This is Part III of a 3-part article series on the topic of farm economics for soilless (hydroponic) farms
In Part I of our farm economics series, we shared a high level analysis of the typical costs that can be expected from a hydroponic (or soilless) farm growing lettuce or tomatoes. Whereas in Part II, we identified overlooked externalities which should be factored into a farm’s decision making process about shifting away from synthetic (conventional) mineral salts as a nutrient source for plants.
What We Know So Far
It’s safe to say, based on the first two parts of our economic series, we can conclude that
- Organics is a market that soilless farms really need to tap into
- Using organic hydroponic nutrients such as our Away We Grow© 4-1-1 (Concentrate) product can significantly reduce a farm’s carbon footprint and the need for constant water flushing
So from a farm economics perspective, this may present the case that a farm should take the bold step towards a fully organic hydroponic nutrient? While we can’t speak for all organic products, we can certainly share some insight based on our own product, Away We Grow© 4-1-1.
#1: Organic Hydroponic Nutrient = 20 – 60% Profitability Increase
A farm can expect to spend $0.40 for each gallon of water in their stock tank of our organic Away We Grow© liquid nutrient concentrate (its usage/application rate is 4 mL per gallon).
In full transparency, we openly recognize that this is slightly higher than mineral salts costs (that tend to vary according to needs). However, we’re playing the long game with farms. What does this mean? We’re helping farms differentiate their brands and enter the organic category while demonstrating their commitment to reducing their usage of mineral salts and increasing their bottom line substantially.
By enabling soilless farms to consistently and reliably deliver organic production using Away We Grow, our farms become positioned to gain from the subsequent increase in overall farm profitability by 20 – 60% from organic production. How did we figure this out?
For a 1-acre hydroponic farm with a 5,000 gallon stock tank, based on our estimates such a farm will use 40 doses of our Away We Grow© product per month. Estimates are used as because environmental conditions vary widely for each farm. This farm will then generate 300,000 lb of leafy green produce (Butter Lettuce) annually and therefore may expect to spend $2.45 as an all-in delivered cost per pound that can be sold at non-organic prices of $3.50 – $5.00 per lb to wholesale buyers. The consumer-driven organic premium enables a 20 – 60% higher profit (estimated at least $6.53 per lb wholesale). It’s important to note that these values are based on projections from the premium that Organic food commands over conventional prices and may vary according to multiple factors.
"This farm will then generate 300,000 lb of leafy green produce (Butter Lettuce) annually and therefore may expect to spend $2.45 as an all-in delivered cost per pound that can be sold at non-organic prices of $3.50 – $5.00 per lb to wholesale buyers."
#2: Lower Carbon Emissions = Increase Sales & Investor Market Value
It’s a known fact that companies with strong sustainability standards lead to fewer risks and a more resilient business. By taking vegetative food byproducts and turning it into water-soluble organic hydroponic nutrients, we are helping farms transition to more circular production methods without having to worry about the setbacks that usually come with using organic products. From a carbon emissions standpoint, farms are able to remove 4 metric tons of CO2e per year for every acre of a soilless farm that is served with Away We Grow©.
What does this mean from a numbers perspective? Besides being able to capitalize on increased brand equity, farms can potentially improve sales. Take the example of Just Salad. When they added carbon labels to their menu last September, sales of their “low carbon food” jumped by over 20%. As more and more companies (eg: Unilever) incorporate this into their business model, it makes economic sense for farms to show that they aren’t just greenwashing their customers but that they’ve been taking the right steps for a while.
"From a carbon emissions standpoint, farms are able to remove 4 metric tons of CO2e per year for every acre of a soilless farm that is served with Away We Grow©."
To add to this, for farms that are considering going public at some point, Away We Grow’s reduction of a farm’s carbon emissions could lead to improved market capitalization. MSCI data showed that the top 30 corporations that reduced their carbon emissions between 2015 to 2018 saw a market capitalization increase of 15% as of September 2020 vs September 2017. On the other hand, the top 30 companies that increased their carbon emissions from 2014 to 2018 saw their market cap decrease by 12% over the same period.
While we cannot explicitly state the economic returns that a farm may get from the 4 metric tons of CO2e reduced per year for every acre of a soilless farm that is served with Away We Grow©, we can confidently say that it will positively affect a farm’s bottom line.
How Can We Help?
Ultimately, our mission is to help global agricultural communities reimagine localized food waste for more sustainable, environmentally-friendly growing practices. However, we are cognizant that farms need to be mindful of their economics. We know there are a lot of things to consider and we’re always here to help. Let’s chat.