yorkers eat an average of 18 pounds of fresh tomatoes per person, and 95% of those tomatoes travel more than 2,000 miles before consumption. Yet demand for local food has grown from $1 billion to $7 billion in the last 9 years. In April 2015, a group of stakeholders gathered with Dr. Neil Mattson at Cornell to discuss how to grow NY’s CEA industry.
New York’s short growing season and large population base make CEA, year-round vegetable production in temperature-controlled greenhouses, a strong business opportunity for a wide range of operators. Many field vegetable growers are seeking to better understand the economics before committing to CEA as a diversification strategy for their current enterprise; while other interest is from entrepreneurs that are seeing opportunity created by newer technologies and increasing demand for local foods. Additionally, many of New York’s Regional Economic Development Plans have identified CEA as part of their strategy, spurring even more interest in the practice.
In October 2015, Mattson and his team were awarded USDA Specialty Crop Block Grant funds administered by the New York State Department of Agriculture and Markets in partnership with NYFVI, to help turn the interest they were hearing into viable business plans. They worked in four areas: consumer research to validate the premium price point these products must command; the development of online interactive business tools that provide estimated production costs for lettuce and tomatoes; surveying retail/wholesale produce buyers to better understand how CEA could fit in their supply chain; and planning a two day conference to convey the knowledge the team built.
The first step was to fully understand the consumer’s perspective and ensure that the halo of buying local extended to CEA production. The team developed a unique experimental model that provided consumers with a fixed amount of money to shop. Willingness to pay for New York field grown and New York greenhouse grown versus out of state field grown or out of state greenhouse grown products was established. Beefsteak tomatoes and baby lettuce mix were both evaluated.
The conclusion? Consumers are willing to pay 30% price premiums for New York State grown tomatoes and 18% price premiums for New York State grown baby lettuce mix.
Once the demand was fully validated, the next step was to build an interactive spreadsheet that allows potential operators to modify the inputs of a model farm and to have an estimate of the capital expense, operating expense, revenue, and profitability. The tables and figures change as the variables are modified. Users own management system, available resources, and location can affect the performance of the operation. Users can experiment with their own yields, inputs, and prices to develop a budget that will accurately represent their own operation.
Next the team worked to understand how to position CEA grown products within the supply chain. They surveyed a range of produce buyers from institutions, restaurants, and supermarkets. Their findings? Just like consumers, buyers associate local products with freshness and believe price premiums are possible for a local, year-round product. Buyers also expressed interest in a wider range of CEA products beyond tomatoes and lettuce.
Resource sheets to help potential operators understand the importance of critical decision points such as site selection, lighting and energy costs were also developed.
The project culminated with a detailed two day entrepreneur workshop bringing together 33 new/transitioning CEA entrepreneurs along with the CEA industry advisory board in November 2017. The goal is for ten of the attendees to establish new CEA vegetable production operations, annually employing more than 25 individuals and generating $5 million in wholesale farm gate value.
Attendee feedback via the conference evaluation survey was strongly positive for the growth of the industry. Respondents indicated plans for a total of 90 acres and 359 full time positions.
“How fantastic to see individuals from all corners of the industry come together to share their knowledge and learn from each other. ”Ashleigh deCarr, Bright Water Farms
Utica, New York