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THE ECONOMIC FEASIBILITY OF GREENHOUSE-GROWN BELL PEPPER, STRAWBERRY AND CUCUMBER AS AN ALTERNATIVE TO FIELD PRODUCTION IN
FLORIDA
By
JAMES EDWARD WEBB
A THESIS PRESENTED TO THE GRADUATE SCHOOL OF THE UNIVERSITY OF FLORIDA IN PARTIAL FULFILLMENT
OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF SCIENCE
UNIVERSITY OF FLORIDA
2007
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© 2007 James Edward Webb
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ACKNOWLEDGMENTS
I would like to thank my wife, parents and all of my professors who supported and aided
me in the completion of my research and the pursuit of my master of science degree.
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TABLE OF CONTENTS page
ACKNOWLEDGMENTS ...............................................................................................................3
LIST OF TABLES...........................................................................................................................7
LIST OF FIGURES .......................................................................................................................11
ABSTRACT...................................................................................................................................12
CHAPTER
1 INTRODUCTION ..................................................................................................................14
Problem Statement..................................................................................................................14 Objectives ...............................................................................................................................15 Testable Hypotheses ...............................................................................................................15 Research Scope.......................................................................................................................15
2 LITERATURE REVIEW .......................................................................................................17
Overview of Greenhouse Vegetable Production Industry ......................................................17 United States....................................................................................................................17 Mexico.............................................................................................................................19 Canada .............................................................................................................................21 The Netherlands...............................................................................................................23 Spain ................................................................................................................................24 Italy..................................................................................................................................27 Japan ................................................................................................................................27 China................................................................................................................................28
Production of Greenhouse-Grown Bell Peppers, Strawberries and Cucumbers in Florida....30 Bell Pepper ......................................................................................................................30 Strawberry .......................................................................................................................32 Cucumber ........................................................................................................................33
Budget Simulation Modeling..................................................................................................36 Feasibility of Production.........................................................................................................37 Summary.................................................................................................................................37
3 THE ECONOMIC FEASIBILITY OF GREENHOUSE-GROWN BELL PEPPERS AS AN ALTERNATIVE TO FIELD PRODUCTION IN NORTH-CENTRAL FLORIDA ......39
Field Production of Bell Peppers in Florida ...........................................................................40 Probabilities and Risk for Greenhouse Colored Type Bell Pepper Production Using
SIMETAR© in North Central Florida ................................................................................42 Methods ..................................................................................................................................43
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The Use of Stochastic Variables in a Simulation Model to Estimate Key Output Variables (KOV)..........................................................................................................43
Greenhouse Structure Used in the Production of Color Type Bell Peppers in North Central Florida .............................................................................................................45
Crop Systems Used in the Production of Colored Type Bell Peppers ............................46 Wholesale Bell Pepper Fruit Prices.................................................................................46 Enterprise Budget Analysis of Greenhouse-Grown Colored Type Bell Peppers............48 Estimated Costs of Production for Growing Greenhouse Colored Type Bell Peppers...49 Sensitivity Analysis for the Production of Greenhouse-Grown Colored Type Bell
Peppers.........................................................................................................................51 Break-Even Analysis for the Production of Greenhouse-Grown Colored Type Bell
Peppers.........................................................................................................................51 Heat Loss Calculations for a 1.0 Acre Greenhouse Bell Pepper Production in North
Central Florida .............................................................................................................51 Field Budget Analysis for Bell Peppers in Florida..........................................................54 Probabilities and Risk in Field Production Using SIMETAR©......................................55
Results.....................................................................................................................................56 Scenario Analysis Used to Analysis Red, Yellow and Orange Greenhouse-Grown
Bell Pepper Production System in North Central Florida............................................56 Probabilities and Risk Results for Greenhouse Colored Type Bell Pepper
Production Using SIMETAR© in North Central Florida ............................................57 Analysis of Florida Field Budget Simulation..................................................................59 Probabilities and Risk in Field Production Using SIMETAR©......................................59
Discussion...............................................................................................................................60 Summary.................................................................................................................................63
4 THE ECONOMIC FEASIBILITY OF GROWING ORGANIC AND CONVENTIONAL GREENHOUSE STRAWBERRIES AS AN ALTERNATIVE TO FIELD PRODUCTION IN FLORIDA...................................................................................96
California and International Pressure on Florida Strawberry Production ..............................97 The Production of Organic Strawberries as an Alternative to Conventional Production.......98 Methods ..................................................................................................................................99
The Use of Stochastic Variables in a Simulation Model to Estimate Key Output Variables (KOV)........................................................................................................100
Greenhouse Structure and Crop Systems Used in Growing Strawberries in North Central Florida ...........................................................................................................100
Wholesale Strawberry Fruit Prices................................................................................101 Enterprise Budget Analysis of Greenhouse-Grown Strawberries .................................102 Estimated Costs of Strawberry Production for a 1.0 Acre Greenhouse in North
Central Florida ...........................................................................................................103 Sensitivity Analysis for the Production of Organic and Non-organic Strawberries .....105 Break-Even Analysis for the Production of Organic and Non-organic Greenhouse-
Grown Strawberries ...................................................................................................106 Heat Loss Calculations for a 1.0 Acre Greenhouse Strawberry Operation in North
Central Florida ...........................................................................................................106 Budget Analysis for Florida Field Production of Strawberries .....................................107
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Scenario Analysis Used to Analyze Organic and Non-organic Greenhouse-Grown Strawberry Production System in North Central Florida...........................................108
Results...................................................................................................................................109 Results from Scenario Analysis Used to Analyze Organic and Non-organic
Greenhouse-Grown Strawberry Production System in North Central Florida ..........109 Probabilities and Risk for the Production of Greenhouse-Grown Strawberries Using
SIMETAR©...............................................................................................................109 Field Strawberry Budget Simulation Analysis ..............................................................111 Probabilities and Risk in Strawberry Field Production .................................................112
Discussion.............................................................................................................................112 Summary...............................................................................................................................115
5 THE ECONOMIC FEASIBILITY OF GREENHOUSE-GROWN CUCUMBERS AS AN ALTERNATIVE TO FIELD PRODUCTION IN NORTH-CENTRAL FLORIDA ....154
Field Production of Cucumbers in Florida ...........................................................................155 Methods ................................................................................................................................156
The Use of Stochastic Variables in a Simulation Model to Estimate Key Output Variables (KOV)........................................................................................................156
Greenhouse Structure Used in the Production of Greenhouse-Grown Cucumbers in North Central Florida.................................................................................................158
Wholesale Greenhouse Cucumber Fruit Prices .............................................................158 Enterprise Budget Analysis of Greenhouse-Grown Cucumbers ...................................159 Estimated Costs of Production for Growing Greenhouse Cucumbers ..........................160 Sensitivity Analysis for the Production of Greenhouse-Grown Cucumbers.................162 Break-Even Analysis for the Production of Greenhouse-Grown Cucumbers...............162 Heat Loss Calculations for a 1.0 Acre Greenhouse Cucumber Operation in North
Central Florida ...........................................................................................................162 Field Budget Analysis for Cucumbers in Florida..........................................................164
Results...................................................................................................................................164 Simulation Analysis Used to Analyze a Greenhouse-Grown Cucumber Production
System in North Central Florida ................................................................................164 Probabilities and Risk for Greenhouse Cucumber Production Using SIMETAR© in
North Central Florida.................................................................................................165 Analysis of Florida Field Budget Simulation................................................................168 Probabilities and Risk in Field Production Using SIMETAR©....................................168
Discussion.............................................................................................................................169 Summary...............................................................................................................................171
6 CONCLUSION.....................................................................................................................198
APPENDIX: ASSUMPTIONS....................................................................................................202
LIST OF REFERENCES.............................................................................................................204
BIOGRAPHICAL SKETCH .......................................................................................................209
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LIST OF TABLES
Table page 3-1 Monthly average dollar per pound wholesale price of colored bell peppers from
select countries 1998-2005 ................................................................................................65
3-2 Value of U.S. imports, from various countries, of bell pepper, 2000-2004.......................66
3-3 Wholesale greenhouse price comparison or red, yellow and orange bell peppers averaged from New York, Atlanta and Miami terminal markets 1998-2005 ....................67
3-4 Yield comparison of various color greenhouse-grown bell pepper types used in the GRKS distribution function ...............................................................................................68
3-5 Monthly marketable fruit yield, average wholesale market prices and gross revenues in a typical fall to spring greenhouse-grown red bell pepper crop in Florida with a total estimated yield of 1.96 lbs/ft2. ...................................................................................69
3-6 Monthly marketable fruit yield, average wholesale market prices and gross revenues in a typical fall to spring greenhouse-grown yellow bell pepper crop in Florida with a total estimated yield of 1.89lbs/ft2. ....................................................................................70
3-7 Monthly marketable fruit yield, average wholesale market prices and gross revenues in a typical fall to spring greenhouse-grown orange bell pepper crop in Florida with a total estimated yield of 1.66 lbs/ft2. ...................................................................................71
3-8 Estimated fixed cost of production for a 1.0 acre greenhouse growing bell peppers in North Central Florida.........................................................................................................72
3-9 Estimated variable cost of production for 1.0 acre of greenhouse-grown bell peppers in North Central Florida.....................................................................................................75
3-10 Comparison of select simulated variables of a 1.0 acre colored greenhouse-grown bell peppers operation ........................................................................................................77
3-11 Sensitivity analysis for a 1.0 acre greenhouse-grown bell pepper operation in North Central Florida ...................................................................................................................78
3-12 Estimated break-even prices for a range of marketable bell pepper fruit yields of 1 - 3.5 lbs/ft2 ............................................................................................................................79
3-13 Surface area of a 1.0 acre greenhouse of a saw-tooth design ............................................80
3-14 Heat loss calculations required for a 1.0 acre saw-tooth greenhouse ................................81
3-15 Cost to obtain required BTU for 1 acre greenhouse in North Central Florida based on historical temperature data.................................................................................................82
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3-16 Probability of obtaining select prices for greenhouse grown red, yellow and orange bell peppers. .......................................................................................................................84
3-17 Probability of obtaining select yields for greenhouse grown red, yellow and orange bell peppers. .......................................................................................................................85
3-18 Probability of obtaining select net profits for 1.0 acre greenhouse operation growing: red, yellow and orange bell peppers. .................................................................................86
3-19 Estimated costs of producing one acre of field bell peppers for fresh market, in Florida ................................................................................................................................87
3-20 Simulated 1.0 acre field pepper return to land and owner in Florida ................................89
3-21 Probability of obtaining select net profit for one acre of field bell pepper production in Florida...........................................................................................................................90
4-1 Values used to construct an empirical distribution function for price .............................117
4-2 Values used to construct a GRKS distribution function for yield ...................................118
4-3 Monthly marketable fruit yield, average wholesale market price and gross revenues in a typical fall to spring greenhouse non-organic strawberry crop in Florida with a total estimated yield of 2.25 lb./ft2...................................................................................119
4-4 Monthly marketable fruit yield, average wholesale market price and gross revenues in a typical fall to spring greenhouse organic strawberry crop in Florida with a total estimated yield of 1.58 lb./ft2 ...........................................................................................120
4-5 Annual non-organic strawberry wholesale prices from 1998-2005 for select states and countries. ...................................................................................................................121
4-6 Monthly non-organic strawberry wholesale prices from 1998-2005 for select states and countries. ...................................................................................................................122
4-7 Annual organic wholesale market values for select states and countries, 1998-2005 .....123
4-8 Monthly organic wholesale market values for select states and countries, 1998-2005 ...124
4-9 Estimated variable cost of production for 1.0 acres of greenhouse-grown organic strawberries in North Central Florida ..............................................................................125
4-10 Estimated variable cost of production for 1.0 acres of greenhouse-grown non-organic strawberries in North Central Florida ..............................................................................128
4-11 Estimated fixed cost of production for a 1.0 acre greenhouse growing strawberries in North Central Florida.......................................................................................................131
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4-12 Simulation results from a 1.0 acre greenhouse strawberry operation in North Central Florida ..............................................................................................................................135
4-13 Sensitivity analysis for a 1.0 acre organic greenhouse strawberry operation in North Central Florida .................................................................................................................136
4-14 Sensitivity analysis for a 1.0 acre non-organic greenhouse strawberry operation in North Central Florida.......................................................................................................137
4-15 Estimated break-even prices for a range of marketable strawberry fruit yields 1.0-3.0 lb./ft2.................................................................................................................................138
4-16 Surface area of a 1.0 acre greenhouse of a saw-tooth design ..........................................139
4-17 Heat loss calculations required for a 1.0 acre saw-tooth greenhouse ..............................140
4-18 Cost to obtain required BTU for 1.0 acre greenhouse in North Central Florida based on historical temperature data..........................................................................................141
4-19 Probability of obtaining select prices for organic and non-organic strawberries ............143
4-20 Probability of obtaining select yields for organic and non-organic strawberries ............144
4-21 Probability of obtaining select net profits for 1.0 acre greenhouse operation growing: organic and non-organic strawberries..............................................................................145
4-22 Estimated costs of producing one acre of field strawberries for fresh market, in Florida ..............................................................................................................................146
4-23 Simulated net profit for 1.0 acre of field strawberries harvested on land in different regions of Central Florida ................................................................................................148
4-24 Probability of obtaining select net profit from field production of strawberries on 1.0 acre of land in three regions in Central Florida ...............................................................149
5-1 Monthly average dollar per pound greenhouse-grown cucumber wholesale price; 1998-2005 ........................................................................................................................173
5-2 Value of U.S. imports, from various countries, of fresh cucumbers; 2000-2004 ............174
5-3 Wholesale price for greenhouse-grown cucumbers from New York, Atlanta and Miami terminal markets; 1998-2005 ...............................................................................175
5-4 Annual yield of greenhouse-grown cucumbers used in the GRKS distribution function ............................................................................................................................176
5-5 Monthly marketable fruit yield, average wholesale market prices and gross revenues in a typical greenhouse-grown cucumber operation in Florida with total estimated yield of 9.98 lbs/ft2..........................................................................................................177
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5-6 Estimated annual fixed cost of production for a 1.0 acre greenhouse growing cucumbers, in North Central Florida ...............................................................................178
5-7 Estimated annual variable cost to produce 3 cucumber crops in a 1.0 acre greenhouse in North Central Florida................................................................................181
5-8 Comparison of select simulated variables of a 1.0 acre greenhouse-grown cucumber operation, in North Central Florida..................................................................................184
5-9 Sensitivity analysis for a 1.0 acre greenhouse-grown cucumber operation in North Central Florida .................................................................................................................185
5-10 Estimated break-even prices for a range of marketable cucumber fruit yields of 1-22 lb./ft2.................................................................................................................................186
5-11 Surface area of a 1.0 acre greenhouse of a saw-tooth design ..........................................187
5-12 Heat loss calculations required for a 1.0 acre saw-tooth greenhouse ..............................188
5-13 Cost to obtain required BTU for 1.0 acre greenhouse in North Central Florida based on historical temperature data..........................................................................................189
5-14 Probability of obtaining select annual prices, yield, net profit and net present value for a 1.0 acre greenhouse-grown cucumber operation in North Central Florida ............191
5-15 Probability of obtaining select seasonal prices and yield for a 1.0 acre greenhouse-grown cucumber operation in North Central Florida.......................................................192
5-16 Estimated costs of producing one acre of field cucumbers for fresh market, in Florida .193
5-17 Simulated Florida field-grown cucumber return to land and owner for one acre............195
5-18 Probability of obtaining select net profit for a one acre of field cucumber production in Florida..........................................................................................................................196
A-1 Average wholesale colored greenhouse vs. field pepper prices; 1998-2005 ...................202
A-2 Average Florida land cash rent ........................................................................................203
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LIST OF FIGURES
Figure page 3-1 Greenhouse vs. field grown red bell pepper average wholesale terminal market
prices; 1998-2005...............................................................................................................91
3-2 Greenhouse vs. field grown yellow bell pepper average wholesale terminal market prices; 1998-2005...............................................................................................................92
3-3 Greenhouse vs. field grown orange bell pepper average wholesale terminal market prices; 1998-2005...............................................................................................................93
3-4 Comparison of average wholesale terminal market field-grown bell pepper prices; 1998-2005 ..........................................................................................................................94
3-5 Surface area of a 1.0 acre saw-tooth greenhouse...............................................................95
4-1 Shares of world fresh strawberry production by country, 2005/2006 growing season ...150
4-2 Volume of U.S. imports of strawberries from top countries, 1994-2004 ........................151
4-3 Monthly U.S. fresh strawberry imports, 2003 .................................................................152
4-4 Organic vs. non-organic monthly average wholesale strawberry prices, 1998-2005 ......153
5-6 Comparison of monthly wholesale price between field and greenhouse production of cucumbers; 1998-2005.....................................................................................................197
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Abstract of Thesis Presented to the Graduate School of the University of Florida in Partial Fulfillment of the
Requirements for the Degree of Master of Science
THE ECONOMIC FEASIBILITY OF GROWING BELL PEPPERS, STRAWBERRIES AND CUCUMBERS IN A GREENHOUSE AS AN ALTERNATIVE TO FIELD PRODUCTION IN
FLORIDA
By
James Edward Webb
August 2007
Chair: Dr. Daniel J. Cantliffe Major: Horticultural Sciences
In 2005, Florida’s fresh market vegetable industry (includes vegetables, watermelons and
berries) ranked second in the U.S., with a value of $1.8 billion, grown on more than 190,900
acres (Florida Agricultural Statistical Directory, 2006). The state has a comparative advantage in
the fresh market vegetable industry, due to its ability to produce in the winter off-season and its
proximity to markets. Florida vegetable farmers face competition from around the globe. An
alternative for certain high-value crops is production in greenhouses.
The objective of my study was to analyze the economic viability of bell peppers,
strawberries and cucumbers produced in greenhouses compared to those grown using
conventional field production. Data were collected from government agencies, personal
communication with commercial growers, and scientific literature.
My study found that greenhouse production of bell peppers, strawberries and cucumbers is
an effective way for Florida growers to increase net profit, in a state that is plagued by rapid
urbanization and rising land prices, along with increasing water and environmental restrictions.
Furthermore, the probability of obtaining a positive annual net profit is significantly greater in
greenhouse production versus field production of these crops. When net profits of greenhouse
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production are compared to field production for the three commodities analyzed, it was
determined that greenhouse production yellow bell peppers [net profit of $15,166/acre] can have
returns up to four and half times greater than that of field production [net profit of $3,289/acre].
Net profit for greenhouse-grown organic strawberries [$23,316/acre] can be up to nine and one
half times greater than field-grown [$2,419/acre] and non-organic greenhouse-grown
strawberries [$3,855/acre] can be up to one and half times greater than the net profit of field-
grown strawberries. Net profit for greenhouse-grown long-seedless cucumbers [$72,775/acre]
can be up to 1,206 times greater than the net profit of field-grown slicer cucumbers [$60/acre].
This suggests that even with the significantly higher capital investment required for greenhouse
production, the risk of failure is significantly lower than that of field production, excluding
natural disasters and lack of technical knowledge of production. Total production costs of
greenhouse-grown colored bell peppers [$167,019/acre] can be up to 20 times greater than that
of field production [$8,468/acre], organic greenhouse-grown strawberries [$158,076/acre] are up
to six times higher than that of field production [$25,602/acre] and non-organic greenhouse-
grown strawberry total production costs [$168,951/acre] can be up to six and a half times greater
than field production costs. Total cost for greenhouse-grown long-seedless cucumbers
[$391,922/acre] can be up to 70 times greater than that of field-grown slicer cucumber costs
[$5,620/acre].
Although the initial costs are high for a greenhouse structure, the probability of decreased
chemical use, higher yields and a price premium for greenhouse production may be off-set, with
higher yields and profits. I concluded that greenhouse production of colored bell peppers,
strawberries and cucumbers is a viable alternative for Florida’s field producers of vegetables.
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CHAPTER 1 INTRODUCTION
Imports of fresh bell peppers, tomatoes and cucumbers have increased over the last decade.
Since the enactment of the North American Free Trade Act (NAFTA), the supply of vegetable
imports from Canada and Mexico has increased, resulting in decreased market share for Florida
growers. From 1995-2005, imports of cucumbers have increased by 66%, bell peppers by 78%
and tomatoes by 66%. Countries such as Mexico, Canada, Israel, Spain and the Netherlands, are
responsible for the increase in imports, many of which produce solely in greenhouses (U.S.
Department of Agriculture, 2005). Productivity in European greenhouses is three to ten times
that of Florida field production (Cantliffe et al., 2003). In addition to increased production per
unit area, product quality is greater than field production. Due to increased consumer demand
for high quality produce, countries which produce in greenhouses have been able to enter U.S.
markets at relatively high prices.
Historically, U.S. winter fresh-market vegetable supplies have been filled predominantly
by Florida and Mexico, which have been in direct competition with each other for many decades,
due to overlapping growing seasons.
Problem Statement
Any technology that could be used to increase quality, yield and profitability of increased
net profit would be welcomed by Florida growers. Florida vegetable growers are continually
looking for new methods of staying competitive in the U.S. and global fresh vegetable market.
My study will identify whether or not the production of bell peppers, strawberries and cucumbers
can be produced economically in a greenhouse setting. Ultimately this study will also determine
whether Florida growers can adopt this new technology while increasing net profit.
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Objectives
The general objective of my study was to develop a tool to help identify potential color
bell pepper, strawberry and cucumber net profit advantages as a result of the adoption of new
greenhouse technologies, and discussed their risk of profitability. The specific objectives were:
• To construct an enterprise budget for greenhouse-grown bell peppers, strawberries and cucumbers
• To determine which color bell pepper has the highest profitability for Florida growers, in addition to determining the risk involved for each colors net profit;
• To compare and determine whether organic or conventional greenhouse strawberry production is more profitable
• To compare the profitability of greenhouse production with the profitability of field production of bell peppers, strawberries and cucumbers in Florida
Testable Hypotheses
Greenhouse production of bell peppers, strawberries and cucumbers are well documented
in the literature. While the production of these commodities is well documented, the profitability
and risk are not as clear. An assumption was made in this study that greenhouse production of
bell peppers, strawberries and cucumbers results in increased quality, yield and net profit
compared to field production. Therefore, the hypotheses studied were the following:
H1: Simulation software can be used to analyze the profitability and risk of returns to
management
H2: The adoption of greenhouse technology will increase quality, yield and net profit
compared to field production
Research Scope
Simulation software packages, such as SIMETAR©, are commonly used to analyze
complex systems with stochastic model. SIMETAR© was used in this study to build a budget
analysis model for greenhouse-grown bell peppers, strawberries and cucumbers. Results from
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previous greenhouse-grown vegetable and fruit production studies, which are highlighted in the
following chapter, were used in this budget analysis model, to analyze the profitability and risk
involved in the production of greenhouse-grown bell peppers, strawberries and cucumbers.
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CHAPTER 2 LITERATURE REVIEW
While there is a vast body of research related to the production of greenhouse-grown
vegetables, less research has been done specifically on the economic feasibility of growing
vegetables in a greenhouse. My review will concentrate on previous studies in four different
areas. The first category gives an overview of the world’s greenhouse vegetable industry. The
second category reviews literature related to production of greenhouse-grown bell peppers,
strawberries and cucumbers. The third category lists previous studies which used simulation
modeling to assess risk through the use of stochastic variables. The last category examines
studies which use budget analysis to determine feasibility of production of greenhouse-grown
vegetables. These studies were used as a basis for this study’s simulation model.
Overview of Greenhouse Vegetable Production Industry
United States
U.S. greenhouse vegetable production utilizes high-technology greenhouses. The U.S.
ranks third in greenhouse production area in North America, behind Mexico and Canada. In
2002, it was estimated that the U.S. produced 1,478 acres of vegetables under protected culture.
California [378 acres], Arizona [189 acres], Texas [143 acres], Colorado [96 acres] and Florida
[76 acres] are the leading producers of greenhouse vegetables in the U.S. (U.S. Department of
Agriculture, 2003). High startup and maintenance costs and the low prices of field-grown
vegetables have created a difficult and competitive market for greenhouse growers. The U.S.
vegetable industry has remained profitable due to its ability to produce year round. U.S. growers
are in continuous competition with Mexico in the winter and Canada in the summer.
In 1998, the U.S. greenhouse cucumber production area was estimated to be 69 acres [total
value of sales equal to $12,226,000], approximately 8% of the total greenhouse vegetable
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production area [916 acres, total value of sales equal to $222,624,000]. The leading greenhouse
cucumber state in the U.S. was California [35 acres, total value of sales equal to $5,382,000]
with Florida [22 acres, total value of sales equal to $5,517,000] in second place (U.S.
Department of Agriculture, 2003).
U.S. greenhouse pepper production area was estimated to be 35 acres [total sales valued at
$5,277,000], approximately 4% of the total greenhouse vegetable production area. Leading
states for greenhouse pepper production were Florida [24 acres, total sales valued at $3,816,000]
and California [5 acres, total sales valued at $662,000] (U.S. Department of Agriculture, 2003).
In addition, U.S. greenhouse tomato production area was estimated to be 397 acres [total
sales valued at $117,856,000], approximately 43.4% of the total greenhouse vegetable
production area. Leading states for greenhouse tomato production are Colorado [93 acres, total
sales valued at $34,220,000] and California [67 acres, total sales valued at $20,244,000] (U.S.
Department of Agriculture, 2003).
From 1996-2004, greenhouse production area in Florida has increased from 60 acres to 74
acres (Tyson et al., 2004). Florida greenhouse production area has fluctuated over the last
decade, due to natural disasters and crop abandonment. Over the last decade, the leading
greenhouse crop has shifted from tomatoes to a greater interest in colored bell peppers and herbs.
This is probably due to the rise in Mexican tomato imports in the mid-90s and the stabilization of
that market by the end of the decade (Tyson et al., 2004). In 2000, greenhouse production of bell
peppers [38 acres], tomatoes [18 acres], cucumbers [12 acres] and lettuce [7 acres] were the
principal crops produced in Florida, using both passively ventilated and fan and pad cooling
systems with predominately double-poly coverings. Major greenhouse vegetable producing
counties in Florida include: St Lucie [38 acres], Collier [14 acres], Dade [13 acres], Suwannee [5
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acres], Okeechobee [5 acres], Broward [4 acres], Hillsborough [3 acres] and Brevard [2 acres]
(University of Florida, 2005). Florida greenhouse vegetable growers have several advantages
over foreign competition such as: proximity to market, production knowledge, climate and
ability to enter market when prices are high. Florida greenhouse growers also have several
disadvantages such as: urban pressure, scarcity of cheap labor, water and environmental
restrictions.
Mexico
Mexico has been a strong competitor with U.S. vegetable growers since the introduction of
the North American Free Trade Agreement (NAFTA), in 1994. NAFTA gave Mexican growers
easier access to U.S. markets with lower import tariffs. This gave way to the appearance of the
first modern greenhouses in Mexico during the 1990s. The states of Sinaloa, Jalisco, Yucatan
and Queretaro were among the first to invest in commercial greenhouse structures. Since then,
the growth of the Mexican greenhouse production area has increased substantially. In 1991,
there was an estimated 124 acres of greenhouse vegetables in production, production area rose to
an estimated 1,483 acres in 1999, in 2001 an estimated 2,348 acres, 3,756 acres in 2002 and in
2004 greenhouse production area was estimated to be 5,436 acres (Steta, 2004).
In 2001, vegetable exports of greenhouse tomatoes, peppers, cucumbers, melons and others
were valued at $225 million (Steta, 2004). Of the 3,756 acres of greenhouse vegetables in
production in 2002, it was estimated that 1,952 acres was greenhouse tomato production area,
292 acres was greenhouse cucumber production, and 519 acres was greenhouse bell pepper
production. While it is believed that the rapid growth of vegetable greenhouse production area in
Canada and the U.S. is stabilizing, growth is still occurring in Mexico (Ministry of Agriculture,
Food and Fisheries Industry Competitiveness Branch, 2003).
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Mexico is the largest producer and per capita consumer of fresh tomatoes in North
America (Cook et al., 2006). Mexico is also the second largest greenhouse tomato exporter to
the U.S. and the largest tomato producer in North America (Steta, 2004). In 2003, it was
estimated that Mexican greenhouse tomato production area was 2,348 acres, producing 148,300
metric tons. From this production, 125,970 metric tons of greenhouse tomatoes were exported to
the U.S.[ 7% of total U.S. tomato import from Mexico] (Calvin et al., 2005). The Mexican
greenhouse tomato industry overtook the U.S. industry in area planted in 1995 and surpassed the
Canadian industry in 1999, reaching about 2,348 acres in operation in 2003. Since the end of the
1990s, a combination of rapid growth in Mexican planted area and improving technology has
combined to erode the gap in total production volume relative to that of the U.S. greenhouse
tomato industry. However, Mexico’s greenhouse tomato industry is still comprised mainly of
low-yielding cherry tomato on the vine [TOV]. In 2003, Mexico’s average greenhouse tomato
yield was estimated at 63 metric tons per acre, compared to the U.S. and Canada which have an
average yield of 202 metric tons per acre (Cook et al., 2006).
In 2005, 52% of Mexico’s protected culture area was comprised of plastic greenhouses,
44% were shade houses, 2% glass greenhouses and 1% was classified as other (Calvin et al.,
2005). The glass used in many European and Canadian greenhouses is not needed due to
warmer climate of Mexico. Many of the greenhouses that are used in Mexico are imported from
Israel, Canada, the Netherlands, Spain, France and the U.S. (Cantliffe et al., 2003). In Mexico,
hydroponic production systems are predominately used in glass houses and a few plastic
greenhouses have additionally begun to use the soilless production system. Some of the
advantages that Mexican growers have over European growers for entering U.S. markets are due
to their proximity to the U.S., which decreases transportation costs, their abundance of cheap
21
labor and warm climate. However, the Mexican greenhouse industry is not without its problems,
such as: the lack of government support, lag of food safety standards behind the international
standards and lack of knowledge of greenhouse production (Steta, 2004).
Canada
The Canadian greenhouse vegetable industry is a large threat to U.S. growers and plays a
major role in the agriculture sector in Canada. In 2000, the production of the Canadian
greenhouse vegetable industry, consisting of approximately 85 commercial greenhouse vegetable
operations, was valued at $505 million, with an estimated $290 million being shipped to the U.S.
(U.S. Department of Agriculture, 2005). There has been tremendous growth in the Canadian
greenhouse production area over the last decade. From 1993-2003, the area of greenhouses
producing vegetables has increased by 339% [1993 Canadian vegetable producing greenhouses
equaled 158 acres, 2003 equaled 536 acres]. Even though Canada is a large country, greenhouse
production is very concentrated. The majority of greenhouse vegetable production takes place
in Ontario, British Columbia, Quebec and Alberta. Ontario and British Columbia account for
90% [Ontario produces 66% and BC produces 24%] of Canadian production (Ministry of
Agriculture, Food and Fisheries Industry Competitiveness Branch, 2003).
The Canadian greenhouse vegetable industry in the lower mainland, predominately uses a
modern, Dutch, Venlo style glass greenhouse, which is well suited for the region’s moderate
climate and lower light levels. In the interior, northern and island regions, a ridge and gutter
poly greenhouse is predominately used, because they provide a higher insulative advantage for
the colder regions and are more cost effective for the smaller growers in these areas. Larger
greenhouses in these regions utilize very high technology and have sophisticated computerized
climate control systems that continuously monitor and regulate temperature, light, humidity,
irrigation and nutrient levels. Canadian greenhouse vegetable growers commonly use hot water
22
boiler systems, which are predominantly fueled by natural gas, to heat the greenhouse. Most
crops are grown hydroponically in soilless media with drip fertigation systems (Ministry of
Agriculture, Food and Fisheries Industry Competitiveness Branch, 2003).
The greenhouse vegetable industry in Canada predominately produces tomatoes (beefsteak,
tomato on the vine (TOV) and cluster), cucumbers (long English cucumbers), bell peppers (red,
yellow and orange) and lettuce (butter lettuce). Canadian growers, with use of their high
technology greenhouses, have achieved globally competitive annual yields per square foot of:
tomatoes 14.95 lbs. /ft2, cucumbers 15 lbs/ft2, bell peppers 5.53 lbs. /ft2, lettuce 19 heads/ft2. In
2002, the productions of these five greenhouse commodities were valued at $240.4 million U.S.
dollars (Ministry of Agriculture, Food and Fisheries Industry Competitiveness Branch, 2003).
In 2002, Canadian greenhouse tomato production had a production area of 1,191 acres and
were harvested from March to November/December and accounted for 58% [24% beefsteak
valued at $56.7 million, 34% tomato on the vine (TOV) valued at $84.4 million] of total sales
volume of greenhouse vegetable production. Greenhouse bell peppers had an estimated
production area of 430 acres and were harvested from March to November and accounted for
31% [valued at $74.7 million] of total sales volume, cucumbers had a production area of 492
acres and were harvested from February to November and accounted for 10% [valued at $23
million] of total sales volume and butter lettuce was harvested all year and accounted for 1%
[valued at $1.6 million] of total sales volume in 2002 (Ministry of Agriculture, Food and
Fisheries Industry Competitiveness Branch, 2003).
Unlike U.S. greenhouse vegetable production, Canadian production is regulated on a quota
system. Due to the National Products Marketing (BC) Act, not just anyone can market
greenhouse vegetables in Canada. In order to market greenhouse vegetables in Canada, growers
23
must apply for a quota that is controlled by the BC Vegetable Marketing Commission
(BCVMC). In order for a grower to submit an application it must be supported by a marketing
agency. Upon submission, the quotas are then reviewed and allocated on an annual basis.
Currently, Canada has four marketing agencies: BC Hot House Foods Inc., Global Greenhouse
Produce Inc., Greenhouse Grown Foods Inc. and the Interior Vegetable Marketing Agency
(Ministry of Agriculture, Food and Fisheries Industry Competitiveness Branch, 2003).
The U.S. is Canada’s major export market. Canada exports approximately 75% of all
greenhouse vegetables produced to the U.S. The Canadian greenhouse vegetable industry has
significant competition within the U.S. market, with commodities coming from Mexico, Europe
and domestic (U.S.) production.
The Netherlands
Over 60% of the land in the Netherlands is defined as rural. Over the last 10 years the
Dutch rural areas have decreased by 222,390 acres, due to development and urbanization. The
area of land for agricultural use (excluding greenhouse horticulture) has decreased by 4%, during
this same period. Most of this decrease is the result of the loss of valuable grassland, which has
decreased by 8.2% from 1996-2004. In the Netherlands, the one agricultural sector which is not
decreasing, but has been rapidly expanding for the last ten years is greenhouse horticulture.
From 1996-2004, land used for greenhouse horticulture has increased by 115% [32,123 acres in
1996 to 37,065 acres in 2004]. This growth of greenhouse horticulture under glass was entirely
due to the ornamental plant cultivation; the area of greenhouse vegetables under glass decreased
from 13,034 acres in 1971 to 10,946.53 in 2005. In the Netherlands, the average size of
greenhouse operations is 2.97 acres and is expected to increase to 6.18 acres per operation within
the next ten years (Berkhout et al., 2006). In the Dutch greenhouse vegetable industry, the most
24
important greenhouse crops are tomatoes, bell peppers and cucumbers. Crops are grown using a
hydroponic system, which uses rockwool for media (Cantliffe et al., 2003).
Unlike Mexico and Spain, which use both high and low technology greenhouses in
vegetable production, the Netherlands uses almost exclusively high technology greenhouses for
vegetable production (Ministry of Agriculture, Food and Fisheries Industry Competitiveness
Branch, 2003). From 2004 to 2005, the value of greenhouse vegetable production increased by
9%. However, the cost of fuel has increased by more than 40% during this same period, which
has put profitability of greenhouse vegetable production under pressure. The average income of
Dutch greenhouse vegetable growers has fallen from $33,333.33 in 2004 to $7,142.86 in 2005
(Berkhout et al., 2006).
During the 1990s, the Dutch greenhouse vegetable industry suffered some setbacks such
as: higher production costs compared to the Spanish, emphasis on productivity levels led to an
image problem with Germany, their largest importer of Dutch products, and the auction-type
selling practices that did not allow them to adapt to changing consumer demand. Since 1996,
Dutch growers have begun to overcome these obstacles by creating an image showing that they
have the ability to produce a year round supply of specific products with constant high quality,
deliver small stocks of last minute products, and produce a product that is considered safe,
products that are traceable with certified producers. They have also been able to show retailers
that they have a reliable supply ensured by very well controlled growing conditions and
improvements of the harvest predictions (Boonekamp, 2004).
Spain
Until ten years ago, the Dutch vegetable growers and organizations had underestimated the
power of the Spanish vegetable industry, when it first entered the European Community. During
this period, Spanish exports of vegetables had a growth rate of 10%, from 1992-1999. Spain
25
accounts for the largest area of greenhouse vegetable production in Europe. In 2002, it was
estimated that there was 172,970 acres of greenhouse vegetable production. This is more than
117% larger greenhouse vegetable acreage than the U.S. and 467% larger than the Netherlands’
greenhouse vegetable production. From 1998 to 2002, the amount of land used for greenhouse
vegetable production in Spain increased more than 173% [90,000-100,000 acres in 1998 to
172,970 acres in 2002] (Cantliffe et al., 2003; Ministry of Agriculture, Food and Fisheries
Industry Competitiveness Branch, 2003). Spain is a major threat to the Dutch greenhouse
vegetable industry. Although the Netherlands is the second largest in terms of greenhouse
vegetable land area, it does not have the available source of cheap labor, from Africa and
Morocco that is available to the Spanish. However, in comparing Spanish and Dutch production,
the Spanish have yet to match the production per square foot that the Dutch are capable of
producing. This is due to the use of low level technology which is characteristic of most
Mediterranean greenhouse industries. The prevailing trend in Mediterranean greenhouses, in
recent decades, has been to adapt the plant to a sub-optimal environment. A consequence of this
has been limited quality of the produce in some periods. Generally, Mediterranean greenhouses
do not have climate control systems, which limit potential yield, product quality, and the timing
of production, but allows a low cost of production compared with the northern European
greenhouse industry (Castilla, 2002).
The majority of Spanish greenhouse production is centered around Almeria, Spain, which
is along the coast of the Mediterranean as well as Murcia to the East. Greenhouses in Spain are
predominately of a Spanish–style flat-roof greenhouse, consisting mostly of shade cloth not
glass. Currently a few Spanish producers have begun to switch to Dutch glass as well as plastic
houses. The average farm size in the Almeria region of Spain is 2.5-3.5 acres. Production of
26
tomatoes, peppers, eggplants, cucumbers, muskmelons and watermelon are the dominant
commodities produced in Spanish greenhouses. The Almeria area is known for its extremely
arid climate, available sunshine, and a large influx of new growers to the area. It is estimated
that half the production from the Almeria region is exported to European Union countries,
especially Germany, France and the Netherlands (Cantliffe et al., 2003).
In the Almeria region of Spain, vegetable production is generally grown as either winter or
summer crops. Winter crops, which consist of tomatoes, peppers, cucumbers, and certain
squashes and have production peaks from December to January. Summer crops consist of
various muskmelons, watermelons and green beans and have a production which peaks from
May to June. In 1998, tomatoes [20,250 acres] and peppers [19,250 acres] had the most
dedicated greenhouse production area (Cantliffe et al., 2003).
Some of the factors that have lead to the success of the Spanish greenhouse vegetable
industry are: good climate conditions, the appearance of adapted varieties (i.e...long-life
tomatoes), lower cost of production compared to the Netherlands, devaluation of the Spanish
peseta between 1992 and 1996 (cheaper exports), large subsidies of the EU and the
modernization of the good marketing concepts for the vegetable industry. The Spanish
greenhouse industry is not without its faults. Some of the problems with Spanish greenhouse
production, which could prove to be detrimental to their future, in the European market is: the
lack of knowledge of advanced growing principles and techniques, the fact that growers are not
used to calculating the long-term return on investment, the Spanish financial infrastructure
(banks are mainly financing on a harvest-credit basis), the lack of independent extension service,
lack of good research in Spain, low food safety, over use of pesticides, elevated problems with
27
whitefly and thrips spread viruses, lack of good quality low cost labor and lastly, there is a lack
of knowledge exchange and cooperation among growers (Boonekamp, 2004).
Italy
In 2002, Italy had a total of 64,246 acres of greenhouse vegetables, with the island of
Sicily [22,239 acres] comprising more than 35% of total greenhouse area. In 2002, seven crops
covered about 90% of the total protected area in Italy: tomato (32%); strawberry (12%); melon
(11%); pepper and squash (10% each); lettuce (8%); eggplant (7%). The average size
greenhouse operation ranges between 1 and 20 acres [3 acres on average], 90% were of the
saddle roof construction type, using either single or multi-span greenhouse types, while 10%
were walk-in tunnels. Polyethylene film is the predominant cover material used, with structure
materials being comprised of concrete, wood or steel pipe. In Italy, heating devices and soilless
culture are rarely used in greenhouse vegetable production. Production is generally in the soil
covered with plastic mulch, using drip irrigation and fertigation systems. However as
technology advances, Italian production may shift to soilless cultivation as a solution to their
brackish water problem and inefficient use of water (Barbieri et al., 2002).
Japan
The Japanese greenhouse industry dates back to the 1600s, where oil-soaked paper and
straw mats were used as insulation. Post WWII, the Japanese greenhouse industry has increased
steadily [24,710 acres in 1969 to 132,238 acres in 1999]. Nearly all of Japan’s greenhouses are
covered using plastic film, glass coverings only make up 4.4% of total greenhouse area.
Japanese greenhouses are predominately used in the production of tomatoes, spinach, melons and
cucumbers. Most of the greenhouse industry is located in the Kyushu area and on the Pacific
Ocean side of Honshu where the climate is rather mild with adequate winter sun. Recently, the
greenhouse industry is expanding in the Hokkaido area (Ikeda, 2006).
28
In 2001, the Japanese greenhouse vegetable industry had an area of 2,147 acres of
greenhouses [Japanese greenhouse figures include rain shelters] and 88,682 acres of plastic
houses in production. In 2003, 69% of the total greenhouse area [131,383 acres] was used for
the production of vegetables [90,829 acres] (Ikeda, 2006).
The Japanese greenhouse industry began using soilless culture in the production of
greenhouse-grown vegetables on a commercial scale, in the late 1960s. In the 1970s, growers
were introduced to the Deep Flow Technique (DFT) and later were introduced to NFT (nutrient
film technique) in the 1980s. Today, most commercial operations use DFT and rockwool
culture, followed by NFT and some substrate cultures using sand, gravel, coir, peat moss and
bark dust are used. Tomatoes, strawberries, mitsuba, welsh onions and butter head lettuce are
the major Japanese crops using soilless culture. Strawberries are grown in elevated beds, using
granulated rockwool, coir, peat moss or bark dust. Growers use the elevated beds to decrease
stoop labor (Nukaya, 2006).
China
China has become the world’s largest producer of fruits and vegetables. In 2002, China
produced 350-400 million tons of fruits and vegetables. The Chinese area of protected culture
has increased from 24,710 acres in the 1980s to about 4,942,000 acres [figures include small
tunnels]. Chinese greenhouse production is predominately located in the Northern provinces
(e.g. Shandong, Jiangsu and Liaoning). Plastic tunnels and solar greenhouses make up the
majority of greenhouse production in China, with only about 988-1,730 acres being of modern
greenhouse structure design. Solar greenhouses are normally used in the production of tomatoes,
cucumbers or peppers. Production is generally produced using soil as a growing media, only a
small percentage of production uses soilless media [e.g. rockwool or perlite] for production
[2,520 acres] (Costa et al., 2004)
29
Chinese production of vegetables has increased about 700% over the last 3 decade. In
2001, the total production area, of all vegetables, was estimated at 46,949,000 acres, with a total
output of 350-400 million tons. Greenhouse production in China began in the early 1990s. In
1995, it was estimated that greenhouse acreage was 988,400 acres, predominately in plastic
tunnels. In 2000, it was estimated that protected acreage had increased to 3,459,400 acres and in
2001, protected area of production varied between 4,200,700 - 5,189,100 acres (Costa et al.,
2004).
China produces a very diverse selection of vegetables. Some of the most important are:
Chinese cabbage, cucumber, tomato, cauliflower, glossy cabbage, purple cabbage, broccoli,
eggplant, celery, potato, mini tomato, pepers, peas, lettuce, melons, mushrooms, chicory,
Brussels sprouts, asparagus, onions and mini radish (Costa et al., 2004).
China has an abundance of cheap labor for the production of labor intensive greenhouse
crops. Even though China has an abundance of cheap labor, productivity is far below the world
average. This is due, in part, to poor instructions and inefficient management (Costa et al.,
2004).
Chinese growers, which are predominately made up of small growers, are given
government incentives to produce vegetable crops. This, and the lack of ability for small
growers to access market prices, causes an overproduction, driving market prices down. Due to
this, Chinese fruits and vegetables are competitive in international markets. However, large
scale exports of vegetables to western countries are limited, for two reasons. First standards,
quality norms and postharvest handling are not up to western standards, and second, the domestic
population is able to absorb most of the production. China’s chief importers of vegetables are
Japan, South Korea, Russia, Singapore and Indonesia (Costa et al., 2004).
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Production of Greenhouse-Grown Bell Peppers, Strawberries and Cucumbers in Florida
Currently, there are relatively few vegetables crops grown commercially in greenhouses in
Florida. Florida greenhouse vegetable production is predominantly comprised of tomatoes,
cucumbers, lettuce and colored bell peppers (Thomas, 2001).
Bell Pepper
Production area of Florida’s greenhouse-grown bell peppers has been increasing over the
last decade (Tyson et al., 2001). This increased greenhouse production of specialty crops such as
colored bell peppers can be partially attributed to the ban of methyl bromide, increased urban
sprawl and subsequent high prices for arable land (Jovicich et al., 2004).
Greenhouse-grown bell pepper fruit are generally higher yielding and are of higher quality
than that of field production. In addition, production is usually harvested at a time of year when
field production is low or not possible and market prices are at their highest. Marketable fruit
yields for an individual’s operation may vary depending on greenhouse location, growing season,
plant density, trellis system, cultivar, irrigation and fertilization management (Jovicich et al.,
2004). Fruit yields of 1.6-3.0 lb./ft2 can be obtained in Florida using passively ventilated
greenhouses in Florida, with a potential of 4 lbs/ft2 with relatively low fuel costs. Hybrid
cultivars, that mature to a red, yellow or orange fruit, are the most commonly used in greenhouse
production of bell peppers. Red and yellow cultivars generally have a yield that ranges1.8-2.2
lbs/ft2, orange fruit yields generally have a range of 1.4-2 lbs/ft2 (Shaw et al., 2002). Pepper
flowers are self pollinating, but the use of bumblebees inside the greenhouse may be used to
ensure the set of high quality fruit, especially during the cool season when pollen viability is
lower (Jovicich et al., 2004).
Currently, Florida greenhouse bell pepper production generally uses a soilless culture
system. Over the last decade, greenhouse production systems have shifted from using rockwool
31
and nutrient flow techniques (NFT) to the use of perlite as the predominant soilless culture
(Tyson et al., 2001). Plants are grown in perlite filled nursery pots aligned in either single or
double rows, which leads to a plant population density of 0.27-0.36 plants/ft2 (Jovicich et al.,
2004).
Pepper plants in soilless culture are fertigated with a complete nutrient solution and
fertigation frequency increases with plant growth. At time of transplant, plants are irrigated 10-
40 times per day with about 1.3-2.5 fl oz per irrigation event and may increase during full
production to volumes of 1.5 gallons per day, in North Central Florida. Due to the fact that
greenhouse bell pepper cultivars are generally indeterminate, frequent pruning and training is
required. Peppers may be supported vertically on either a Dutch “V” or the Spanish trellis
system (Jovicich et al., 2004).
Florida greenhouse-grown bell pepper production season generally extends from July to
May. Greenhouse-grown bell pepper have a long crop cycle [300 days] and are transplanted
from the middle to end of July, and producing the first harvest around the middle of October and
generally ends towards the end of May. During this period, high temperatures in July and
August are good for young plant growth but may also lead to higher incidence of blossom-end
rot and fruit cracking. Likewise, colder temperatures from December to February may adversely
affect the set of marketable fruit due to poor pollination and delayed maturation and earliness in
production (Jovicich et al., 2004).
During the harvest period, pepper fruit will ripen in flushes or waves throughout the
production. If temperatures are warmer it is possible for crops to be harvested once or twice a
week [up to 3 fruits per plant]. Marketable fruit yields are graded by diameter, using grading
standards set by the USDA. Larger fruits bring a higher price than their smaller counterparts.
32
Insects are controlled predominately through the use of biological control methods and the
use of a fine mesh screen around the perimeter of the greenhouse. In greenhouse pepper
production, melon aphids can be controlled by releasing a parasitic wasp, Aphidius Colemai and
two-spotted spider mites can be controlled by releasing a predatory mite, Neoseiulus
Californicus (Jovicich et al., 2004). Biological control methods have many positive benefits to
producers; pests do not build up resistance to biologicals as they do with other insecticides,
reduced environmental impact. The use of biological control also allows growers to market their
fruit as pesticide-free.
Strawberry
In the U.S. commercial greenhouse strawberry production has not gained popularity and is
almost non-existent. Currently, countries such as Belgium, Italy, Spain, U.K., Australia, Israel
and the Netherlands are producing strawberries under protected structures. Advantages of
greenhouse production are: no methyl bromide needed, increased water efficiency, protection
from rain, cold weather, and birds, decreased stoop labor, decreased pesticide use, increased
quality and yield (Paranjpe et al., 2003).
In Florida, strawberries are grown under protected culture on less than two acres. Previous
studies on greenhouse strawberry production from the University of Florida, show that
strawberry cultivars adapted to Florida grow well within a temperature range of 60-80°F, but
plant growth slows down considerably below 50°F (Paranjpe et al., 2003). Plug transplants are
preferred over bare root transplants in protected strawberry cultivation, due to their survival rate,
ability to become established and quick growth. Plug transplants are grown in a glasshouse,
using propagation trays used for plug production, from June 7 to September 15 [110 days]. In
strawberry production, plants require a chilling period in order to induce an early flowering, thus
plugs are transferred to a walk-in cold chamber for two weeks or are purchased from a nursery
33
that has pre-chilled the plugs in order to obtain the early flowering. In October, plugs are
transplanted in the greenhouse in ‘Hanging Bed-Pack’ trough systems (i.e..Polygal® ‘Hanging
Bed-Pack’ troughs). Growing systems are arranged in a single horizontal tier [usually a north-
south direction], with a plant density of 2.26 plants per ft2. The soilless media used is a pine bark
media, readily available in Florida. Plants are fertigated with 150 ml of a complete nutrient
solution per day, through drip tape (Paranjpe et al., 2003).
In field production, strawberry flowers are aided in pollination by wind, bees and other
insects. Since a greenhouse is a protected environment, bumblebees are required to pollinate the
strawberry flowers. Bumblebee hives are added to the greenhouse as the onset of flowering
occurs. In order to control insects and not harm the bumblebees, biological control is used.
Major pests in greenhouse strawberry production include: the two-spotted spider mite, cotton
aphids and western flower thrips. The two-spotted spider mite is controlled by the release of N.
Californicus, for aphids a parasitic wasp, Aphidius Colemani, is released and Amblyseius
Cucumeris a predatory mite is released to control thrips (Paranjpe et al., 2003). As previously
stated above, the use of biological control allows growers to market a pesticide-free product in
addition to using a control that will not allow insects to build up tolerances to, such as have been
seen in many insecticides.
Fruit is considered marketable when fruit has 80% color development and weighs more
than 10 grams. Fruit is harvested at 4-5 day intervals. Fruit yield [November to March] for a
plant density of 2.26 plants/ft2 was estimated at 1.96 lb. /ft2 [7,115 12-lb. flats per acre].
Cucumber
Production area of greenhouse-grown cucumbers in Florida has decreased over the last
decade. This is partially due to the fact that greenhouse cucumbers were being marketed to
34
Canada and an unfavorable exchange rate has resulted in the shift from cucumbers to colored
bell peppers that can be marketed primarily in the U.S. (Tyson et al., 2001).
The cucumber is a warm season crop with required growing conditions of 80-85°F and
plenty of sunlight. European seedless-type cucumber is the primary variety grown in Florida
greenhouses. Mature fruit is harvested at a length of 12-14 inches with a weight of about 1
pound (Hochmuth, 2001). In addition to the European seedless, smaller specialty cucumbers
known as Beit Alpha are becoming popular in Florida (Shaw et al., 2004). Greenhouse
cucumbers are self pollinating and are indeterminate in growth, continually producing fruit on
new growth. Minimum temperature for greenhouse-grown cucumbers should be kept
approximately at 65°F for sustained production. Extreme temperatures above 95°F may also
have adverse effects, by reducing fruit quality and production (Hochmuth, 2001).
Generally, greenhouse cucumber production systems are in nursery pots using perlite or
pine bark as media. Transplants are ordinarily established in the greenhouse as transplants using
rockwool or foam blocks. Seed costs are high compared to other greenhouse crops; a typical
seed costs between $0.25-0.30 per seed (Hochmuth, 2001).
Cucumber seeds have a rapid germination rate [2-3 days] at their optimum germination
temperature of 84°F . Once transplants have three to four true leaves plugs are ready for
transplanting (Hochmuth, 2001).
Spacing is very important in greenhouse cucumber production, due to the large size of the
plants, rigorous growth and large requirements of light. Plants may be spaced using a single or
double row layout. Double row spacing requires approximately 5-6 feet between row centers
and 2 feet between the double-row systems. Plants should be spaced 18-24 inches between
35
plants. Single-spaced rows in a vertical cordon system should be approximately 4-5 feet
between rows and 12-18 inches between plants (Hochmuth, 2001).
The umbrella system is the most common pruning system for vertical cordon training
system. This system prunes all lateral branches until the main stem reaches the overhead wire.
The growing point of the main stem is then removed when one or two leaves have developed
above the wire. The growing point of each lateral is removed when near the ground. Fruits will
then develop at the node of each leaf. Fruit on the first 30 inches of the main stem should be
removed to allow for vigorous plant growth (Hochmuth, 2001).
Fruits should be thinned if more than one fruit develops at each node (Hochmuth, 2001).
Beit Alpha cucumber types are vigorous enough to support and develop multiple fruit per node
(Shaw et al., 2004).
Due to the rapid growth of greenhouse seedless cucumbers, nutrient requirements are very
high. Thus, growers must implement a complete nutrient program making adjustments in the
program as the crop’s demands change (Hochmuth, 2001).
Just as in greenhouse bell pepper and strawberry production, the use of biological control
systems is used against harmful insects in greenhouse cucumber crops. Green peach aphids
[Myzus Persicae] are controlled using lady beetle larvae [Hippodamia Convergens] and
parasitic wasps [Aphidius Colemani]. Two-spotted spider mites are controlled by releasing
predatory mites [Neoselius Californicus] (Shaw et al., 2004).
When harvesting, growers should look for a uniform length, shape and diameter. Typical
fruit length for European seedless fruit ranges between 12 to 14 inches with a minimum USDA
grade standard length of 11 inches. European seedless cucumber types require frequent harvest
intervals, usually three to four harvests per week. Plant yields during peak harvest periods
36
generally range between 1 to 3 pounds of fruit per plant. Yields over the entire crop cycle of
approximately 12 weeks, have a range of 20 to 25 pounds per plant (Hochmuth, 2001).
Harvesting of the Beit Alpha mini-cucumbers occurs about every other day from mid
March to the end of May. Total plant yields range between 13 and 14 pounds per plant, during
the approximate 9 to 10 week harvest period (Shaw et al., 2004). It is possible to have 3-4 crops
per year, when producing cucumbers due to their short crop cycles.
Budget Simulation Modeling
One particular relevant study (Richardson et al., 2003), to this paper, showed an example
of building a dynamic simulation model for analyzing the different inputs for ethanol production
for different sized facilities.
Similar to this study the Richardson et al (2003) study applied stochastic variables to
assess the risk of production for different sized plants using different input variables for the
production of ethanol. The study used financial statements similar to the statements used in this
study. Additionally the Richardson et al (2003) study uses the simulation program SIMETAR©
to simulate stochastic variables and determine risk of production using the different stochastic
variables.
Just as in this study, the Richardson et al (2003) study uses stochastic variables to represent
historical monthly prices and production yields for different inputs through the use of scenarios
placed in their financial budgets. Just as in this study, their simulation model results in key
output variables [KOV], which are used in assessing the risk of each scenario used in the study.
The results of their stochastic feasibility study, shows an unbiased estimate of how risk of
input and output prices affect the viability of the three different sized ethanol production
facilities in Texas. Using these results, the study was able to determine which sized facility was
needed to generate a 100 percent probability for economic success.
37
Feasibility of Production
Previous studies on the feasibility of greenhouse-grown bell pepper production have been
performed by Jovicich et al (2005). Likewise similar feasibility studies have been created for
greenhouse strawberry production by Paranjpe et al (2004). All past greenhouse-grown
vegetable production studies have failed to include a “true” estimate of the risks associated with
greenhouse vegetable production, because they showed only a snap shot of a particular time for
production costs , returns, prices and yields and did not provide probabilities or risks of obtaining
their given results. Those risks include high fuel, harvest labor and marketing costs along with
low production yields and low market prices for production. In their analysis, Jovicich et al
(2005) and Paranjpe et al (2004), failed to represent the stochastic component of their variable
input prices, market prices and production yields, by simply using a stagnant average for these
inputs.
In their studies, Jovicich et al (2005), and Paranjpe et al (2004), provided the operational
and construction costs for the production of greenhouse bell peppers and strawberries. These
studies were then adapted for the production cost of greenhouse-grown cucumbers. Thus, the
analysis provided in this study is based on their operational and construction costs.
Summary
Florida vegetable growers are faced with increasing competition from around the world
and can no longer rely solely on field production to maintain market share in the U.S. vegetable
industry. Over the last decade, the U.S. has become less reliant on Florida for the bulk of its
fresh vegetables. U.S. consumers are shifting demand toward year round supply of high quality,
greenhouse-grown vegetables. Due to this, countries such as Canada, Mexico, Spain, Israel and
the Netherlands are filling the seasonal markets with fresh, predominantly greenhouse-grown
vegetables.
38
Greenhouse vegetable production may be one alternative to Florida field production.
Studies have shown that greenhouse production offers increased quality and yield over field
production and are not reliant on the use of soil fumigants such as methyl-bromide. This study
will look at the economic feasibility of greenhouse vegetable production of bell peppers,
cucumbers and strawberries and determine the potential returns and costs of production of these
commodities.
39
CHAPTER 3 THE ECONOMIC FEASIBILITY OF GREENHOUSE-GROWN BELL PEPPERS AS AN
ALTERNATIVE TO FIELD PRODUCTION IN NORTH-CENTRAL FLORIDA
In Florida’s 2003-2004 growing season, 18,300 acres of mostly green bell peppers were
harvested primarily from fields with raised beds using sub-seepage and some drip irrigation
(Florida Agriculture Statistical Directory, 2005). Currently, domestic consumption of fresh bell
peppers in 1979 was 661,000,000 lb. and rose to 2,090,000,000 lb. in 2005, an increase of 316%,
while imports have increased 411% respectively from 1979 to 2005 [143.7 million lb to 590
million lb (U.S. Department of Agriculture, 2005). Today, increased public demand for colored
bell peppers has allowed other countries such as Canada, Mexico, the Netherlands, Israel and
Spain, which produce mostly colored, mature, ripe bell peppers, to fill that demand in the United
States.
The U.S. is one of the few countries that still produce the majority of its bell peppers as
green colored grown in the field on raised beds, with drip irrigation. Outside the U.S., bell
peppers are produced in greenhouses producing mature, colored peppers (Jovicich et al., 2005).
In 2002, Canada’s greenhouse bell pepper production area was more than 470 acres (519 acres)
greater than that of the U.S. (49 acres), while Mexico (430 acres) is more than 381 acres greater
than that of the U.S. (49 acres). (B.C. Ministry of Agriculture, Food and Fisheries, 2003).
Florida bell pepper producers are in direct competition with Mexico, Israel and Spain in the
winter months, due to overlapping seasons; while Canada and Holland is able to enter the U.S.
market in the spring, summer and fall months.
Historically, consumers are willing to pay more for greenhouse-grown bell peppers, due to
their high quality and seasonal availability, even though they command a higher price than that
of field grown bell peppers (Smither-Kopperl and Cantliffe, 2004). Countries that produce a
high quality colored bell pepper acquire a high annual average price per pound of product for
40
both field and greenhouse produced. From 1998-2005, colored greenhouse grown bell peppers
from Israel acquired a 200% higher average price [$2.08/lb.] than Mexico’s [$1.04/lb.] colored
field peppers. Mexico’s average price per pound, for colored field bell peppers, is also 48% less
than that of the Netherlands greenhouse colored bell peppers. Greenhouse-grown colored bell
peppers in Mexico receive a 160% higher price [$1.66/lb] than field bell peppers [$1.04/lb] from
Mexico (Table 3-1) (U.S. Department of Agriculture, 2005). In 2004, 27.3% of domestic
consumption in the U.S. was imported, at a value of $436,968,000 (U.S. Department of
Agriculture, 2005).
Mexico is Florida’s biggest competitor due to each area having the same growing seasons.
In 2004, imports from Mexico had a value of $250,021,000 which accounted for 57% of the total
value of imported bell peppers into the U.S. The second largest exporter of bell peppers to the
U.S. is Canada, which accounts for 21% of the total imported valued at $91,262,000 and the
Netherlands comes in third with a value of $56,544,000 [13% of total] (Table 3-2).
Field Production of Bell Peppers in Florida
In Florida, bell pepper production is primarily on raised polyethylene-mulched beds using
drip irrigation and fumigated with the now restricted chemical methyl-bromide. Florida has been
a principle winter supplier of bell peppers, to the north-eastern and Midwestern United States
(Jovicich et al., 2005). Most of Florida’s bell pepper field production is predominantly of the
green pepper type. Florida is the second leading producer of bell peppers [567,300,000/lb] in the
United States behind California [800,300,000/lb] (U.S. Department of Agriculture, 2005). In the
2002-2004 growing season, Florida harvested 18,300 acres producing 567,308,000 lb.
[20,261,000 bushels]. Total U.S. production of fresh market bell peppers is valued at
$576,375,000. The value of Florida’s production [$218,411,000] accounts for 38% of the total
value of the U.S. fresh market bell pepper production (U.S. Department of Agriculture, 2005)
41
(Florida Agricultural Statistical Directory, 2005). Florida pepper producers harvest from
November – May, picking predominantly mature green peppers. Historically, field producers are
offered a premium price for mature red [$.83/lb. ± .41]; yellow [$1.03/lb. ± .51] and orange
[$1.43/lb. ± .70] colored peppers over mature green peppers [$.43/lb. ± .17]. However, by
delaying harvest, field producers increase their risk, via reduced yield or loss from weather,
disease, viruses or insects, which leads to unmarketable fruit.
The goal of this research was to determine whether greenhouse production of colored bell
peppers, in Florida, is an economically feasible alternative to field production. This was
accomplished through the use of simulation models, using stochastic variables. In this study, the
definition of a simulation model is a mathematical representation of a business or economic
system that reflects sufficient detail of the system to address the questions at hand. The term
simulation defines the process of solving a mathematical simulation model, which represents an
economic system comprised of a set of exogenous variables. Exogenous variables are defined as
alternative management strategies and policy scenarios and are the numerical representation of a
“What if …?” question. Simulation models are frequently solved to statistically represent all
possible combinations of the random variables in the system. The results from a simulation
process are a large number of simulated values for key output variables (KOVs) of interest to the
decision makers. The simulated values for a KOV represent an empirical estimate of the
probability distribution for the variable and quantify the risk associated with the variable. This
type of answer is analogous to performing a large number of field trials on corn using the same
dosage of product X to determine the mean and variance of a lethal dose (Richardson, 2006).
Simulation models can be solved both deterministically and stochastically. Deterministic
Models are simulation models without risk and are solved using simple calculator arithmetic.
42
Stochastic simulation models are solved a large number of times using one value for X to
generate a sample of outcomes for the dependent variable Y, recognizing that X has risk.
Because there is risk in the forecast for Y, it must be forecasted using a probability distribution
rather than using a point estimate. The simulated distribution for Y informs the decision maker of
the riskiness of the forecast for the KOV, the skewness of the outcome, and the chances of a
favorable outcome, all answers not available from a deterministic or linear programming forecast
(Richardson, 2006).
Probabilities and Risk for Greenhouse Colored Type Bell Pepper Production Using SIMETAR© in North Central Florida
Stochastic simulation involves simulating uncertain economic systems that are a function
of risky variables, for the express purpose of making better decisions. This study assumes that
future risk mimics historical risk, so past variability is used to estimate parameters for the
probability distributions of risky variables in the model. Probability distributions are simulated a
large number of times to formulate probabilistic projections for the risky variables. The
interaction of the risky variables with other variables in the model allows the projection of how
risky a decision would likely be under alternative management strategies. In this way the model
can provide useful information about the likely outcomes of alternative management decisions
under risk (Richardson, 2006).
In greenhouse production, just as in all agricultural ventures, risk is a major variable to
consider. The higher the risk, in most instances, the greater the return, likewise the lower the
risk, in most instances, the lower the returns, however, the amount of risk a producer is willing to
take on is entirely up to the producer. Caution should be used when using this model to assess an
individual’s risk. This model is just a guide so that others may tailor it to their needs, in order to
measure risk of yield and price. No model can measure all risks including natural disasters,
43
market prices, personal knowledge of plant production or management. All prices are based on
historical wholesale prices from New York, Atlanta and Miami terminal markets and are not
necessarily the prices that all growers have received.
The objective of this study was to determine the economic feasibility of growing colored
bell peppers in a greenhouse. In addition this study will make a comparison of the profitability
between greenhouse and field production of bell peppers, in North Central Florida.
Methods
This study describes and applies stochastic simulation to a financial model of a 1.0 acre
bell pepper greenhouse operation in North Central Florida. Stochastic simulation is defined as a
“tool for addressing ‘what if…’ questions about a real economic system” (Richardson 2002).
This study uses a simulation engine that is an add-on to Excel©, in order to run stochastic
simulations. This simulation engine has the ability to do the following tasks: generate pseudo
random numbers, collect the output from simulations, and facilitate the analysis of simulation
results by presenting the information in alternative forms that aid in the analysis and ranking of
the scenarios. SIMETAR© is a simulation package that was used in this study. 1
The model simulates the economic activity of a greenhouse production area of 1.0 acre of
red, with the assumption changes of input and output coefficients; it is also used to analyze
yellow and orange bell pepper production.
The Use of Stochastic Variables in a Simulation Model to Estimate Key Output Variables (KOV)
Deterministic results are a derivative of simulation models that do not include risk.
Stochastic models are deterministic simulation models that include variables which are not
1 “SIMETAR© was developed by Richardson, Schumann, and Feldman in the Department of Agricultural Economics, Texas A&M University. It is an add-on to Microsoft Excel© that was developed in Visual Basic for applications. It consists of both menu-driven and user-defined functions in Microsoft Excel©” (Gill, Richardson, Outlaw, Anderson, 2003).
44
known with certainty but have a known probability distribution. A stochastic model is simulated
a large number of times using randomly selected values for the risky variables to estimate the
probable outcomes for key output variables (KOVs). The simulated sample of values for each
KOV constitutes an estimate of the variable’s probability distribution which can be used to make
decisions in a risky environment (Richardson, 2006).
The stochastic variables used in the greenhouse model are price and yield. A description
of the methods used to develop parameters for simulation of the stochastic variables is provided
as follows. A major stochastic variable in this model is price, since price is a moving variable
that moves with the supply and demand curve. Its mean and parameters for this economic
analysis model were gathered from the U.S. Department of Agriculture (U.S. Department of
Agriculture, 2005). A second and equally important stochastic variable is yield, since yield
changes from month to month during a crop cycle. The means and parameters for yield were
estimated from experiments conducted at the Protected Agriculture Project, University of
Florida, Florida (Jovicich et al., 2004, Jovicich et al., 2005, Shaw et al., 2002, Smither-Kopperl
et al., 2004).
Price was simulated using a uniform probability distribution. A uniform probability
distribution function was used because each observation of the random variable between the
minimum and maximum has an equal chance of occurrence. The parameters for the uniform
probability distribution [PDF] are the minimum value for the distribution, the maximum value
for the distribution, and the uniform standard deviate [USD]. The USD variable X is distributed
over the range of 0 to 1 and is denoted as X ~ U (0, 1). Uniform standard deviate is simulated in
SIMETAR using the command =UNIFORM ( ). The uniform probability distribution function
for the uniform distribution given a and b can be explained through the function:
45
In the function above a is equal to the minimum wholesale price and b is equal to the maximum
wholesale price. The wholesale price input variables [min, max, USD] for conducting a uniform
probability distribution for each color scenario are shown in Table 3-3.
Do to a limited data set; yield was simulated using the GRKS distribution. GRKS stands
for the names of the creators of the distribution, Gray, Richardson, Klose, and Schumann It was
developed to simulate subjective probability distributions based on minimal input data
(Richardson et al., 2006).
Business managers can provide estimates of three points on a distribution of possible
outcomes (min, midpoint, max), but they often admit things could be worse or better than they
expect.
The GRKS distribution is a continuous probability distribution for sampling from a
minimum data population. Given a minimum, middle and a maximum value to describe the
population, the GRKS function is a continuous distribution substitute for the triangle distribution.
The GRKS distribution is a closed form distribution. The GRKS distribution is simulated in
SIMETAR© with =GRKS (min, midpoint, max) (Richardson et al., 2006). The lb/ft2 input
variables [min, mid, max] for conducting a GRKS distribution for each of the color scenarios can
be found in Table 3-4.
Greenhouse Structure Used in the Production of Color Type Bell Peppers in North Central Florida
Experiments were performed in passively ventilated high roof greenhouse units of a saw-
tooth design, located at the Protected Agriculture Project, University of Florida, Plant Science
Research Unit Citra, Florida (Jovicich et al., 2005). Total floor area of the structure is 43,560 ft2
(1.0 acre). The multiple-bay high-roof greenhouse structure was covered with polyethylene and
46
had retractable side walls and saw-tooth roofs with a roof vent on every bay. All openings were
screened with a 50-mesh insect-proof screen. Due to the location [North Central Florida] of the
greenhouses, minimum heating from November to the beginning of March was required in order
to have good plant growth with high quality fruits. Heating was primarily done to prevent
freezing. Annual heating requirements will be addressed later on in this chapter. This model
used Diesel-fueled heaters to reduce fuel costs, even though the University of Florida Protected
Agriculture Project, Citra, Florida uses propane. Diesel-fueled heaters serve dual purposes. The
heaters in conjunction with aluminized thermal screens were used to keep greenhouse
temperatures to a minimum 50°F, while they also had the ability to lower temperatures by
improving ventilation, when used in conjunction with the sidewall openings, fans and aluminized
screens, during the months of August-October and from March-May, in the passively ventilated
structure (Jovicich et al., 2005).
Crop Systems Used in the Production of Colored Type Bell Peppers
Large portions of data (including planting, yield, crop cycle, fertilization and pollination)
used in this enterprise budget and model are based on research trials done at the University of
Florida’s Plant Science Research Unit, Citra Florida (Jovicich et al.,2005, Shaw et al., 2002).
Crop cycle lasted 298 days from seeding to removal of the crop. Plug transplants were grown in
plug trays for 35 days then transplanted in August. Harvesting started at the end of October
(usually one harvest per week, with a total of 30 harvests), until the end of March (Shaw et al.,
2002).
Wholesale Bell Pepper Fruit Prices
Historical fruit prices for mature colored fruit were gathered from the U.S. Department of
Agriculture’s USDA Fruit and Vegetable Market News Portal (U.S. Department of Agriculture,
2005). Daily price data was gathered for the last seven years (1998-2005) from three different
47
terminal markets (New York, Atlanta and Miami) to calculate a maximum, minimum and mean
dollar per pound wholesale fruit price used in the budget analysis model. Means and standard
deviation were calculated for different price series. Fruit prices were sorted by color, origin and
weight of packaging. Fruit from Spain, Israel and the Netherlands were used to calculate
greenhouse pepper prices, since these countries ship only mature, ripe, colored bell peppers to
the U.S., while fruit from Florida, California, Georgia and Mexico were used to calculate field
prices.
Once historical daily prices for red, yellow and orange bell peppers were collected, the data
were sorted, matched and cropped from January 1998 to December 2005. An annual model is
used in this study so the daily data was averaged to generate an annual average dollar per pound
price for the three scenarios of red, yellow and orange bell peppers.
Historically, prices of colored greenhouse bell peppers have been two to three times higher
than those of field-grown peppers. Annual average wholesale price for greenhouse-grown red
bell peppers is $1.89/lb., versus average annual field prices of $0.83/lb (Figure 3-1). The annual
average wholesale price of greenhouse yellow peppers is $2.00/lb. compared to the field $1.03/lb
(Figure 3-2). Annual average greenhouse price for orange is $2.12/lb. compared to the field at
$1.43/lb (Figure 3-3). Even though colored peppers historically obtain a higher price per pound,
green bell peppers are the predominate type produced in fields. The annual average field price
for green bell peppers is $0.43/lb (Figure 3-4). Annual average wholesale price of field green
bell peppers is 193% lower than red, 240% lower than yellow and 333% lower than orange field-
grown bell peppers. Monthly greenhouse prices for colored bell peppers peak between March
and May, with the highest price in April [red $2.34/lb., yellow $2.45/lb., orange $2.66/lb.].
Colored field bell pepper prices peak in May [red $0.94/lb., yellow $1.18/lb., orange $1.81/lb.]
48
and July [red $0.86/lb., yellow $1.15/lb., orange $1.53/lb.] (Figure 3-1, Figure 3-2, Figure 3-3).
The annual average wholesale greenhouse price for all [red, yellow, orange] colors is $2.00/lb.
compared to the annual average wholesale field price for all [red, yellow, orange] colors of
$1.04/lb. Mature colored bell peppers from a greenhouse demanded a $0.96/lb. greater price
than that of field production (U.S. Department of Agriculture, 2005).
Enterprise Budget Analysis of Greenhouse-Grown Colored Type Bell Peppers
Common financial statements were developed and used for each of the three color types of
bell peppers. There was no cost difference to produce any of the three pepper types so the only
changes necessary in the simulation were price and yield (Jovicich et al., 2005). An enterprise
budget was constructed consisting of gross revenue, costs [initial investment, variable and fixed]
and profit that is associated with a 1.0 acre pepper greenhouse operation in North Central
Florida. Budget Tables consisted of items, quantities, units and prices used. This section
describes the generic model and, when appropriate, indicates changes in the variables for the
different colored peppers.
Annual receipts [gross revenue] were derived by multiplying the annual stochastic dollar
per pound price by the volume of peppers produced [gross revenue = sales volume x price, sales
volume = yield x usable greenhouse area] for the October - March harvest period (Table 3-5,
Table 3-6, Table 3-7). Total fruit yield for red bell pepper were estimated to be 1.96 lb. /ft2,
yellow bell pepper yields were estimated to be 1.89 lb./ft2 and orange bell pepper yields were
estimated to be 1.66 lb./ft2, based on the technology and practices used and the length of the crop
cycle (Shaw et al., 2002). Costs and revenue were predominantly based on unit area of the total
greenhouse area [1.0 acre]. The formula used to calculate gross revenue was: gross revenue
($/ft2) = yield (weight per ft2) x stochastic price ($/lb.).
49
Estimated Costs of Production for Growing Greenhouse Colored Type Bell Peppers
Fixed costs are defined as costs that the producer would incur even if no crop was being
grown in the greenhouse at the time. All items have been depreciated over their expected useful
life, with a straight line depreciation method. Straight line depreciation is defined as a procedure
for depreciating long-lived assets that recognizes equal amounts of depreciation in each year of
the asset’s useful life. Useful life of an asset is defined as the number of years an asset can be
used before the asset deteriorates to the point when repairs are not economically feasible. The
usefulness of a long-lived asset is largely determined by technological advancements, which
could at any time render certain long lived assets obsolete. For this reason, all items in this study
were assumed to have zero salvageable value at the end of their useful life. Fixed production
costs were derived from the sum of depreciation and other costs. Annual fixed costs came to
$39,660 [$0.91/ft2] (Table 3-8).
The fixed costs to depreciate [initial] investment required for a 1.0 acre greenhouse venture
was determined by compiling all construction, materials, equipment, labor, and durables needed
up front to start a greenhouse enterprise. Initial investment is part of the estimated annual fixed
cost. Initial investment cost consisted of the land, greenhouse structure and cover materials, site
preparation costs, greenhouse permits, construction supervision, head house structure, fruit size
grading machine, backup generator, heating and ventilation systems, nutrient injector and climate
control systems, nutrient solution tanks, weather station, computer software, training to use
computer software, water filters, valves and pressure regulators, irrigation emitters, stakes,
tubing, polyethylene pipe, pipe connectors, nursery pots, electrical, drainage system, bulk storage
tanks, trellis accessories, automobile, and a fork lift. A summary of these initial investment costs
can be found in Table 3-8.
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Variable costs are defined, as it pertains to this model, as operating costs that would be
incurred only if the crop was grown. Variable production costs [$/ft2] were taken from Table 3-9
except for electricity and gas costs, which will be discussed later in the chapter. Variable costs
were derived by summing preharvest costs, harvest costs and package and marketing costs.
Annual variable costs for a 1.0 acre greenhouse operation came to $127,359 [$2.92/ft2] (Table 3-
9).
Profit was calculated by subtracting total cost from gross revenue. The formula used for
calculating profit: (profit = gross revenue [yield (weight per ft2) x stochastic price ($/lb.)] – total
costs [variable + fixed (depreciation + other durables)]). Net present value [NPV] is defined as
the present value of cash inflows less present value of cash outflows. It is also said to be the
increase in wealth accruing to an investor when he or she undertakes an investment. Net present
value was calculated using Excel ©. The function used was: =NPV ((interest rate, Cash Flow
[array t=1 thru t=20]) + Initial Investment). Cash flows were calculated using an initial
investment of $441,384, with a book value at the end of its 20 year life expectancy of $22,069
with an assumed interest rate of 8.35% (Farm Credit, 2006). After tax cash flows were then
calculated with the following formula: ATCF = (profits [$19,417] – depreciation [$39,660] =
Earnings before taxes [EBT= -$20,243] – taxes [$0] + depreciation [$39,660]) = $19,417. Net
present value [NPV] was then calculated using the formula: NPV = sum (cash flows x present
value interest factor [PVIF]). Net present value was then simulated using SIMETAR©, after
simulating each color pepper scenario n=500 iterations, it was determined that all scenarios have
a negative NPV, the results can be found in Table 3-10.
The internal rate of return [IRR] is defined as the discount rate at which the investment’s
net present value [NPV] equals zero. As it pertains to this model, IRR was calculated using
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Excel© and can be viewed in the following formula: =IRR (Cash Flow [array t=0 thru t=20],
discount rate). The sum of the cash flows was not greater than the initial investment, resulting in
negative NPV and IRR for all three scenarios. Since the NPV was negative for all three
scenarios there can be no discount rate that will work perfectly in calculating an IRR.
Sensitivity Analysis for the Production of Greenhouse-Grown Colored Type Bell Peppers
Sensitivity analysis was used to analyze the effect on income when a change in one of the
input variables is invoked. Net returns were calculated in the sensitivity analysis with
marketable fruit yields ranging from .20 – 4.10 lb. /ft2 and wholesale market prices ranging from
$1.80 - $2.40/lb. (Table 3-11). According to the Shaw et al., (2002) study marketable fruit yield
ranged from 1.41 – 2.31 lb. /ft2 during an October – March harvest period (Table 3-4).
Break-Even Analysis for the Production of Greenhouse-Grown Colored Type Bell Peppers
A break-even analysis was created to show the different combinations of yield and the
price required to break-even in a 1.0 acre bell pepper greenhouse venture. For example, a yield
of 3 lb./ft2 would require a price of $1.28/lb. to break-even, anything over this price at 3 lb./ft2
would be considered profit or return to management, anything lower would make the venture
unprofitable (Table 3-12). The break-even analysis was calculated using the following formula:
break-even price = total cost [variable + fixed costs] / sales volume [yield x usable greenhouse
area (43,560 ft2)].
Heat Loss Calculations for a 1.0 Acre Greenhouse Bell Pepper Production in North Central Florida
There are many different types of heating systems available to heat greenhouses, some of
these choices include: unit space heaters, hot water systems, steam heating systems, unit radiant
heaters, solar radiant systems or poly-tube systems. In choosing a heating system a grower must
consider the location of production, the size of the growing area and type of structure and
52
materials used in construction of the structure. Future expansion, along with the minimum
temperature in which is acceptable for fruit growth for his/her particular crop being produced
should also be considered. This section will display the steps used to calculate energy required
to heat the 1.0 acre greenhouse in north central Florida. The choice of type of heating system a
grower should choose is up to the grower and is not included in this section.
Minimum temperature is a major variable to consider when growing vegetables in a
greenhouse. Many plants cease to grow at temperatures lower than 55°F and below 45°F
chilling injury can occur. A grower must weigh the expense in their decision whether to keep
temperature above 55°F for adequate fruit growth or just try to keep the plant alive by
maintaining temperatures at 55°F.
From 2000-2006, hourly data from the FAWN database [University of Florida, Institute of
Food and Agricultural Sciences], was gathered and sorted for University of Florida’s Plant
Science Research Unit, Citra, Florida. The greenhouses are high roofed [46 ft], saw-tooth
design, constructed of a single layer of polyethylene film. Minimum temperature, as it pertains
to this model was kept at 50°F. Average hours below 50°F base temperature are listed monthly
in Table 3-15. To determine the temperature needed to achieve the 50°F, the expected minimum
adverse temperature for the location is subtracted from the desired temperature in the greenhouse
to obtain the differential, of the desired base temperature inside the greenhouse from the
expected minimum adverse temperature for the location, in °F. The expected minimum adverse
temperature was calculated by averaging the minimum daily temperature in January for the last
six years [44°F]. The first step in determining heat loss is to calculate surface area, in square
feet, of the greenhouse. Total surface area for the greenhouse came to 60,515 ft2 (Table 3-13)
(Figure 3-5).
53
In a greenhouse, heat is lost in three ways: conduction, air infiltration, and perimeter heat
loss. Conduction heat loss is the estimated energy losses through cover material from the high
temperatures inside the greenhouse to the colder temperatures outside. This can be explained in
the formula: “Qc = A x (Ti – To)/R where Qc equals the total ‘conduction’ heat loss in Btu/hr, R =
the overall heat transfer coefficient in Btu/(ft2°F hr), A = the total exposed roof and wall area in
ft2, Ti = the inside greenhouse temperature °F, and To = the outside air temperature °F” (Jones,
2001). Calculated values used in the formula were: Qc = Area [60,515 ft2] * (base temperature
[50°F] – (average minimum January temperature [44°F] – difference between inside and outside
temperature [15°F]))/Resistance to heat flow coefficient [1.43].
Annual conduction heat loss was calculated to be 888,681.82 Btu/hr for the 1.0 acre
greenhouse (Table 3-14). Air infiltration heat loss is used to estimate the loss due to infiltration
air exchange. The air infiltration formula used is: QA = .015 V C (Ti – To) (Worley, 2005) (Jones,
2001). When calculated, the air infiltration formula appears as follows: QA = air exchange per
hour [1.5 for single layer polyethylene] x greenhouse volume in cubic square feet [589,199.52] x
overall heat transfer coefficient [1] x (base temperature [50°F] – (average minimum January
temperature [44°F] - ∆T [15°F])). Air infiltration losses equal 185,597.85 Btu/hr (Table 3-14).
Perimeter heat losses are the estimated loss of energy lost to the ground underneath and
beside a greenhouse. The perimeter heat loss formula is as follows: QP = P x L x (∆T) (Worley,
2005). When calculated appears as: QP = perimeter heat loss coefficient, Btu/ft °F hr [.8] x
distance around perimeter [842] x (base temperature [50°F] – (average minimum January
temperature [44°F] - ∆T [15°F])). Perimeter heat loss equals 14,145.60 Btu/hr (Table 3-14).
The formula used to determine total heat loss is: QT = QC + QA + QP. Total heat loss for the 1.0
acre greenhouse used in this model equaled 1,088,425.27 Btu/hr.
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To determine the estimated annual cost of energy, total heat required was multiplied by the
number of average hours per month the temperature fell below 50°F, and then summed those
totals to get an estimated number of annual Btu required for a 1.0 acre greenhouse (Table 3-15).
There are many different sources of fuel to create energy, and all have different estimated
efficiencies (Buffington et al., 2002). This study uses diesel fuel heaters [estimated 70%
efficient, producing 138,000Btu/gal], it was estimated that it would require 8,266.20 gallons of
diesel fuel to heat the greenhouse, with a base temperature at 50°F. To obtain an estimated
annual cost for fuel, the total annual number of gallons of fuel required was multiplied by the
current local price of agricultural diesel fuel [$2.20/gallon or $0.000016/Btu (Grimsley Oil,
2005. Personal Communication.)] (Table 3-15). The estimated annual cost to heat a 1.0 acre
greenhouse is $18,185.63 (Table 3-15). In addition, to determine the most efficient fuel source
for heating the greenhouse, fuel requirements for both propane and electric heaters were
determined. It was estimated that propane heaters [propane has an estimated efficiency of 80%,
with a heat value of 92,000 BTU/gallon] would require 18,533.63 gallons of fuel annually, at an
annual cost of $30,580.50 [$1.65/gallons or $0.000018/BTU (Energy Information
Administration, 2006)]. Electric heaters [electricity has an estimated efficiency of 100%, with a
heat value of 3,413 BTU/hr] would require 499,588.15 kWh, at an annual cost of $39,967.05
[$0.08/kWh or $0.000023/BTU (Florida Power & Light (FPL). 2005. Personal
Communication.)] (Table 3-15).
Field Budget Analysis for Bell Peppers in Florida
Common financial statements were created by the University of Florida, Food and
Resource Economics Department, for field bell pepper production in the state of Florida (Smith,
2005). These financial statements were modified to create a model using stochastic variables
and scenarios. As in the greenhouse model, the field budget has stochastic variables in place for
55
both yield and price. In addition, five scenarios were used to determine the effect of increased
land prices in the State of Florida, on the estimated annual net profit that a grower might receive.
Gross revenue was calculated by multiplying average yield per acre by the average
wholesale market price taken from the “Florida Agricultural Statistical Directory 2005” from
1994–2004 (Table 3-19).
Variable costs, as defined previously, are those costs that a grower will incur only if a crop
is being grown. Variable costs for one acre of bell peppers in Florida were calculated to be
$2,772/acre (Table 3-19).
Fixed costs are costs that a grower will incur whether or not a crop is being produced.
Fixed costs were calculated to be $3,759/acre (Table 3-19).
Postharvest costs include harvesting and marketing costs. Total harvesting and marketing
costs were calculated to be $4,708/acre (Table 3-19).
Total costs were calculated by summing total variable costs, fixed costs and harvest and
marketing costs. Total costs equal $8,468/acre.
Probabilities and Risk in Field Production Using SIMETAR©
As mentioned in the previous risk section, the program SIMETAR©, was used to assess
the probabilities and risk involved in field production of green bell peppers in five different
regions of Florida. Just as in greenhouse production, caution should be used when using any
method of assessing risk. This model does not assess the risk of losses due to natural disasters or
lack of grower knowledge. In this model, the stochastic prices and yields are derivatives of
average prices and yields that Florida growers have obtained from 1994-2004 (Florida
Agricultural Directory, 2005).
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Results
Scenario Analysis Used to Analysis Red, Yellow and Orange Greenhouse-Grown Bell Pepper Production System in North Central Florida
Three scenarios were set-up in this model in order to discover the different risks involved
in producing colored bell peppers in a greenhouse, through simulation. Each color of bell pepper
has its own distinctive price range and respective yield, and therefore its own levels of risk. For
this reason, three scenarios were created: red, yellow and orange bell pepper colors. As stated
previously, the model is set up with stochastic price and yield, through the use of scenarios, each
color was simulated simultaneously. The benefit of using scenarios in SIMETAR© is that, “the
program runs the model multiple times using exactly the same random deviates (risk) for each
scenario. Thus, the analysis guarantees that each scenario was simulated using the same risk and
the only difference is due to the differences in the scenario variables” (Richardson et al., 2006).
Price and yield were the only stochastic variables in the model; however the model was set
up so that as the stochastic yield and price moved along its defined distribution, the model’s net
profit and net present value moved accordingly. Each scenario’s stochastic variable was
simulated at 500 iterations. The number of iterations used in the model was calculated by
simulating the model for a range of iteration numbers (25, 50, 75, 100, 200, 500, 1,000, and
5,000) and then the summary statistics were compared to the stochastic and key output variables.
The standard deviation for the key output variables were compared across the alternative
iterations. As the number of iterations increased, the standard deviation for the output variables
changed until it reached equilibrium. The iteration number where the standard deviation
stabilized was the minimum number of iterations used for the model.
Results from the simulation showed an annual mean price for greenhouse-grown red
peppers to be $2.09/lb. ± 0.14, mean yields equal to 1.98 lb./ft2 ± 0.20, annual net profit mean
57
equals $13,693± 18,292 for a 1.0 acre greenhouse producing red bell peppers. Annual mean
yellow bell pepper prices equal $2.21/lb. ± 0.14, yields equal 1.90 lb./ft2 ± .18, annual net profit
mean equal to $15,166 ± 18,027 for a 1.0 acre greenhouse. Annual mean orange prices equal
$2.37/lb. ± 0.15, yields equal 1.63 lb. /ft2 ± .14, annual net profit mean equals $3,855 ± 15,962
for a 1.0 acre greenhouse producing orange bell peppers (Table 3-10).
Probabilities and Risk Results for Greenhouse Colored Type Bell Pepper Production Using SIMETAR© in North Central Florida
Historical average wholesale price for greenhouse-grown orange bell pepper [average
$2.38/lb.] have been more than 114% higher than that of greenhouse-grown red bell peppers
[average $2.09/lb.]. This can be partially explained by the fact that there is more risk involved in
producing orange over red bell peppers. The reason for this risk is that peppers are vulnerable to
the lightest injury during the two weeks from the time the fruit reaches mature green to the time
it turns full color. Once the pepper begins to turn full color, its resistance to damage and ability
to heal surface wounds is minimal. Any damage to the fruit surface from bacteria, insects,
sunburn or physical injury causes the pepper’s marketable yield to drop quickly (Katz, 2006).
Orange colored peppers are more susceptible to sunburn than red colored fruit (Katz, 2006).
This leads to a lower marketable yield, when simulated, for orange [1.63 lb. /ft2 ± .14] compared
to red [1.98 lb./ft2 ± .2] fruit (Table 3-8) (Shaw et al., 2002).
SIMETAR© can be used to assess some risk, by estimating the probability that a simulated
variable might be achieved. Price and yield were set as stochastic variables in the model, with
defined parameters for the specific distribution function used. Table 3-16 shows select prices
within the distribution range that were used to calculate the probability of obtaining the select
price or lower, based on historical pricing data and the simulation software. The probability that
a grower would get a price for a greenhouse-grown red bell pepper below the minimum end of
58
the distribution [$1.85/lb.] or a price above the maximum end [$2.34/lb.] is 0%. There is a 69%
probability that the estimated price received would be greater than $2.00/lb. and a 31%
probability that it would be equal to or less than $2.00/lb. The probability that the price received
for yellow greenhouse-grown bell peppers would fall outside the parameters of the minimum
[$1.97/lb.] or maximum [$2.458/lb.] parameter is 0%. There is a 94% probability that the price
will be greater than $2.00/lb. and a 6% probability that the price will be less than or equal to
$2.00/lb. Orange greenhouse-grown bell peppers have a parameter range of $2.11 - $2.64/lb. It
has a 100% probability of being greater than $2.00/lb. and a 0% probability of being less than or
equal to $2.00/lb. (Table 3-16).
The method for determining the probability of yield works much in the same manner as it
did for price. Stochastic price used a uniform probability distribution function [minimum,
maximum value, uniform standard deviant], whereas yield uses a GRKS distribution function
[minimum, middle, maximum value, uniform standard deviant]. Table 3-17 displays select
yields and their probabilities of obtaining those yields. There is a 0% probability, that the
estimated yield for red greenhouse-grown bell peppers will fall outside the parameter range of
1.18 – 2.48 lb./ft2. There is a 98% probability that the yield will be greater than 1.5 lb./ft2 for red
greenhouse bell peppers and a 2% chance that the yield would be equal to or less than 1.5 lb./ft2.
Yield parameters for yellow bell peppers are 1.25 – 2.33 lb. /ft2 and 1.33 – 2.14 lb. /ft2 for orange
peppers (Table 3-17).
It would be logical for a grower to want to produce the commodity that gets the highest
price and the highest yield. However, the commodity that consistently obtains the highest price
is the orange bell pepper, but it also has the lowest yield. Red greenhouse-grown bell peppers
have the highest yield but the lowest price. Thus, a grower must look at what combination of
59
these variables will yield the greatest net profit. Table 3-18 shows that the mean net profit for
yellow bell peppers is the highest of the three colors [$15,166] with a 22% probability of making
more than $30,000 or a 1% probability of making more than $50,000 with a 1.0 acre greenhouse
operation. Red bell peppers, which have the largest yield, have a mean simulated net profit of
$13,693 and a 19% probability of making more than $30,000 and a 2% probability of making
more than $50,000. Orange, the color that demands the highest price, has a simulated mean net
profit of $3,855 and a 6% probability of making more than $30,000 and a 1% probability of
making more than $50,000 (Table 3-18). As shown in this model, risk plays an important role in
selecting the commodity a grower should produce and when looking at risk among red, yellow
and orange bell peppers, grown in greenhouses, it is apparent that yellow has the lowest risk
involved, followed by red then orange bell peppers.
Analysis of Florida Field Budget Simulation
The enterprise budget model was simulated using the average land cash rent price
representing the average rental price of irrigated cropland in Florida, as defined in Appendix A-
2. Counties that produce bell peppers are Suwannee, Columbia, Union, Alachua and Putnam,
Hardee, Lee, Collier, Palm Beach and Martin counties (Florida Agricultural Statistical Directory,
2005). This model used the same stochastic yield and price variables as the greenhouse model
and was simulated at 500 iterations.
Estimated average net profit for a one acre field operation in Florida producing mature
green bell peppers was $3,289 ± 1,427 (Table 3-20).
Probabilities and Risk in Field Production Using SIMETAR©
Both stochastic price and yield variables were set up using a GRKS distribution function.
The parameters needed for a GRKS distribution function, is a minimum, middle and a maximum
value. Simulation results display a 0% probability of a negative net profit. This also calculates a
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100% probability of a positive net present value. There was an 82% probability of a net profit
greater than $2,000/acre. The probability for a net profit greater than $4,000/acre was 29%. The
probability for a net profit greater than $6,000/acre was 4% (Table 3-21).
Discussion
Due to new and ever changing trade policies, Florida bell pepper producers must compete
with many other countries for market share. Countries such as Canada, Mexico, Israel, the
Netherlands and Spain are quickly filling the increasing demand for colored bell peppers in the
United States (Cantliffe et al., 2001). Florida growers, which have predominantly grown bell
peppers in fields on raised beds, must adapt to the shifting market demand for colored bell
peppers in order to maintain a substantial market share.
In the U.S., consumption of red, orange and yellow bell peppers has increased dramatically
during the last decade (U.S. Department of Agriculture, 2006). From 1995-2005, per capita
consumption of fresh bell peppers has increased from 6.2 lb to 7.1 lb (U.S. Department of
Agriculture, 2005). In addition, over the last decade the U.S. population has increased from 267
million to 294 million (U.S. Department of Agriculture, 2005).
Unlike field production, the greenhouse environment uses a soilless production system
which avoids weeds, soil-borne pathogens or plant parasitic nematodes. Screened structures
greatly reduce the presence of insects, and those that are present can be controlled using
biological control. Additionally, there is increased efficiency in use of fertilizer and water,
which can be recycled within the system (Smither-Kopperl et al. 2004). Methyl bromide is a soil
fumigant that is used to control soil-borne pathogens, plant parasitic nematodes and weeds
(Smither-Kopperl et al., 2004). Field production in Florida is heavily dependant upon the use of
methyl bromide. The ban on methyl bromide and the greater demand for high quality colored
bell peppers has created an opportunity for growers to produce bell peppers in a greenhouse.
61
The most common greenhouse bell pepper production season extends from mid-July or
early August to May. Florida’s temperate climate requires minimum heating for the production
of bell peppers in a greenhouse compared to other regions of the U.S. With ever increasing fuel
prices, this will allow Florida growers to stay competitive in the bell pepper production industry.
This allows growers to produce over extended periods depending on fruit prices and on the
quality of the fruits harvested. These factors may allow production to extend until June (U.S.
Department of Agriculture, 2005).
This project determined that greenhouse production of bell peppers can produce a net
profit four times greater than field production. Results from Jovicich et al (2005) also reveal that
greenhouse production is a profitable venture for Florida bell pepper producers. Jovicich et al
(2005) estimated that returns to management and capital equaled $1.66/ft2 and a yield of 1.6 lb.
/ft2 was required to break-even.
Results from Jovicich et al (2005) and Smith (2005) were used to compare to the findings
in this project. Jovicich et al (2005) reported that greenhouse production is a profitable venture,
however variations were found between this and his study. Jovicich et al (2005) found a positive
IRR and no net present value was determined. Possible reasons for this variation in results could
be attributed to the use of land prices in the budget analysis, differences in the definition of fixed
versus variable costs, and a difference in price and amount of fuel required for heating a
greenhouse. Yield quantities presented in Jovicich et al (2005) were gathered from Jovicich’s
own experimental data, where as yields used in this project was determined by Shaw et al (2002).
Field budgets constructed by Smith (2005) were used to compare field returns with this studies
greenhouse production return. Results from the comparison showed that greenhouse production
62
of bell peppers [$15,166/acre] can be up to four times higher than returns from field production
[$3,289/acre].
Three simulation scenarios were used, red bell pepper production, yellow bell pepper
production and orange bell pepper production. Through the use of the program SIMETAR©,
budgets were set up in a manner in which net profit could be compared in different scenarios.
Simulation of these scenarios enables the user to calculate risks and probabilities associated with
each. Simulated scenarios for greenhouse-grown colored bell peppers illustrated that yellow bell
pepper price and yield combinations would earn growers the highest net profit, compared to the
red with its highest yield, or the orange with the highest average wholesale price.
The break-even fruit yields and required prices for profit determined by this study are
attainable for Florida bell pepper growers. Current experimental and commercial crops are
obtaining yields of 2 – 3 lb/ft2 and historical prices of colored bell peppers range from $1.54 -
$2.54/lb. (Jovicich et al., 2005) (U.S. Department of Agriculture, 2006). Yields and market
values such as these are sufficient to make greenhouse bell pepper production profitable
according to the results of this study.
Greenhouse enterprises are variable in size, composition and management. Thus growers
seeking to undertake the production of bell peppers in a greenhouse setting should use this study
as a guide and calculate budgets for their own enterprise. This study used a greenhouse size of
1.0 acre, greenhouses with a different size, construction material or configuration may differ in
cost of initial investment and in cost of production. However, investment per unit area is always
considered high compared investments in field vegetable production.
Florida vegetable growers are currently faced with many challenges, from natural disasters
to international competition which is able to ship year round. Florida growers must find ways to
63
surmount obstacles such as urbanization [loss of warm weather, costal farm land], labor
shortages [labor shifting to steady higher-paying jobs such as construction], water restrictions,
and the loss of methyl-bromide. For some growers seeking to produce high value specialty
crops, such as colored bell peppers, soilless greenhouse production may be an alternative that can
overcome some of these obstacles.
Summary
Florida fresh market vegetable growers are faced with increased pressure from
urbanization, water and chemical restrictions, and foreign competition. Growers are in need of a
clear alternative to field production that can off-set these growing obstacles. Past research has
suggested that greenhouse vegetable production could be one alternative to field production.
These studies have created enterprise budgets for the production of greenhouse bell peppers.
Additionally, studies have examined the pressure on the U.S. vegetable market from foreign
countries. Additional research is needed to assess the risk and potential earnings that growers
can obtain in greenhouse vegetable production.
The objective of this study was to determine the costs and benefits associated with
greenhouse pepper production. Through the use of SIMETAR© and Excel© software, a budget
analysis model was created for the production of greenhouse-grown bell peppers. Using this
model, cost of production, net profit and risk have been simulated and compared to field
production. Variable cost from a greenhouse bell pepper venture was $128,362/acre [$2.95/ft2]
compared to $2,772/acre for field production. Fixed costs were $39,659/acre annually for
greenhouse production and $5,695/acre for field production.
Although greenhouse production requires a significantly larger capital investment
compared to field production [field net profit : $3,289/acre], potential profits from growing
colored peppers have been determined to be as much as four times greater in greenhouse
64
production [greenhouse net profits:$15,166/acre yellow]. These are significant findings for
Florida growers searching for alternatives to field production. Greenhouse production may allow
them to stay competitive in the U.S. fresh vegetable market. This study has determined that not
only is it economically feasible to grow bell peppers in a greenhouse setting, but it has also
shown that potential profit is significantly greater for greenhouse-grown bell peppers compared
to field-grown bell peppers.
65
Table 3-1 Monthly average dollar per pound wholesale price of colored bell peppers from select countries 1998-2005Y Avg $/lbz CANADA ISRAEL MEXICOx NETHERLANDS SPAIN U.S.w Average Jan $1.71 $1.93 $1.72 $2.40 $1.94 $0.81 $1.75 Feb $2.01 $1.81 $2.26 $1.96 $0.81 $1.77 Mar $1.59 $2.27 $1.94 $2.38 $2.17 $0.89 $1.87 Apr $2.26 $2.46 $1.98 $2.48 $2.91 $0.97 $2.18 May $2.22 $1.71 $2.23 $0.97 $1.78 Jun $2.01 $0.85 $1.91 $0.87 $1.41 Jul $1.83 $1.80 $0.92 $1.52 Aug $1.71 $1.63 $0.83 $1.39 Sep $1.35 $0.91 $1.73 $0.68 $1.17 Oct $1.46 $1.79 $0.74 $1.33 Nov $1.70 $1.80 $1.39 $2.09 $0.87 $1.57 Dec $2.07 $1.98 $2.60 $2.30 $1.99 $0.95 $1.98 Annual Average $1.81 $2.08 $1.66 $2.08 $2.19 $0.86 $1.78 W Monthly wholesale market prices for the U.S. are an average of field and greenhouse bell peppers from California, Florida, Texas and Georgia. X Wholesale market price for greenhouse-grown colored bell peppers, average annual whole sale price for field bell peppers, from Mexico, was $1.04. Y Wholesale prices are derived from New York, Atlanta and Miami terminal markets from 1998-2005. Z Wholesale prices are an average of daily terminal market wholesale prices. (U.S. Department of Agriculture, 2005)
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Table 3-2 Value of U.S. imports, from various countries, of bell pepper, 2000-2004Z Year Canada Mexico Netherlands Other World
----$1,000---- 2000 49,098 134,773 48,928 20,602 253,401 2001 64,424 188,042 50,195 25,835 328,497 2002 71,417 132,727 56,844 29,601 290,589 2003 78,661 158,147 63,735 38,136 338,679 2004 91,262 250,021 56,544 39,142 436,968
Z Value of colored and green bell peppers (U.S. Dept. of Agriculture, 2005)
67
Table 3-3 Wholesale greenhouse price comparison or red, yellow and orange bell peppers averaged from New York, Atlanta and Miami terminal markets 1998-2005
$/lb RedX YellowX OrangeX Mean $1.89 $2.00 $2.12 StDev 0.248 0.242 0.299 95 % LCI 1.705 1.822 1.897 95 % UCI 2.071 2.179 2.339 Min $1.54 $1.68 $1.69 Median $1.87 $1.98 $2.19 Max $2.34 $2.45 $2.66 W Average annual wholesale price is in dollars per pound units XGreenhouse-grown colored bell pepper prices are an average from Canada, Israel, Netherlands and Spain YLCI = Lower Confidence Interval ZUCI = Upper Confidence Interval (U.S. Dept of Agriculture, 2005)
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Table 3-4 Yield comparison of various color greenhouse-grown bell pepper types used in the GRKS distribution function
RedX YellowX OrangeX Mean 1.9579 1.8877 1.6590 StDev 0.2278 0.2503 0.2816 95 % LCI 1.8410 1.5843 0.9800 95 % UCI 2.0747 2.1911 2.3380 Min 1.5361 1.4747 1.4132 Median 2.0174 1.9355 1.5976 Max 2.3144 2.1915 1.9662 W Average yield is in pounds per foot squared units X Annual marketable yield Y LCI = Lower Confidence Interval Z UCI = Upper Confidence Interval (Shaw, 2002.)
69
Table 3-5 Monthly marketable fruit yield, average wholesale market prices and gross revenues in a typical fall to spring greenhouse-grown red bell pepper crop in Florida with a total estimated yield of 1.96 lbs/ft2.
Aug Sept Oct Nov Dec Jan Feb Mar Apr May June July Oct-March Yield Y (lbs/ft2) 0.326 0.326 0.326 0.326 0.326 0.326 End 1.96 Price Z ($/lbs) $1.59 $1.54 $1.60 $1.84 $2.05 $1.95 $1.87 $2.07 $2.34 $2.20 $1.87 $1.76 $1.90 Gross Revenue ($/ft2) $0.52 0.60 0.67 0.64 0.61 0.67 3.71 Gross Revenue ($/acre) $22,692.43 26,132.93 29,183.60 27,700.51 26,520.36 29,400.75 161,630.59 Y Monthly fruit yields estimated from experimental crops at the University of Florida (Shaw et al., 2002). Z Average wholesale price (1998-2005) for greenhouse-grown bell peppers at the Miami, New York and Atlanta terminal markets (Appendix A-1)
70
Table 3-6 Monthly marketable fruit yield, average wholesale market prices and gross revenues in a typical fall to spring greenhouse-
grown yellow bell pepper crop in Florida with a total estimated yield of 1.89lbs/ft2. Aug Sept Oct Nov Dec Jan Feb Mar Apr May June July Oct-March Yield Y (lbs/ft2) 0.315 0.315 0.315 0.315 0.315 0.315 End 1.89 Price Z ($/lbs) $1.68 $1.69 $1.78 $1.97 $2.16 $1.99 $2.05 $2.26 $2.45 $2.22 $1.95 $1.80 $2.03 Gross Revenue ($/ft2) $0.56 0.62 0.68 0.63 0.65 0.71 3.84 Gross Revenue ($/acre) $24,374.30 26,938.30 29,580.08 27,287.98 28,111.34 31,012.17 167,304.17 Y Monthly fruit yields estimated from experimental crops at the University of Florida (Shaw et al., 2002). Z Average wholesale price (1998-2005) for greenhouse-grown bell peppers at the Miami, New York and Atlanta terminal markets (Appendix A-1)
71
Table 3-7 Monthly marketable fruit yield, average wholesale market prices and gross revenues in a typical fall to spring greenhouse-grown orange bell pepper crop in Florida with a total estimated yield of 1.66 lbs/ft2.
Aug Sept Oct Nov Dec Jan Feb Mar Apr May June July Oct-March Yield Y (lbs/ft2) 0.277 0.277 0.277 0.277 0.277 0.277 End 1.66 Price Z ($/lbs) $1.69 $1.72 $1.85 $2.18 $2.27 $2.22 $2.20 $2.49 $2.66 $2.27 $1.99 $1.88 $2.20 Gross Revenue ($/ft2) $0.51 0.60 0.63 0.62 0.61 0.69 3.65 Gross Revenue ($/acre) $22,231.19 26,234.08 27,330.96 26,791.81 26,468.35 29,982.87 159,039.26 Y Monthly fruit yields estimated from experimental crops at the University of Florida (Shaw et al., 2002). Z Average wholesale price (1998-2005) for greenhouse-grown bell peppers at the Miami, New York and Atlanta terminal markets (Appendix A-1)
72
Table 3-8 Estimated fixed cost of production for a 1.0 acre greenhouse growing bell peppers in North Central Florida
Cost Projected
Life Depreciation per
year Invested item ($/acre) ($/ft2) (years) ($/acre) ($/ft2)
Percent Cost of Total
Investment Land cash rent 572.00 0.013 1 572.00 0.01 0% Site preparation z Labor leveling, compacting 11,056.80 0.254 3% Lime rock and milling 3,317.04 0.076 1% Water piping to greenhouse complex 2,764.20 0.063 1% Site electrical/communications to complex 11,056.80 0.254 3%
Total site work 28,194.84 0.647 30 939.83 0.02 6%
Greenhouse permit z 829.26 0.019 20 41.46 0.00 0% Greenhouse structure and cover materials z Columns, arch, gutters, polyethylene locking profiles 47,875.94 1.099 20 2393.80 0.05 11% Access gates, four pavilions 1,879.66 0.043 10 187.97 0.00 0% Side-wall and roof-vent motors 8,237.31 0.189 10 823.73 0.02 2% Insect proof netting, 50-mesh (all openings) 2,133.96 0.049 10 213.40 0.00 0% Polyethylene cover 4,831.82 0.111 3 1610.61 0.04 1% Thermal and shading screen 23,108.71 0.531 10 2310.87 0.05 5% Freight overseas-Gainesville 5,528.40 0.127 20 276.42 0.01 1% White ground cover 2,918.99 0.067 7 417.00 0.01 1%
Total greenhouse structure and cover materials 96,514.80 2.216 22%
Greenhouse erection and concrete (by contractor) z 88,454.39 2.031 20 4422.72 0.10 20% Construction supervision z 3,317.04 0.076 20 165.85 0.00 1% Head house structures (26'x32' ft) 5,897.98 0.135 20 294.90 0.01 1% Fruit size grading machine z 2,764.20 0.063 10 276.42 0.01 1% Refrigeration room z 11,056.80 0.254 20 552.84 0.01 3% Backup generator z 2,211.36 0.051 12 184.28 0.00 1%
73
Table 3-8 Continued
Cost Projected
Life Depreciation
per year Invested item ($/acre) ($/ft2) (years) ($/acre) ($/ft2)
Percent Cost of Total
Investment Heating and ventilation systems z 6% Floor mounted heating units (diesel) 0% 20 heating units 80,639 kcal each 28,537.60 0.655 10 2853.76 0.07 0% Polyethylene convection tube (62 x 984 ft per roll) 735.28 0.017 3 245.09 0.01 0% Diesel tank (2,996 Gal) with shading roof 1,990.22 0.046 8 248.78 0.01 2% Site diesel plumbing 1,658.52 0.038 10 165.85 0.00 9% Air circulation fans (60 units) 6,634.08 0.152 8 829.26 0.02 Total heating and ventilation systems 39,555.70 0.908 1% Irrigating and climate control systems 3%
Water well and pumps 5,528.40 0.127 15 368.56 0.01 3%
Water tanks (2 x 14,979 Gal) 14,373.84 0.330 15 958.26 0.02 1% Nutrient injector and climate control systems 14,647.49 0.336 10 1464.75 0.03 1% Nutrient solution tanks (6 x 528 Gal) 2,819.48 0.065 10 281.95 0.01 1% Weather station and temperature and humidity sensors 4,422.72 0.102 10 442.27 0.01 0% Computer and software 2,764.20 0.063 5 552.84 0.01 0% Training for using control systems 829.26 0.019 0% Water filters 386.99 0.009 10 38.70 0.00 3% Valves and pressure regulators 1,596.05 0.037 5 319.21 0.01 0% Irrigation emitters, stakes, and tubing 12,480.36 0.287 5 2496.07 0.06 0% Polyethylene pipe (18,700 ft) 875.15 0.020 5 175.03 0.00 1% Pipe connectors and adaptors 304.06 0.007 5 60.81 0.00 2% Other irrigation parts and labor 2,764.20 0.063 5 552.84 0.01 16% 3 Gallon nursery pots 8,126.75 0.187 5 1625.35 0.04 Total irrigation and climate control systems z 71,918.95 1.651
74
Table 3-8 Continued
Cost Projected
Life Depreciation per
year Invested item ($/acre) ($/ft2) (years) ($/acre) ($/ft2)
Percent Cost of Total
Investment Electrical z 44,227.19 1.015 10 4422.72 0.10 10% Drainage system (troughs, pipes, pump)z 1,724.86 0.040 5 344.97 0.01 0% Bulk storage tanks (three tanks of 2,008 gal each)z 6,799.93 0.156 10 679.99 0.02 2% Trellis accessories z Cables for plant support (17,717 ft) and "U" clamps 3,095.90 0.071 10 309.59 0.01 1% Poles for plant support (13 per row) 3,593.46 0.082 10 359.35 0.01 1% Stem ring clips 580.48 0.013 2 290.24 0.01 0% Total trellis accessories 7,269.85 0.167 2% Automotive (medium-duty delivery truck) 14,539.69 0.334 10 1453.97 0.03 3% Fork lift 6,634.08 0.152 10 663.41 0.02 2% Other durables z Scales 829.26 0.019 5 165.85 0.00 0% Sprayer and fogger 1,105.68 0.025 5 221.14 0.01 0% pH meter 82.93 0.002 5 16.59 0.00 0% Electrical conductivity meter 138.21 0.003 5 27.64 0.00 0% Ion meters for nitrate and potassium 386.99 0.009 4 96.75 0.00 0% Harvest trolleys 829.26 0.019 6 138.21 0.00 0% Harvest bins 3,317.04 0.076 6 552.84 0.01 1% Tools 2,211.36 0.051 4 552.84 0.01 1% Total other durables 8,900.72 0.204 2% Total investment $441,383.62 $10.13 $39,659.56 $0.91 Z (Jovicich et al., 2005)
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Table 3-9 Estimated variable cost of production for 1.0 acre of greenhouse-grown bell peppers in North Central Florida
Bell Peppers Unit Quantity Price Amount Total
Items (no. units) ($.unit) ($/acre) ($/acre) ($/ft2)
Percent of Total Variable
Cost Production costs Preharvest Fertilizer X 7,747.97 0.18 6.08% 1.06 lbs/plant used in 298 days lbs 11,464.00 0.68 7,747.97 Biologicals Y 1,691.08 0.04 1.33% A. colemani (10.8/ft2) 2 releases x500 20.83 22.55 469.80 N. califonrnicus (107/ft2) 1 release x1000 34.90 31.83 1,110.76 B. thuringiensis 2 drain applications 2.5-Gal 1.04 106.10 110.52 Pollinators y 466.84 0.01 0.37% Bumble Bees 50-bee hive 2.00 233.42 466.84 Other material inputs X 10,758.91 0.25 8.45% Twine spool x 9842.5 ft 4.00 13.79 55.17 Double hooks unit 8,333.00 0.01 88.41 Bleach Gallon 20.00 1.06 21.20 Seedling trays Unit 57.00 3.18 181.43 Media seedlings ft3 22.00 2.10 46.27 Seeds unit 11,375.00 0.37 4,224.11 Media for pots (perlite) ft3 4,780.00 1.20 5,744.45 Sticky cards (insect pest monitoring) box x 100 15.00 26.53 397.88 Energy 19,435.66 0.45 15.26% Diesel Gallon 8,266.20 2.20 18,185.63 Electricity kWh 15,625.34 0.08 1,250.03 Labor X 2,818.55 0.06 2.21% Seeding and seedling growing h 1.00 52.00 52.00 Preparation greenhouse h 1.00 80.00 80.00 Transplanting h 1.00 25.00 25.00 Plant support with twines and hooks h 30.00 50.00 1,500.00
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Table 3-9 Continued
Unit Quantity Price Amount Total
Items (no. units) ($.unit) ($/acre) ($/acre) ($/ft2)
Percent of Total
Variable Cost
Removal of cull fruits, old leaves and shoots h 30.00 25.00 750.00 Fertilizer preparation h 30.00 1.00 30.00 Solution monitoring and filter cleaning h 30.00 2.00 60.00 Scouting (pests, diseases and beneficials) h 30.00 3.00 90.00 Removal of plants and cleaning h 1.00 80.00 80.00 Polyethylene cover change (every 3 years) h 0.33 35.00 11.55 Empting and washing pots (every 2 years) h 35.00 4.00 140.00 Total Labor h 2,177.17 Total preharvest costs 42,919.02 0.99 33.44% HarvestX Pick labor (75 h/harvest x 30 harvests) h 1,170.00 7.50 8,775.00 Total harvest costs 8,775.00 0.20 6.84% Packing and MarketingX Pack labor (1,442 h) lbs 99,357.16 0.06 5,858.79 4.56% Cartons, dividers and labels lbs 99,357.16 0.08 7,661.50 Marketing and miscellaneous packing lbs 99,357.16 0.10 10,365.56 Vehicle operation Miles 5,178.21 0.32 1,666.70 Sale transaction expenses (15% of Total Sales) 28,115.81 Total packing and marketing costs 53,668.37 1.23 41.81% Other Variable Costs Repairs and Maintenance 8,000.00 Taxes and Licenses 2,000.00 Greenhouse Insurance 5,000.00 Vehicle Insurance 2,000.00 Telephone 3,500.00 Misc 2,500.00 Total Other Expenses 23000.00 0.53 Total production costs $128,362.39 $2.95 X (Jovicich et al., 2005) Y (Koppert Biological Systems, 2006)
77
Table 3-10 Comparison of select simulated variables of a
1.0 acre colored greenhouse-grown bell Peppers operation
Red Yellow Orange Price V $2.09 $2.21 $2.37 StDev 0.142 0.139 0.153 CV Z 6.759 6.276 6.449 Min $1.85 $1.97 $2.11 Max $2.34 $2.45 $2.64 YieldW 1.981 1.895 1.634 StDev 0.197 0.182 0.141 CV Z 9.949 9.593 8.604 Min 1.180 1.247 1.332 Max 2.483 2.325 2.136 Net Profit X $13,693.09 $15,166.20 $3,855.18 StDev 18292.44 18027.23 15962.14 CV Z 133.59 118.86 414.04 Min ($41,387.92) ($43,276.41) ($29,908.96) Max $65,070.33 $64,664.70 $67,261.85 NPV Y ($306,088.09) ($291,976.00) ($400,115.35) StDev 174690.95 172215.27 152549.92 CV Z -57.07 -58.98 -38.13 Min ($832,928.96) ($850,997.31) ($723,102.69) Max $178,328.63 $174,564.13 $198,667.15 V Simulated average (mean) price W Simulated average (mean) yield X Simulated average (mean) net profit for 1.0 acre greenhouse Y Simulated average (mean) net present value Z Coefficient of Variation
78
Table 3-11 Sensitivity analysis for a 1.0 acre greenhouse-grown bell pepper operation in North Central Florida
Yield Wholesale Market Price ($/lbs) (lbs/ft2) $1.80 $1.90 $2.00 $2.10 $2.20 $2.30 $2.40 ----------------------------------------Net Revenue ($/ft2)------------------------------------- 0.20 (3.47) (3.45) (3.43) (3.41) (3.38) (3.36) (3.34) 0.41 (3.10) (3.06) (3.02) (2.98) (2.94) (2.89) (2.85) 0.61 (2.73) (2.67) (2.61) (2.55) (2.49) (2.42) (2.36) 0.82 (2.36) (2.28) (2.20) (2.12) (2.04) (1.95) (1.87) 1.02 (2.00) (1.89) (1.79) (1.69) (1.59) (1.48) (1.38) 1.23 (1.63) (1.51) (1.38) (1.26) (1.14) (1.01) (0.89) 1.43 (1.26) (1.12) (0.97) (0.83) (0.69) (0.54) (0.40) 1.64 (0.89) (0.73) (0.57) (0.40) (0.24) (0.07) 0.09 1.84 (0.53) (0.34) (0.16) 0.03 0.21 0.40 0.58 2.05 (0.16) 0.05 0.25 0.46 0.66 0.87 1.07 2.25 0.21 0.44 0.66 0.89 1.11 1.34 1.56 2.46 0.58 0.82 1.07 1.31 1.56 1.81 2.05 2.66 0.95 1.21 1.48 1.74 2.01 2.28 2.54 2.87 1.31 1.60 1.89 2.17 2.46 2.75 3.03 3.07 1.68 1.99 2.29 2.60 2.91 3.22 3.52 3.28 2.05 2.38 2.70 3.03 3.36 3.69 4.01 3.48 2.42 2.76 3.11 3.46 3.81 4.16 4.50 3.69 2.78 3.15 3.52 3.89 4.26 4.63 5.00 3.89 3.15 3.54 3.93 4.32 4.71 5.10 5.49 4.10 3.52 3.93 4.34 4.75 5.16 5.57 5.98
79
Table 3-12 Estimated break-even prices for a range of marketable bell pepper fruit yields of 1 - 3.5 lbs/ft2
Yield v Price w
(lb/ft2) ($/lbs) 1.00 3.83 1.25 3.07 1.66x 2.31 1.89y 2.03 1.96z 1.96 2.50 1.53 3.00 1.28 3.50 1.10
V Marketable greenhouse-grown colored bell pepper yield ranged from 1.66-1.96 lb/ft2 (Shaw et al., 2002) W Wholesale fruit price for colored bell peppers range from $1.54-$2.54/lb, New York, Atlanta and Miami Terminal markets 1998-2005 (U.S. Department of Agriculture, 2005) X Average annual fruit yield for orange greenhouse-grown bell peppers Y Average annual fruit yield for yellow greenhouse-grown bell peppers Z Average annual fruit yield for red greenhouse-grown bell peppers
80
Table 3-13 Surface area of a 1.0 acre greenhouse of a saw-tooth design
Surface Area of Greenhouses (ft2) End Walls in ft2 5,640.00 Side Walls 4,416.00 Roof 43,347.00 Vent End 776.00
Vent Side 6,336.00 GH Sub Total Surface Area 60,515.00
81
Table 3-14 Heat loss calculations required for a 1.0 acre saw-tooth greenhouse
Heat Loss Calculations
Q=A(Ti-To)/R Q = Heat loss, BTU/hr A = Area of greenhouse surface, sq ft R = Resistance to heat flow
(Ti-To) = Air temperature difference between inside and outside Conduction Heat Loss, Qc: Qc = Area x ∆T/R 888,681.82 BTU/hr
Volume ft3: 589,199.52 Air Infiltration Losses, QA: QA: 0.20 x Volume x C x ∆T C = Number of air exchanges per hour 185,597.85 BTU/hr Perimeter Heat Loss, QP:
QP: P x L x (∆T) P = Perimeter heat loss coefficient, BTU/ftºF hr L = Distance around perimeter 14,145.60 BTU/hr Total Heat Loss, QT: QT = QC + QA + QP Heat Required: 1,088,425.27 BTU/hr Heat Required for 1 acre: 1,088,425.27 BTU/hr
318,905.73 Watts or 318.91 kWh
Heat required is based on an Average Minimum daily January temperature of 44°F and keeping the temperature at a level of 50°F
82
Table 3-15 Cost to obtain required BTU for 1 acre greenhouse in North Central Florida based on historical temperature data
Months Hours Heat is needed S BTU Required T Gallons of Diesel V Cost of Diesel Y Jan 294.83 320,900,421.46 2,325.37 $5,115.80 Feb 177.33 193,010,452.59 1,398.63 $3,076.98 Mar 110.17 119,911,811.66 868.93 $1,911.64
Apr 59.80 65,087,830.97 471.65 $1,037.63 May 3.33 3,624,456.14 26.26 $57.78 Jun 0.00 0.00 0.00 $0.00 Jul 0.00 0.00 0.00 $0.00
Aug 0.00 0.00 0.00 $0.00 Sep 0.00 0.00 0.00 $0.00 Oct 29.20 31,782,017.80 230.30 $506.67 Nov 94.00 102,311,975.10 741.39 $1,631.06 Dec 279.40 304,106,019.59 2,203.67 $4,848.07
Annual 1,048.06 1,140,734,985.31 8,266.20 $18,185.63
Months Hours Heat is needed S BTU Required T kWh Required W Cost of Electricity Z Jan 383.5 417,411,089.89 122,300.35 $9,784.03 Feb 278.17 302,767,256.52 88,710.01 $7,096.80 Mar 179.4 195,263,492.90 57,211.69 $4,576.94 Apr 115 125,168,905.70 36,674.16 $2,933.93 May 16.5 17,959,016.91 5,261.94 $420.96 Jun 0.00 0.00 0.00 $0.00 Jul 0.00 0.00 0.00 $0.00
Aug 0.00 0.00 0.00 $0.00 Sep 1 1,088,425.27 318.91 $25.51 Oct 53 57,686,539.15 16,902.00 $1,352.16 Nov 170.2 185,249,980.44 54,277.76 $4,342.22 Dec 369.8 402,499,663.73 117,931.34 $9,434.51
Annual 1,566.57 1,705,094,370.50 499,588.15 $39,967.05
83
Table 3-15 Continued Months Hours Heat is needed S BTU Required T Gallons of Propane U Cost of Propane X
Jan 383.5 417,411,089.89 4,537.08 $7,486.18 Feb 278.17 302,767,256.52 3,290.95 $5,430.06 Mar 179.4 195,263,492.90 2,122.43 $3,502.01 Apr 115 125,168,905.70 1,360.53 $2,244.88 May 16.5 17,959,016.91 195.21 $322.09 Jun 0.00 0.00 0.00 $0.00 Jul 0.00 0.00 0.00 $0.00
Aug 0.00 0.00 0.00 $0.00 Sep 1 1,088,425.27 11.83 $19.52 Oct 53 57,686,539.15 627.03 $1,034.60 Nov 170.2 185,249,980.44 2,013.59 $3,322.42 Dec 369.8 402,499,663.73 4,375.00 $7,218.74
Annual 1,566.57 1,705,094,370.50 18,533.63 $30,580.50
S Hours based on historical weather temperatures taken from Citra, FL 2000-2006 T BTU figures are based on the heat needed to heat a 1 acre greenhouse U Estimated Propane Efficiency is 80% with a heat value of 92,000 BTU/gal (Buffington et al., 2002) V Estimated Diesel Fuel Efficiency is 70% with a heat value of 138,000 BTU/gal (Buffington et al., 2002) W Estimated Electricity Efficiency is 100% with a heat value of 3,413 BTU/kWh (Buffington et al., 2002) X Price of Propane = $1.65/gal (Energy Information Administration, 2006) Y Price of Diesel Fuel = $2.20/gal (Grimsely Oil, 2005) Z Price of Electricity = $0.08/kWh (FPL, 2005)
84
Table 3-16 Probability of obtaining select prices for greenhouse grown red, yellow and orange bell peppers.
Price RedX Yellow Y Orange Z x1-value $1.80 $1.80 $1.80 Prob(X<=x1) 0% 0% 0% x2-value $2.00 $2.00 $2.00 Prob(X<=x2) 31% 6% 0% x3-value $2.10 $2.10 $2.10 Prob(X<=x3) 51% 27% 0% x4-value $2.40 $2.40 $2.40 Prob(X<=x4) 100% 90% 55% x5-value $2.45 $2.45 $2.45 Prob(X<=x5) 100% 100% 64% X Probability of obtaining select price or lower based on simulated distribution of a minimum of $1.85/lbs and maximum of $2.34/lbs. Y Probability of obtaining select price or lower based on simulated distribution of a minimum of $1.97/lbs and maximum of $2.45/lbs. Z Probability of obtaining select price or lower based on simulated distribution of a minimum of $2.11/lbs and maximum of $2.64/lbs.
85
Table 3-17 Probability of obtaining select yields for greenhouse grown red, yellow and orange bell peppers.
Yield Red X Yellow Y Orange Z x1-value 1.25 1.25 1.25 Prob(X<=x1) 0% 0% 0% x2-value 1.50 1.50 1.50 Prob(X<=x2) 2% 3% 15% x3-value 2.00 2.00 2.00 Prob(X<=x3) 47% 69% 99% x4-value 2.25 2.25 2.25 Prob(X<=x4) 94% 99% 100% x5-value 2.45 2.45 2.45 Prob(X<=x5) 100% 100% 100% X Probability of obtaining select yield or lower based on simulated distribution of a minimum of 1.18 lbs/ft2. Mean of 1.98 lbs/ft2 and a maximum of 2.48 lbs/ft2. Y Probability of obtaining select yield or lower based on simulated distribution of a minimum of 1.25 lbs/ft2. Mean of 1.90 lbs/ft2 and a maximum of 2.33 lbs/ft2. Z Probability of obtaining select yield or lower based on simulated distribution of a minimum of 1.33 lbs/ft2 mean of 1.63 lbs/ft2 and a maximum of 2.14 lbs/ft2.
86
Table 3-18 Probability of obtaining select net profits for 1.0 acre greenhouse operation growing: red, yellow and orange bell peppers.
Net Profit Red X Yellow Y Orange Z x1-value $0.00 $0.00 $0.00 Prob(X<=x1) 23% 19% 46% x2-value $20,000.00 $20,000.00 $20,000.00 Prob(X<=x2) 61% 57% 84% x3-value $30,000.00 $30,000.00 $30,000.00 Prob(X<=x3) 81% 78% 94% x4-value $40,000.00 $40,000.00 $40,000.00 Prob(X<=x4) 93% 93% 97% x5-value $50,000.00 $50,000.00 $50,000.00 Prob(X<=x5) 98% 99% 99% X Probability of obtaining select net profits or lower based on combinations of simulated price and yield variables. Y Probability of obtaining select net profits or lower based on combinations of simulated price and yield variables. Z Probability of obtaining select net profits or lower based on combinations of simulated price and yield variables.
87
Table 3-19 Estimated costs of producing one acre of field bell peppers for fresh market, in Florida Y
Quantity Unit $/Unit Total GROSS RETURNS Bell Peppers (55-lb bushel) 1107.81 55-lb bushel $10.90 $12,080.15 Item Unit Quantity Price Value Cash Expenses, Preharvest: Plants 1000 14.00 77.00 1078.00 Lime, applied ton 0.50 33.00 16.50 Fertilizer, mixed cwt. 10.00 10.13 101.30 Side-Dress Fertilizer cwt. 2.00 15.00 30.00 Plastic Mulch rolls 2.80 120.00 336.00 Mulch Removal acre 1.00 75.00 75.00 Herbicide acre 1.00 4.70 4.70 Insecticide acre 1.00 66.34 66.34 Fungicide appl. 5.00 9.54 47.70 Tractor + Machinery acre 1.00 66.55 66.55 Truck (pickup) mi. 20.00 0.19 3.80 Labor hr. 8.00 7.00 56.00 Irrigation appl. 1.00 408.00 408.00 Land Rent acre 1.00 70.00 70.00 Interest on Oper. Cap. $ 2289.88 0.07 160.29 Total Preharvest Cash Expenses 2520.17 Interest on Variable Costs 10% 252.02 Total Variable Cost 2772.19 Fixed Costs, Preharvest: Tractor + Machinery acre 1.00 74.58 74.58 Truck (pickup) mi. 20.00 0.18 3.60 Irrigation acre 1.00 85.00 85.00 Overhead and Management $ 2520.17 0.10 252.02 Land Cash Rent Z acre 1.00 572.00 572.00 Total Preharvest Fixed Costs 987.20 Total Preharvest Costs 3759.39 Harvest and Marketing Costs: Picking and Hauling 55-lb bushel 1107.81 1.25 1384.77 Grading and Packing 55-lb bushel 1107.81 1.75 1938.67 Boxes 55-lb bushel 1107.81 0.70 775.47 Marketing 55-lb bushel 1107.81 0.55 609.30 Total Harvest and Marketing Costs 4708.21 Total Costs 8467.60 RETURN TO OPERATOR LABOR, LAND, CAPITAL, & MGT. 3,612.56
88
Table 3-19 Continued Quantity Unit $/Unit Total Operator and Unpaid Family Labor hrs. 40 $ 8.00 320.00 RETURN TO OPERATOR LABOR, LAND, CAPITAL, & MGT. $3,292.56 X (Florida Agricultural Statistical Directory, 2005) Y (Smith, 2005) Z (Florida extension agent estimates)
89
Table 3-20 Simulated 1.0 acre field pepper return to land and owner in Florida
Net Profit
Mean Y $3,288.81 StDev 1,427.31
CV Z 43.399 Min ($237.49) Max $7,971.94 Y Average annual simulated return to land and owner Z CV = Coefficient of Variation
90
Table 3-21 Probability of obtaining select net profit for one acre of field bell pepper production in Florida
Net Profit x1-value $0.00 Prob(X<=x1) 0% x2-value $2,000.00 Prob(X<=x2) 18% x3-value $4,000.00 Prob(X<=x3) 71% x4-value $6,000.00 Prob(X<=x4) 96% x5-value $10,000.00 Prob(X<=x5) 100%
91
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Month
Dol
lars
per
Pou
nd ($
)
Red GreenhouseRed Field
Figure 3-1 Greenhouse vs. field grown red bell pepper average wholesale terminal market prices; 1998-2005 (U.S. Department of
Agriculture, 2006)
92
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Month
Dol
lars
per
Pou
nd ($
)
Yellow GreenhouseYellow Field
Figure 3-2 Greenhouse vs. field grown yellow bell pepper average wholesale terminal market prices; 1998-2005 (U.S. Department of
Agriculture, 2006)
93
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Month
Dol
lars
per
Pou
nd ($
)
Orange GreenhouseOrange Field
Figure 3-3 Greenhouse vs. field grown orange bell pepper average wholesale terminal market prices; 1998-2005 (U.S. Department of
Agriculture, 2006)
94
$0.00
$0.20
$0.40
$0.60
$0.80
$1.00
$1.20
$1.40
$1.60
$1.80
$2.00
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Months
Ave
rage
Dol
lar P
er P
ound
Pric
e ($
/lb)
GreenRedYellowOrange
Figure 3-4 Comparison of average wholesale terminal market field-grown bell pepper prices; 1998-2005(U.S. Department of
Agriculture, 2006)
95
Figure 3-5 Surface area of a 1.0 acre saw-tooth greenhouse
96
CHAPTER 4 THE ECONOMIC FEASIBILITY OF GROWING ORGANIC AND CONVENTIONAL
GREENHOUSE STRAWBERRIES AS AN ALTERNATIVE TO FIELD PRODUCTION IN FLORIDA
In Florida’s 2003-2004 growing season, 7,100 acres of fresh strawberries were planted in
fields under plastic mulch on raised beds, irrigated using drip irrigation (Florida Statistical
Directory, 2005). Florida is the second largest fresh market strawberry producing state in the
U.S. behind California. In 2005, Florida’s fresh market strawberry value [$1.10/lb.] per pound
[lb.] exceeded that of California [$0.62/lb.] (U.S. Department of Agriculture, 2006). In 2004-
2005, the value of production of Florida fresh market strawberries was $196,790,000 [16% of the
total value of fresh market strawberries in the U.S., valued at $1,235,122,000] the second highest
value behind California [$977,985,000, which is 80% of the total value of U.S. fresh market
strawberry production]. Florida strawberry growers have been able to maintain their market
share because of their ability to produce in the winter months. Currently, the per capita
consumption of strawberries has increased 275% [1.97 lb. in 1980 to 5.41 lb. in 2004], while
imports, of fresh market strawberries, have increased 743% [12.7 million lb. to 94.4 million lb.]
from 1980 to 2004 (U.S. Department of Agriculture, 2005). Today, increased demand for
strawberries has allowed other countries such as Mexico and Chile to fill some of the demand in
the U.S. (U.S. Department of Agriculture, 2005).
Florida strawberry growers are faced with many challenging obstacles such as: the loss of
methyl-bromide, urbanization in key production areas, weather, water restrictions and bird
damage. The objective of this chapter was to create a model determining the feasibility of
greenhouse production of strawberries, both conventionally and organically, as an economical
alternative for Florida strawberry growers, competing in a global economy.
97
California and International Pressure on Florida Strawberry Production
The U.S. is the leading producer of strawberries in the world. In the 2005-2006 growing
season the world production of fresh strawberries equaled 5,782,725,137 lb. The U.S. produced
41% [2,380,992,432 lb.] of the world’s production of strawberries in 2005, followed by China
producing 25% [1,424,186,214 lb.] and Spain producing 11% [650,363,673 lb.] (Foreign
Agricultural Service, Counselor and Attaché Reports, Official Estimates, USDA Estimates,
2006) (Figure 4-1, Figure 4-2).
Both consumption and imports of fresh strawberries are on the rise in the U.S. (U.S.
Department of Agriculture, 2005). From 1980 to 2004, domestic consumption increased by
359%. Domestic consumption in 1980 was 447.7 million pounds and rose to 1,606.3 million
pounds in 2004. During that same time period [1980-2004] imports of fresh strawberries
increased by 743% [12.7 million pounds in 1980 to 94.4 million pounds in 2004] (U.S.
Department of Agriculture, 2005).
Mexican imports of fresh strawberries overlap with Florida’s strawberry production
November to March (Perez et al., 2006) (Bertelesen et al., 1995). The highest U.S. strawberry
import volume peaks in March [18,116,000 lb.] and April [19,212,000 lb.] (Figure 4-3) (U.S.
Department of Agriculture, 2005).
Mexico is one of Florida’s largest international competitors for strawberry production due
to overlap of growing seasons (Perez et al., 2006). From 1993 to 2004, the volume of fresh
strawberries imports, from Mexico has increased 342% [fresh: 26,455,472/lb. in 1993 to
90,389,528/lb. in 2004]. In 2004, the value of Mexican fresh strawberry imports equaled $60
million (U.S. Department of Agriculture, 2006).
98
The Production of Organic Strawberries as an Alternative to Conventional Production
The production of organic strawberries is an alternative to the need for methyl bromide use
for strawberries. Organic producers do not use methyl bromide or any other synthetic pesticide
or fertilizer in the production of certified organic strawberries. Instead they use organically
acceptable production methods to control or suppress weeds, plant pathogens, and nematodes.
Included are, the use of plastic mulches coupled with supplemental hand weeding to suppress
weeds, soil solarization, good sanitation practices, biological control fungi and/or organic matter,
hot water treatments, crop rotation, various other cultural controls. These techniques are part of
an overall integrated pest management (IPM) program (U.S. Environmental Protection Agency,
2006).
The production of organic agriculture is rapidly growing in the United States. Consumer
interest in organic products continues to increase, which leads to new organic production and
marketing systems. The USDA implemented the national organic standards in 2002, these
standards allowed organic production to spread across the country, as consumer demand and
grower awareness increased (U.S. Department of Agriculture/AMS, 2006). During the last half-
century, growers developed rigorous standards and management-intensive production systems
for organic farming. Prior to the implementation of the USDA’s national organic standards,
many States and most organic distributors required third-party certification to ensure that organic
farmers adhered to organic production standards. USDA’s new rules make certification
according to the national standards mandatory, if growers want their product to display the
USDA Certified Organic label (U.S. Department of Agriculture, 2003). However, many growers
do label their products organic without displaying the USDA certified label, when selling at
farmers markets or local stands.
99
The advantages of organic agriculture are: elimination of synthetic fertilizers and
pesticides and the building of healthy soil. Organically grown strawberries can be sold at a
higher price than conventional strawberries, which does not normally offset the lower yield.
While only a small percentage of the Florida strawberry crop is produced organically, price
premiums for certified organic strawberries provide a considerable incentive for growers to
consider organic production techniques in the future. Organic strawberry production also
eliminates environmental stress caused by pesticide use, thus increasing soil biotic diversity and
beneficial organisms (U.S. Environmental Protection Agency, 2006).
Organic production has many advantages which offer growers an alternative to
conventional production, since the loss of methyl bromide. However, it is unlikely that all
strawberry farms will switch to organic production, doing so would cause a shift in the price
premiums that organic production has over conventional production. If all large growers did shift
to organic production practices, the price differential between conventional vs. organic
strawberries would decrease along with some of the price incentives to convert to organic
production practices. Instead, without methyl bromide, most conventional (non-organic) Florida
strawberry producers probably would be able to use a variety of other pesticides to help improve
yields over those obtained under organic systems alone (U.S. Environmental Protection Agency,
2006). The present study compares the economic feasibility of organic strawberry production to
conventional production in a greenhouse.
Methods
This study describes and applies stochastic simulation to a financial model of a 1.0 acre
strawberry greenhouse operation in North Central Florida (see Chapter 3 for detailed information
regarding stochastic simulation).
100
The Use of Stochastic Variables in a Simulation Model to Estimate Key Output Variables (KOV)
Price was simulated using an empirical probability distribution, a distribution function in
SIMETAR©. An empirical distribution was used because the empirical distribution has a finite
minimum and maximum based on the observed values so it is a closed form. The shape of the
distribution is defined by the data. The function assumes a continuous distribution so it
interpolates between the specified points on the distribution (Si) using the cumulative distribution
probabilities (F(Si)). Si represents an array of N sorted random values including the min and max,
F(Si) cumulative probabilities for the Si values, including the end points of zero and one, the use
of a uniform standard deviate [USD] is optional, but was used in this model. It should be noted
that ‘i = n [n = number of random variables] for the Si and F(Si) parameters, which denotes that
these are ranges and not individual values’. The wholesale price input variables [Si, F(Si),
[USD]] for conducting an empirical probability distribution for each scenario are shown in Table
4-1.
Yield was simulated using the GRKS distribution (Richardson et al., 2006). The lb. /ft2
input variables [min, mid, max] for conducting a GRKS distribution for each of the greenhouse
production method scenarios are shown in Table 4-2. For detailed information on stochastic
models, key output variables (KOV) and GRKS distributions refer to Chapter 3.
Greenhouse Structure and Crop Systems Used in Growing Strawberries in North Central Florida
Experiments by Paranjpe et al (2004) were performed in a 1.0 acre passively ventilated
high roof greenhouse unit of a saw-tooth design, located at the Protected Agriculture Center, part
of the University of Florida Plant Science Research Unit in Citra, Florida. For additional
information on total floor area of greenhouse or heaters used see Chapter 3).
101
Planting, yield; crop cycle and fertilization data for this model were taken from
experiments performed at the University of Florida’s Horticultural Science Research Unit,
Gainesville, Florida (Paranjpe et al., 2004).
The study that this model was based on used hanging bed-pack containers. These
containers were designed for strawberry production and could hold 1.02 plants per linear foot.
Containers were arranged parallel to each other and were spaced 20 inches apart. The
combination of plant and row spacing used in the experimental trials yielded a plant density of
2.04 plants/ft2. The study determined the average yield to be 2.25 lb./ft2 for non-organic
production from November through March (Table 4-3). Organic strawberry yield was estimated
to be 1.58 lb./ft2, from November to March, by assuming a 30% yield decrease over the non-
organic strawberry yield (Ames et al., 2006) (Table 4-4).
Wholesale Strawberry Fruit Prices
Historical fruit prices for strawberry fruit were gathered from the U.S. Department of
Agriculture’s USDA Fruit and Vegetable Market News Portal (U.S. Department of Agriculture,
2005). Daily price data were gathered for the last seven years (1998-2005) from three different
terminal markets (New York, Atlanta and Miami) to calculate a maximum, minimum and mean
dollar per pound wholesale fruit price used in the budget analysis model. Means and standard
deviation were calculated for different price series. Fruit prices were sorted by long or short
stem, origin and weight of packaging.
Once historical daily prices for no stem strawberries were collected, the data was sorted,
matched and cropped from January 1998 to December 2005. An annual model is used in this
study so the daily data was averaged to generate an annual average dollar per pound price for the
two scenarios organic and non-organic strawberries.
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Historically, annual average prices of organic fruit have been more than one and a half
times higher than that of non-organic fruit. Annual average wholesale price for non-organic fruit
is $1.55/lb. ± .13 (Table 4-5), versus average annual organic price of $2.53 ± .45 (Table 4-7).
Monthly non-organic prices peaked between November [$2.41 ± 1.25] and December [$2.51 ±
1.18] (Table 4-6). Organic fruit prices peaked between February [$3.46 ± 0.67] and March
[$3.31 ± 1.47] and again in September [$3.18 ± 0.70] (Table 4-8) (Figure 4-4). The study used
in this model had a harvest period of November to March. The average wholesale price during
the November to March harvest period was $1.76/lb. (Table 4-3) for non-organic and $2.60/lb.
(Table 4-4) for organic.
Enterprise Budget Analysis of Greenhouse-Grown Strawberries
An enterprise budget was constructed consisting of gross revenue, costs [initial investment,
variable and fixed] and profit that is associated with a 1.0 acre strawberry greenhouse operation
in North Central Florida. Budget tables consisted of items, quantities, units and prices used.
This section describes the generic model and, when appropriate, indicates changes in the
variables for the different strawberry production scenarios.
Common financial statements were developed and used for organic and non-organic
strawberries. In creating the financial statements, one fixed cost and one variable cost statement
was made. Scenario functions were substituted in the variable cost statement for fertilizer,
organic certification, pick labor, number of packaging flats, number of flats cooled, and number
of flats transported. These scenario functions allowed comparisons between organic and non-
organic production to be made, by simulating each production method with its own set
corresponding variable costs. In the organic scenario total fertilizer cost was $763/acre, non-
organic fertilizer cost was estimated at $1,346/acre. Organic certification was equal to
$400/acre, not required for non-organic production. Organic pick labor was estimated at 199
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hours required; non-organic pick labor was estimated at 285 hours. Number of flats required to
be packaged, cooled and transported was estimated to be 6,605 for organic, and 9,437 for non-
organic. Additionally, price and yield scenarios were set up for organic and non-organic
financial statements.
Annual receipts [gross revenue] were derived by multiplying the annual stochastic dollar
per pound price by the volume of strawberries produced [gross revenue = sales volume x price,
sales volume = yield x usable greenhouse area] for the November – May harvest period (Tables
4-3 and 4-4). “Total fruit yield was estimated to be 2.25 lb./ft2 for non-organic and 1.58 lb./ft2
for organic production, based on the technology and practices used and the length of the crop
cycle” (Paranjpe et al., 2004). Fruit yields, costs and revenue were based on unit area of the total
greenhouse area [1.0 acre]. The formula used to calculate gross revenue was: gross revenue
($/ft2) = yield (weight per ft2) x stochastic price ($/lb.).
Estimated Costs of Strawberry Production for a 1.0 Acre Greenhouse in North Central Florida
Variable costs are defined, as it pertains to this model, as operating costs that would be
incurred only if the crop was grown. Variable production costs [$/ft2] were taken from Table 4-9
and 4-10 except for electricity and gas costs, which will be discussed later in the chapter.
Variable costs were derived by summing preharvest costs, harvest costs, packaging and
marketing costs. Annual variable costs for a 1.0 acre organic greenhouse operation came to
$110,340 [$2.53/ft2]; annual variable costs for a non-organic were estimated to be $121,215
[$2.78/ft2] (Table 4-9, 4-10).
Fixed costs are defined as costs that the producer would incur even if no crop was being
grown in the greenhouse at the time. All items have been depreciated over their expected useful
life, with a straight line depreciation method. Straight line depreciation is defined as a procedure
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for depreciating long-lived assets that recognizes equal amounts of depreciation in each year of
the asset’s useful life. Useful life of an asset is defined as the number of years an asset can be
used before the asset deteriorates to the point when repairs are not economically feasible. The
usefulness of a long-lived asset is largely determined by technological advancements, which
could at any time render certain long lived assets obsolete. For this reason, all items in this study
were assumed to have zero salvageable value at the end of their useful life. Fixed production
costs were derived from the sum of depreciation and other costs. Annual fixed costs came to
$47,736 [$1.10/ft2] (Table 4-11). These costs may vary each year, due to the fact that not all
items have the same useful life expectancy.
The fixed costs to depreciate [initial] investment required for a 1.0 acre greenhouse venture
was determined by compiling all construction, materials, equipment, labor, and durables needed
up front to start a greenhouse enterprise. Initial investment is part of the estimated annual fixed
cost. Initial investment cost consisted of the land, greenhouse structure and cover materials, site
preparation costs, greenhouse permits, construction supervision, head house structure, backup
generator, heating and ventilation systems, nutrient injector and climate control systems, nutrient
solution tanks, weather station, computer software, training to use computer software, water
filters, valves and pressure regulators, irrigation emitters, stakes, tubing, polyethylene pipe, pipe
connectors, troughs, electrical, drainage system, bulk storage tanks, trellis accessories,
automobile, and a fork lift. A summary of these initial investment costs can be found in Table 4-
11.
Profit was calculated by subtracting total cost from gross revenue. The formula used for
calculating profit was: profit = gross revenue [yield (weight per ft2) x stochastic price ($/lb.)] –
total costs [variable + fixed (depreciation + other durables). Net present value [NPV] is defined
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as the present value of cash inflows less present value of cash outflows. It is also said to be the
increase in wealth accruing to an investor when he or she undertakes an investment net present
value was calculated using Excel ©. The function used was: =NPV ((interest rate, Cash Flow
[array t=1 thru t=20]) + Initial Investment).Cash flows were calculated using an initial
investment of $508,368 with a book value at the end of its 20 year life expectancy of $25,418
with an assumed interest rate of 8.35% (Farm Credit, 2006). After tax cash flows were then
calculated with the following formula: ATCF = (profits [$9,906] – depreciation [$47,736] =
Earnings before taxes [EBT= -$37,830] – taxes [$0] + depreciation [$47,736]) = $9,906. Net
present value [NPV] was then calculated using the formula: NPV = sum (cash flows x present
value interest factor [PVIF]). Net present value was simulated using SIMETAR©, after
simulating each production system scenario n=500 iterations, it was determined that both
scenarios have a negative NPV, the results can be found in Table 4-12.
The internal rate of return [IRR] is defined as the discount rate at which the investment’s net
present value [NPV] equals zero. As it pertains to this model, IRR was calculated using Excel©
and can be viewed in the following formula: =IRR (Cash Flow [array t=0 thru t=20], discount
rate). The sum of the cash flows was not greater than the initial investment, resulting in negative
NPV and IRR for both scenarios. Since the NPV was negative for both scenarios there can be no
discount rate that will work perfectly in calculating an IRR.
Sensitivity Analysis for the Production of Organic and Non-organic Strawberries
Sensitivity analysis was used to analyze the effect on income when a change in one of the
input variables is invoked. Net returns were calculated in the sensitivity analysis with
marketable fruit yields ranging from .10 – 3.00 lb./ft2 and wholesale market prices ranging from
$1.51 - $3.28/lb. for organic production and $1.17 - $2.34/lb. for non-organic production. These
prices reflect the average wholesale prices that could be obtained during the harvest period of
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November – May. Using the organic and non-organic scenarios two separate sensitivity analyses
were created using different costs of production for the two production practices (Tables 4-13
and 4-14).
Break-Even Analysis for the Production of Organic and Non-organic Greenhouse-Grown Strawberries
A break-even analysis was created to compare the different combinations of organic versus
non-organic yield and the price required to break-even in a 1.0 acre strawberry greenhouse
venture. For example, a yield of 2.25 lb./ft2 would require a price of $1.61/lb. for organic
production and $1.72/lb. for non-organic production to break-even, any price over $1.61/lb. for
organic production and $1.72/lb. for non-organic production at 2.25 lb./ft2 would be considered
profit or return to management, anything lower would make the venture unprofitable (Table 4-
15). The break-even analysis was calculated using the following formula: break-even price =
total cost [variable + fixed costs] / sales volume [yield x usable greenhouse area (43,560 ft2)].
Heat Loss Calculations for a 1.0 Acre Greenhouse Strawberry Operation in North Central Florida
The two most expensive variables in greenhouse production are labor and energy. Just as
in chapter two of this study (The economic feasibility of greenhouse-grown bell peppers as an
alternative to field production in North Central Florida), annual heat cost were estimated using
formulas to determine conduction, air infiltration and perimeter heat loss on a 1.0 acre
greenhouse in North Central Florida. This study used a minimum base temperature inside the
greenhouse of 41°F, for adequate plant growth.
Just as in chapter three, calculations, in this model, are based on the surface area of on 1.0
acre greenhouse. It was determined that, in order to maintain the 41°F minimum base
temperature, an estimated 507,818.18 BTU/hr was needed to offset conduction heat loss. Air
infiltration heat losses required 106,055.91 BTU/hr and perimeter heat loss required 8,083.20
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BTU/hr. Total heat required to maintain the 41°F minimum bass temperature was 193,589.76
BTU/hr for a 1.0 acre saw-tooth greenhouse with a total surface area of 60,515 ft2 (Table 4-16
and 4-17). For calculation procedures refer to Chapter 3 of this study.
Based on historical temperature data it was determined that the temperature outside the
greenhouses in Citra, Florida , fell below the 41°F minimum base temperature for an average of
421.54 hours annually. Thus, an estimated 262,179,878.31BTU’s are required annually to heat
the greenhouse (Table 4-18). This model uses diesel heaters in order to lower costs. An
estimated 1,899.85 gallons of diesel fuel annually are required to generate the needed BTUs, at a
cost of $4,179.68 [$2.20/gal or $0.000016/BTU (Grimesly Oil, 2005)] (Table 4-18). In addition,
estimated fuel costs for propane and electricity heaters are examined to determine the most cost
efficient fuel source to heat the greenhouses. Electric power source would require 76,818.01
kWh at a cost of $6,145.44 [$0.08/kWh or $0.000023/BTU (FPL, 2005)]. A propane fuel source
would require 2,849.78 gallons at a cost of $4,702.14 [$1.65/gallon or $0.000018/BTU (Energy
Information Administration, 2006)] (Table 4-18).
Budget Analysis for Florida Field Production of Strawberries
Common financial statements were created by the University of Florida, Food and
Resource Economics Department, for field strawberry production in the State of Florida (Smith,
2005). These financial statements were modified to create a model using stochastic variables.
As in the greenhouse model, the field budget has stochastic variables in place for both yield and
price.
• Gross revenue was calculated by multiplying average yield per acre by the average wholesale market price taken from the “Florida Agricultural Statistical Directory 2005” from 1994–2004 (Table 4-22).
• Variable costs, as defined previously, are those costs that a grower will incur only if a crop is grown. Variable costs for production of one acre of strawberries in Central Florida were calculated to be $7,612 /acre (Table 4-22).
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• Fixed costs are costs that a grower will incur whether or not a crop is being produced. Fixed costs were calculated to be $3,430/acre (Table 4-22).
• Total costs were calculated by summing total variable costs, fixed costs, harvesting and marketing costs. Total costs equal $25,602/acre (Table 4-22).
Scenario Analysis Used to Analyze Organic and Non-organic Greenhouse-Grown Strawberry Production System in North Central Florida
Two scenarios were set-up in this model in order to discover the different risks involved in
producing organic and non-organic strawberries in a greenhouse, through simulation. Both
organic and non-organic strawberry production has its own distinctive price ranges and
respective yield, and therefore their own level of risk. For this reason, two scenarios were
created: organic and non-organic strawberries. As stated previously, the model was set up with
stochastic price and yields, through the use of scenarios, both production methods were
simulated simultaneously. The benefit of using scenarios in SIMETAR© is that, “the program
runs the model multiple times using exactly the same random deviates (risk) for each scenario.
Thus, the analysis guarantees that each scenario was simulated using the same risk and the only
difference is due to the differences in the scenario variables” (Richardson, Schumann, Feldman,
2006).
Price and yield were the only stochastic variables in the model; however the model was set
up so that as the stochastic yield and price moved along their defined distribution, the model’s
net profit and net present value moved accordingly. Each scenario’s stochastic variable was
simulated at 500 iterations (see Chapter 3 for more information on how the number of iterations
was determined).
In greenhouse production, just as in all agricultural ventures, risk is a major variable to
consider. The higher the risk, in most instances, the greater the return, likewise the lower the
risk, in most instances, the lower the returns, however, the amount of risk a producer is willing to
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take on is entirely up to the producer. Caution should be used when using this model to assess an
individual’s risk. This model is just a guide so that others may tailor it to their needs, in order to
measure risk of yield and price. No model can measure all risks including natural disasters,
market prices, personal knowledge of plant production or management. All prices are based on
historical wholesale prices from New York, Atlanta and Miami terminal markets and are not
necessarily the prices that all growers have received.
Results
Results from Scenario Analysis Used to Analyze Organic and Non-organic Greenhouse-Grown Strawberry Production System in North Central Florida
Simulation showed an annual mean wholesale price for organic strawberry production to
be $2.66/lb. ± .48, mean yields equal to 1.58 lb./ft2 ± .14, annual net profit mean equals $23,316
± 31,318 for a 1.0 acre greenhouse producing organic strawberries. Annual mean wholesale
price for non-organic strawberries equal $1.76/lb. ± .51, yields equal 2.25 lb./ft2 ± .20, annual net
profit mean equal to $3,855 ± 51,885 for a 1.0 acre greenhouse producing non-organic
strawberries (Table 4-12).
Probabilities and Risk for the Production of Greenhouse-Grown Strawberries Using SIMETAR©
Historical organic strawberry average annual wholesale prices [average $2.60/lb.] has been
more than 148% higher than that of non-organic strawberries [average $1.76/lb.] (Table 4-1).
This can be partially explained by the fact that there is more risk involved in producing organic
over non-organic strawberries. The reason for this risk is that insecticides, fungicides and
synthetic fertilizer are strictly regulated and in many cases prohibited in organic production.
This leads to a lower marketable fruit yield, when simulated, organic strawberry yields [1.58
lb./ft2 ± .14] compared to non-organic yields [2.25 lb./ft2 ± .2] (Table 4-12) (Paranjpe et al.,
2004) (Ames et al., 2006).
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SIMETAR© can be used to assess some risk, by estimating the probability that a simulated
variable might be achieved. Price and yield were set as stochastic variables in the model, with
defined parameters for the specific distribution function used. Table 4-19 shows select prices
within the distribution range that were used to calculate the probability of obtaining the select
price or lower, based on historical pricing data and the simulation software. The probability that
a grower would get a wholesale price for an organic strawberry below the minimum end of the
distribution [$1.38/lb.] or a price above the maximum end [$3.46/lb.] is 0%. There is a 93%
probability that the estimated price received would be greater than $2.00/lb. and a 7% probability
that it would be equal to or less than $2.00/lb. The probability that the wholesale price received
for non-organic strawberry would fall outside the parameters of the minimum [$1.13/lb.] or
maximum [$2.56/lb.] parameter is 0%. There is a 28% probability that the price will be greater
than $2.00/lb. and a 72% probability that the price will be less than or equal to $2.00/lb. The
probability of obtaining a price greater than $2.50/lb. for organic strawberries is 54% [46%
probability of equal to or less than $2.50/lb.] and for non-organic the probability of a price
greater than $2.50/lb. is 21% [79% probability of equal to or less than $2.50/lb.] (Table 4-19).
The method for determining the probability of yield works much in the same manner as it
did for price. Stochastic price used an empirical probability distribution function [Si, F(Si),
uniform standard deviant], whereas yield uses a GRKS distribution function[minimum, middle,
maximum value, uniform standard deviant]. Table 4-20 displays select yields and the
probabilities of obtaining those yields. There is a 0% probability that the estimated yield for
organically-grown strawberries will fall outside the parameter range of 1.15 – 2.01 lb./ft2. There
is a 70% probability that the yield will be greater than 1.50 lb./ft2 for organic strawberries and a
30% probability that the yield would be equal to or less than 1.50 lb. /ft2. Yield parameters for
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non-organic strawberries is 1.66 – 2.85 lb./ft2, which after simulation is calculated to have an
89% probability of a yield greater than 2.00 lb./ft2 or a 11% probability of yield being less than
or equal to 2.00 lb./ft2 (Table 4-20).
It would be logical for a grower to want a production method that gets the highest price
and the highest yield. However, the production method that consistently obtains the highest
price is organic production, but it also has the lowest yield. Non-organic strawberry has the
highest yield but the lowest price. Thus, a grower must look at what combination of these
variables will yield the greatest net profit. Table 4-21 shows that the mean net profit for organic
production is the highest of the two production methods [$23,316/acre] with a 21% probability
of making more than $50,000 or a 7% probability of making more than $75,000 with a 1.0 acre
greenhouse operation. Non-organic strawberry production, which has the greatest yield, has a
mean simulated net profit of $3,855/acre and a 22% probability of making more than $50,000
and a 13% probability of making more than $75,000 (Table 4-21). As shown in this model, risk
plays an important role in selecting the commodity a grower should produce and when looking at
risk between organic and non-organic greenhouse strawberry production, it is apparent that
organic production has both the lowest and highest risk. In terms of profitability, organic
production has the lowest risk, due to its high market price and low competition. On the other
hand organic production has some of the highest risks of production, since the use of synthetic
fertilizers and pesticides are prohibited, risk of low marketable yield or crop loss is much higher
than non-organic production.
Field Strawberry Budget Simulation Analysis
The enterprise budget model was simulated using the average land cash rent price
representing the average rental price of irrigated cropland in Florida, as defined in Appendix A-
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2. The strawberry field models used the same stochastic yield and price variables, and were
simulated at 500 iterations, as in the greenhouse model.
Estimated average net profit for a one acre fresh strawberry field operation in Florida was
$2,419 ± 3,414 (Table 4-23).
Probabilities and Risk in Strawberry Field Production
As mentioned in the previous risk section, the program SIMETAR©, was used to assess
the probabilities and risk involved in field production of strawberries in Florida. Just as in
greenhouse production, caution should be used when using any method of assessing risk. This
model does not assess the risk of losses due to natural disasters or lack of grower knowledge. In
this model, the stochastic prices and yields are derivatives of average prices and yields that
Florida growers have obtained from 1994-2004 (Florida Agricultural Directory, 2005).
Both stochastic price and yield variables were set up using a GRKS distribution function.
The parameters needed for a GRKS distribution function, is a minimum, middle and a maximum
value. Simulation results display a 25% probability of a negative net profit. This also calculates
a 75% probability of a positive net profit in Florida. In addition there was a 68% probability of a
net profit greater than $500/acre, while the probability for a net profit greater than $5,000/acre
for Florida cropland was 21% (Table 4-24).
Discussion
As per capita consumption of strawberries increases in the U.S., Florida strawberry
production is presently able to maintain a substantial market share in the fresh market strawberry
industry, due to its ability to produce in winter months when California production is at a low. In
the future, this may not be enough to compete with the rising imports of strawberries into the
U.S. from countries such as Mexico and increasing production in California. If California
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growers, with their high quality and volume, move their production into tunnels to extend their
season, Florida strawberry production may be over.
Florida strawberry producers must pursue new technologies in order to maintain an edge in
the fresh strawberry market. In order to do this Florida growers which currently harvest
December through March, must find new methods in which to produce and harvest earlier, in the
key winter months of November and December. Currently, the largest harvest month in Florida
is in March, which has the lowest prices (Florida Agriculture Statistical Directory, 2005).
Unlike field production, the greenhouse environment uses a soilless production system
which avoids weeds, soil-borne pathogens or plant parasitic nematodes. Screened structures
greatly reduce the presence of insects, and those that are present can be controlled using
biological control. Screened in structures also protect against birds, which have in recent years
have accounted for large fruit losses. Additionally, there is increased efficiency in use of
fertilizer and water, which can be recycled within the system (Smither-Kopperl et al. 2004).
Methyl bromide is a soil fumigant that is used to control soil-borne pathogens, plant parasitic
nematodes and weeds (Smither-Kopperl et al., 2004). Field production in Florida is heavily
dependant upon the use of methyl bromide. The ban on methyl bromide has created an
opportunity for greenhouse strawberry growers to obtain a significant market share in the U.S.
strawberry industry.
Current strawberry field production season extends from December to early April.
Florida’s temperate climate requires minimum heating for the production of strawberries in a
greenhouse compared to other regions of the U.S. With ever increasing fuel prices, this will
allow Florida growers to stay competitive in the strawberry production industry. Additionally,
Florida’s climate may allow growers to produce earlier in the season when prices are highest and
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may also allow producers to grow over extended periods depending on fruit prices and on the
quality of the fruits harvested (U.S. Department of Agriculture, 2005).
This project determined that organic greenhouse production of strawberries can produce a
net profit nine times greater than field production and non-organic greenhouse production can be
up to one and half times greater than field production. Results from Paranjpe et al (2004) also
reveal that greenhouse production is a profitable venture for Florida strawberry producers.
Paranjpe et al (2004) estimated that non-organic returns to management and capital equaled
$0.35/ft2 at an average yield of 2.3 lb. /ft2.
Results from Paranjpe et al (2004) and Smith (2005) were used to compare to the
findings in this project. Paranjpe et al (2004) reported that greenhouse production is a profitable
venture, however variations were found between this and his study. Paranjpe et al (2004) did not
determine an IRR or net present value for his study. Other variations in results can be attributed
to the use of land prices in the budget analysis, differences in the definition of fixed versus
variable costs, and a difference in price and amount of fuel required for heating a greenhouse.
Field budgets constructed by Smith (2005) were used to compare field returns with this studies
greenhouse production return. Results from the comparison showed that greenhouse production
of non-organic strawberries [$3,855/acre] can be up to one and a half times higher than returns
from field production [$2,419/acre] and organic greenhouse-grown strawberries [$23,316/acre]
can be up to nine and a half times higher than non-organic field production.
Two simulation scenarios were used, organic and non-organic strawberry greenhouse
production. Through the use of the program SIMETAR©, budgets were set up in a manner in
which net profit could be compared in different scenarios. Simulation of these scenarios enables
the user to calculate risks and probabilities associated with each. Simulated scenarios for
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greenhouse-grown strawberries illustrated that organic strawberry price and yield combinations
would earn growers the highest net profit, compared to non-organic which had the highest yield.
The break-even fruit yields and required prices for profit determined by this study are
attainable for Florida strawberry growers. Current experimental crops are obtaining yields of 2 –
3 lb./ft2 and historical prices range from $1.36 - $3.46/lb. for organic strawberries and $1.13/lb. -
$2.56/lb. for non-organic strawberries (Paranjpe et al., 2004) (U.S. Department of Agriculture,
2006). Yields and market values such as these are sufficient to make greenhouse strawberry
production profitable according to the results of this study.
Greenhouse enterprises are variable in size, composition and management. Thus growers
seeking to undertake the production of strawberries in a greenhouse setting should use this study
as a guide and calculate budgets for their own enterprise. This study used a greenhouse size of
1.0 acre, greenhouses with a different size, construction material or configuration may differ in
cost of initial investment and in cost of production. However, investment per unit area is always
considered high compared investments in field vegetable production.
Florida vegetable and berry growers are currently faced with many challenges, from
natural disasters to international competition which is able to ship year round. Florida growers
must find ways to surmount obstacles such as urbanization [loss of warm weather, coastal farm
land], labor shortages [labor shifting to steady higher-paying jobs such as construction], water
restrictions, and the loss of methyl-bromide. For some growers seeking to produce high value
specialty crops, such as organic strawberries, soilless greenhouse production may be an
alternative that can overcome some of these obstacles.
Summary
Florida fresh market strawberry growers are faced with increased pressure from
urbanization, water and chemical restrictions, and California and foreign competition. Growers
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are in need of a clear alternative to field production that can off-set these growing obstacles. Past
research has suggested that greenhouse vegetable production could be one alternative to field
production. These studies have created enterprise budgets for the production of greenhouse
strawberries. Additionally, studies have examined the pressure on the U.S. vegetable market
from foreign countries. Additional research is needed to assess the risk and potential earnings
that growers can obtain in greenhouse strawberry production.
The objective of this study was to determine the costs and benefits associated with
greenhouse strawberry production. Through the use of SIMETAR© and Excel© software, a
budget analysis model was created for the production of greenhouse-grown organic and non-
organic strawberries. Using these models, cost of production, net profit and risk have been
simulated and compared to field production.
This study found that although greenhouse production requires a significantly larger capital
investment [total costs organic: $158,076/acre; non-organic:$168,951/acre] compared to field
production [total costs: $25,602/acre], potential profits of greenhouse-grown organic
strawberries [$23,316/acre]have been determined to be as much as nine and half times greater
than field production and non-organic greenhouse-grown strawberries [$3,855/acre] have been
determined to be up to one and a half times greater than field production [$2,419/acre]. These
are significant findings for Florida growers searching for alternatives to field production.
Greenhouse production may allow them to stay competitive in the U.S. fresh strawberry market.
This study has determined that not only is it economically feasible to grow strawberries in a
greenhouse setting, but it has also shown that potential profit is significantly greater for
greenhouse-grown strawberries compared to field-grown strawberries.
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Table 4-1 Values used to construct an empirical distribution
function for price
Price ($/lb.) Organic Non-Organic Mean X $2.60 $1.76
StDev 0.703 0.611 95 % LCIY 1.841 1.106 95 % UCIZ 3.352 2.419 Min $1.36 $1.13 Median $2.52 $1.80 Max $3.46 $2.56 W Summary statistics derived from wholesale market price of strawberries from Nov-March from New York, Atlanta and Miami terminal markets, 1998-2005, (U.S. Department of Agriculture, 2005) X Mean equals the average dollar per pound price from 1998-2005 Y LCI equals lower confidence interval Z UCI equals upper confidence interval
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Table 4-2 Values used to construct a GRKS distribution function
for yield Yield (lbs/ft2) Organic V Non-Organic W Mean X 0.20 0.28
StDev 0.104 0.148
95 % LCIY 0.084 0.120 95 % UCIZ 0.307 0.438 Min 0.04 0.06 Median 0.20 0.28 Max 0.31 0.44 V Organic yields were derived from a 30% reduction of non-organic yields (Ames et al., 2006) W (Paranjpe et al., 2004) X Mean equals the average monthly pounds per square foot Y LCI equals lower confidence interval Z UCI equals upper confidence interval
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Table 4-3 Monthly marketable fruit yield, average wholesale market price and gross revenues in a typical fall to spring greenhouse non-organic strawberry crop in Florida with a total estimated yield of 2.25 lb./ft2
Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Nov-Mar Yield X
(lbs/ft2) Tw 0.09 0.54 0.59 0.63 0.40 End 2.25 Price ($/lb.) $2.56 $2.56 $1.83 $1.80 $1.26 $1.20 $1.13 $2.00 Gross Revenue ($/ft2) $0.23 $1.38 $1.08 $1.13 $0.50 $4.51 Gross Revenue Z ($/acre) $10,036.22 $60,217.34 $47,031.73 $49,397.04 $21,954.24 $188,636.58 W Transplanting plugs: 1 Oct; harvest period: Nov-March; termination: 1 April X Monthly fruit yields estimated from experimental crops at the University of Florida (Paranjpe et al., 2004) Y Average wholesale prices (1998-2005) for strawberries at the New York, Atlanta and Miami terminal markets, (U.S. Department of Agriculture, 2005) Z Gross revenue calculated using a usable greenhouse area of 43,560 ft2
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Table 4-4 Monthly marketable fruit yield, average wholesale market price and gross revenues in a typical fall to spring greenhouse organic strawberry crop in Florida with a total estimated yield of 1.58 lb./ft2
Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Nov-Mar Yield X (lbs/ft2) Tw 0.06 0.38 0.41 0.44 0.28 End 1.58 Price ($/lb.) $2.81 $2.28 $1.36 $3.46 $3.31 $2.52 $2.42 $2.59 Gross Revenue ($/ft2) $0.18 $0.86 $0.56 $1.53 $0.93 $4.09 Gross Revenue Z ($/acre) $7,711.43 $37,541.75 $24,466.78 $66,466.46 $40,371.41 $176,557.83 W Transplanting plugs: 1 Oct; harvest period: Nov-March; termination: 1 April X Monthly fruit yields estimated from experimental crops at the University of Florida (Paranjpe et al., 2004) Y Average wholesale prices (1998-2005) for strawberries at the New York, Atlanta and Miami terminal markets, (U.S. Department of Agriculture, 2005) Z Gross revenue calculated using a usable greenhouse area of 43,560 ft2
121
Table 4-5 Annual non-organic strawberry wholesale prices from 1998-2005 for select states and countries. Year CALIFORNIA FLORIDA MEXICO AVERAGE
$/lb. Std $/lb. Std $/lb. Std $/lb. Std
1998 $1.54 0.76 $1.50 0.60 $1.89 0.77 $1.55 0.72
1999 $1.55 1.12 $1.22 0.64 $1.07 0.87 $1.45 1.01
2000 $1.42 0.96 $1.12 0.62 $0.96 0.34 $1.34 0.89
2001 $1.58 1.18 $1.45 1.02 $1.15 0.67 $1.54 1.13
2002 $1.62 1.10 $1.46 1.07 $1.32 0.69 $1.55 1.07
2003 $1.67 0.93 $1.60 0.96 $1.76 1.22 $1.69 0.97
2004 $1.73 0.87 $2.01 0.86 $1.35 1.03 $1.77 0.90
2005 $1.43 0.65 $1.68 0.75 $1.75 0.66 $1.53 0.69
Average $1.57 0.11 $1.51 0.27 $1.41 0.35 $1.55 0.13 Y Average wholesale market prices obtained from New York, Atlanta and Miami terminal markets 1998-2005, (U.S. Department of Agriculture, 2005) Z Average wholesale market prices are an average of non-organic prices
122
Table 4-6 Monthly non-organic strawberry wholesale prices from 1998-2005 for select states and countries.
CALIFORNIA FLORIDA MEXICO AVERAGE
$/lb. Std $/lb. Std $/lb. Std $/lb. Std
Jan $2.10 0.99 $1.71 0.86 $1.46 0.63 $1.82 0.91
Feb $2.16 1.26 $1.54 0.70 $1.68 0.64 $1.80 1.00 March $1.56 0.70 $0.98 0.54 $1.06 0.58 $1.26 0.69 April $1.30 0.75 $0.97 0.42 $0.82 0.36 $1.20 0.69 May $1.15 0.55 $1.29 0.29 $0.54 0.38 $1.13 0.55 June $1.09 0.43 $1.09 0.43 July $1.14 0.66 $1.14 0.66 Aug $1.34 0.69 $1.34 0.69
Sept $1.52 0.86 $1.52 0.86
Oct $1.52 0.70 $1.50 $1.53 0.70
Nov $2.43 1.31 $1.99 0.63 $2.35 0.92 $2.41 1.25
Dec $2.76 1.10 $2.20 1.16 $2.85 1.36 $2.51 1.18
Average $1.67 0.55 $1.53 0.48 $1.53 0.77 $1.56 0.49 Y Average wholesale market prices obtained from New York, Atlanta and Miami terminal markets 1998-2005, (U.S. Department of Agriculture, 2005) Z Average wholesale market prices are an average of non-organic prices
123
Table 4-7 Annual organic wholesale market values for select states and countries, 1998-2005
Year CALIFORNIA MEXICO Average
$/lb. std $/lb. std $/lb. std
2003 $2.01 0.61 $2.01 0.61
2004 $2.52 1.63 $2.52 1.63
2005 $2.61 0.89 $0.40 0.30 $2.47 1.02
2006 $3.49 0.91 $2.60 1.27 $3.11 1.15
Average $2.66 0.61 $1.50 1.56 $2.53 0.45 Y Average wholesale market prices obtained from New York, Atlanta and Miami terminal markets 1998-2005, (U.S. Department of Agriculture, 2005) Z Average wholesale market prices are an average of organic prices
124
Table 4-8 Monthly organic wholesale market values for select states and countries, 1998-2005
Year CALIFORNIA MEXICO Average
$/lb. std $/lb. std $/lb. std
Jan $1.36 1.29 $1.36 1.29
Feb $3.46 0.67 $3.46 0.67 Mar $3.42 1.55 $3.13 1.39 $3.31 1.47 Apr $2.52 0.95 $2.52 0.95 May $2.46 0.79 $2.20 0.69 $2.42 0.78 Jun $2.13 0.98 $2.13 0.98 Jul $1.86 0.66 $1.86 0.66 Aug $2.53 0.74 $2.53 0.74
Sep $3.18 0.70 $3.18 0.70
Oct $2.76 1.32 $1.06 $2.72 1.32
Nov $3.49 2.13 $0.39 0.20 $2.81 2.28
Dec $5.75 3.17 $0.30 0.26 $2.28 3.26
Average $3.05 1.05 $1.41 1.09 $2.55 0.61 Y Average wholesale market prices obtained from New York, Atlanta and Miami terminal markets 1998-2005, (U.S. Department of Agriculture, 2005) Z Average wholesale market prices are an average of organic prices
125
Table 4-9 Estimated variable cost of production for 1.0 acres of greenhouse-grown organic strawberries in North Central Florida
Unit Quantity Price Amount Total
(no. units) ($.unit) ($/acre) ($/acre) ($/ft2)
Production costs
Preharvest
Fertilizer R 763.40 0.02
Gallon 51.43 14.85 763.71
Biologicals S 7,728.15 0.18
Neoseiulus Californicus 4 releases/year x1000 161.94 7.50 1,214.57
Aphidius Colemani 3 release/year x5000 12.15 145.00 1,761.13
Amlysieus Cucumeris 3 releases/year x500 99.11 47.95 4,752.44
Pollinators S 1,020.24 0.02
Bumble Bees 100-bee hive 4.86 210.00 1,020.24
Other material inputs T 14,850.50 0.34
Drip Tape (2” emitter spacing) ft 26,539 0.02 647.13
Poly-pipe (3/4 inch), fittings, etc.) ft 1,329 0.05 60.73
Transplants unit 89,068.83 0.14 12,469.64
Soilless Media (Pine Bark) ft3 3,461 0.24 825.91
Sticky cards (insect pest monitoring) box x 800 1.97 429.64 847.10
Organic Certification Fee U
$50 1st time application fee, $150 certification fee, $200 inspection fee 400.00 400.00 0.01
Energy 5,425.40 0.12
Diesel Gallon 1,899.85 2.20 4,179.68
Electricity kWh 15,571.47 0.08 1,245.72
126
Table 4-9 Continued Unit Quantity Price Amount Total
(no. units) ($.unit) ($/acre) ($/acre) ($/ft2)
Labor T Total h 3,162.85 0.07 Preparation greenhouse h 0.52 7.83 4.06 Filling growing system with soilless media (3.048 s/ft) h 22.67 7.83 177.52 Planting strawberry transplants (allowing 7 s per plant) h 173.28 7.83 1,356.78 Removal of cull fruits, old leaves and shoots h 1.04 7.83 8.13 Fertilizer preparation h 77.73 7.83 608.65 Solution monitoring and filter cleaning h 15.57 7.83 121.92 Scouting (pests, diseases and beneficials) h 68.02 7.83 532.57 Releasing N. Californicus (3 min/1000 mites) h 10.12 7.83 79.25 Releasing A Colemani (3 min/1000 wasp) h 6.07 7.83 47.55 Releasing A Cucumeris (3 min/1000 mites) h 6.07 7.83 47.55 Removal of plants and cleaning h 22.67 7.83 177.52 Polyethylene cover change (every 3 years) h 0.17 7.83 1.34 Total Labor h 403.94
Total Preharvest costs 33,350.54 0.77 Harvest V Pick labor (242,508.49lbs) (4,041.07lbs per harvest x 60 harvest) h 199.39 7.83 1,561.23 Total harvest costs 1,561.23 Packing and Marketing
Flat with eight, 1.3-lbs clamshells W flat 6,605.20 2.00 13,210.40
Pre-cooling X flat 6,605.20 0.75 4,953.90
Vehicle operation Y flat 6,605.20 0.60 3,963.12 Sale transaction expenses (15% of total sales) 25,959.96 Total packing and marketing costs 48,087.38 1.10
127
Table 4-9 Continued Unit Quantity Price Amount Total
(no. units) ($.unit) ($/acre) ($/acre) ($/ft2) Other variable costs Z Repairs and maintenance 8,161.54 Taxes and licenses 2,176.41 Greenhouse insurance 5,441.03 Vehicle insurance 2,040.38 Telephone 6,121.15 Other expenses 3,400.64 Total other variable costs 27,341.15 0.63 Total production costs $110,340.30 $2.53 R Organic fertilizer requires 51.4 gallons per 180/d crop cycle at a cost of $763.40 (Smart World Organics Inc, 2006), the non-organic fertilizer requires 2,119.79 gallons per 180/d crop cycle at a cost of $1,346.07 (Paranjpe et al.,2004) S (Koppert Biological Systems, 2006) T (Paranjpe et al., 2004) U Organic Certification costs are $400.00 (Quality Certification Services, 2006), non-organic strawberries requires $0.00 certification fees V Organic production will require 1,561.23 hrs of pick labor, non-organic production will require 2,230.47 hrs of pick labor W Organic production will require 6,605.2 flats, non-organic production will require 9,436.6 flats X Organic production will require 6,605.2 flats to be cooled, non-organic production will require 9,436.6 flats to be cooled Y Organic production will require 6,605.2 flats to be transported, non-organic production will require 9,436.6 flats to be transported Z (Jovicich et al., 2004)
128
Table 4-10 Estimated variable cost of production for 1.0 acres of greenhouse-grown non-organic strawberries in North Central Florida
Unit Quantity Price Amount Total
(no. units) ($.unit) ($/acre) ($/acre) ($/ft2) Production costs Preharvest
Fertilizer R 1,346.07 0.03
(2.1 oz. Fert. or nutrient soln. at 5 fl. oz. per plant per day x 180 d) Pounds 2,119.86 0.64 1,356.71
Biologicals S 7,728.15 0.18 Neoseiulus Californicus 4 releases/year x1000 161.94 7.50 1,214.57 Aphidius Colemani 3 release/year x5000 12.15 145.00 1,761.13 Amlysieus Cucumeris 3 releases/year x500 99.11 47.95 4,752.44
Pollinators S 1,020.24 0.02 Bumble Bees 100-bee hive 4.86 210.00 1,020.24
Other material inputs T 14,850.50 0.34 Drip Tape (2” emitter spacing) ft 26,539 0.02 647.13 Polypipe (3/4 inch), fittings, etc.) ft 1,329 0.05 60.73 Transplants unit 89,068.83 0.14 12,469.64
Soilless Media (Pine Bark) ft3 3,461 0.24 825.91 Sticky cards (insect pest monitoring) box x 800 1.97 429.64 847.10
Organic Certification Fee U
$50 1st time application fee, $150 certification fee, $200 inspection fee 0.00 0.00 0.00
Energy 5,425.40 0.12 Diesel Gallon 1,899.85 2.20 4,179.68
Electricity kWh 15,571.4
7 0.08 1,245.72
129
Table 4-10 Continued Unit Quantity Price Amount Total
(no.
units) ($.unit) ($/acre) ($/acre) ($/ft2)
Labor T Total h 3,162.85 0.07 Preparation greenhouse h 0.52 7.83 4.06 Filling growing system with soilless media (3.048 s/ft) h 22.67 7.83 177.52 Planting strawberry transplants (allowing 7 s per plant) h 173.28 7.83 1,356.78 Removal of cull fruits, old leaves and shoots h 1.04 7.83 8.13 Fertilizer preparation h 77.73 7.83 608.65 Solution monitoring and filter cleaning h 15.57 7.83 121.92 Scouting (pests, diseases and beneficials) h 68.02 7.83 532.57 Releasing N. Californicus (3 min/1000 mites) h 10.12 7.83 79.25 Releasing A Colemani (3 min/1000 wasp) h 6.07 7.83 47.55 Releasing A Cucumeris (3 min/1000 mites) h 6.07 7.83 47.55 Removal of plants and cleaning h 22.67 7.83 177.52 Polyethylene cover change (every 3 years) h 0.17 7.83 1.34 Total Labor h 403.94
Total Preharvest Costs 33,533.21 0.77
Harvest V
Pick labor (242,508.49lbs) (4,041.07lbs per harvest x 60 harvest) h 284.86 7.83 2,230.47
Total harvest costs 2,230.47 Packing and Marketing
Flat with eight, 1.3-lbs clamshells W flat 9,436.60 2.00 18,873.20
Pre-Cooling X flat 9,436.60 0.75 7,077.45
Vehicle operation Y flat 9,436.60 0.60 5,661.96 Sale transaction expenses (15% of total sales) 26,497.98 Total packing and marketing costs 58,110.59 1.33
130
Table 4-10 Continued Unit Quantity Price Amount Total
(no. units) ($.unit) ($/acre) ($/acre) ($/ft2)
Other variable costs Z Repairs and maintenance 8,161.54 Taxes and licenses 2,176.41 Greenhouse insurance 5,441.03 Vehicle insurance 2,040.38 Telephone 6,121.15 Other expenses 3,400.64 Total other variable costs 27,341.15 0.63 Total production costs $121,215.43 $2.78 R Organic fertilizer requires 51.4 gallons per 180/d crop cycle at a cost of $763.40 (Smart World Organics Inc, 2006), the non-organic fertilizer requires 2,119.79 gallons per 180/d crop cycle at a cost of $1,346.07 (Paranjpe et al.,2004) S (Koppert Biological Systems, 2006) T (Paranjpe et al., 2004) U Organic Certification costs are $400.00 (Quality Certification Services, 2006), non-organic strawberries requires $0.00 certification fees V Organic production will require 1,561.23 hrs of pick labor, non-organic production will require 2,230.47 hrs of pick labor W Organic production will require 6,605.2 flats, non-organic production will require 9,436.6 flats X Organic production will require 6,605.2 flats to be cooled, non-organic production will require 9,436.6 flats to be cooled Y Organic production will require 6,605.2 flats to be transported, non-organic production will require 9,436.6 flats to be transported Z (Jovicich et al., 2004)
131
Table 4-11 Estimated fixed cost of production for a 1.0 acre greenhouse growing strawberries in North Central Florida
Cost Projected
Life Depreciation per
year
Invested item ($/acre) ($/ft2) (years) ($/acre) ($/ft2)
Land cash rent Y 571.88 0.01 1 571.88 0.01
Site preparation X
Labor leveling, compacting 11,014.22 0.25
Lime rock and milling 3,304.27 0.08
Water piping to greenhouse complex 2,753.56 0.06
Site electrical/communications to complex 11,014.22 0.25
Total site work 28,086.27 0.64 30 936.21 0.02
Greenhouse permit X 2,040.38 0.05 20 102.02 0.00
Greenhouse structure and cover materials X
Columns, arch, gutters, polyethylene locking profiles 47,691.58 1.09 20 2,384.58 0.05 Access gates, four pavilions 1,872.42 0.04 10 187.24 0.00 Side-wall and roof-vent motors 8,205.60 0.19 10 820.56 0.02 Insect proof netting, 50-mesh (all openings) 2,125.74 0.05 10 212.57 0.00 Polyethylene cover 4,813.21 0.11 3 1,604.40 0.04 Thermal and shading screen 23,019.72 0.53 10 2,301.97 0.05 Freight overseas-Gainesville 5,507.11 0.13 20 275.36 0.01 White ground cover 2,907.75 0.07 7 415.39 0.01 Total greenhouse structure and cover materials 96,143.14 2.21 Greenhouse erection and concrete (by contractor) 88,113.78 2.02 20 4,405.69 0.10 Construction supervision X 3,304.27 0.08 20 165.21 0.00 Head house structures (49 x 33 ft) Z 8,591.09 0.20 20 429.55 0.01 Refrigeration room Z 8,591.09 0.20 20 429.55 0.01
132
Table 4-11 Continued
Cost Projected
Life Depreciation per year
Invested item ($/acre) ($/ft2) (years) ($/acre) ($/ft2)
Backup generator 2,202.84 0.05 12 183.57 0.00 Heating and ventilation systems X Floor mounted heating units (diesel) 10 heating units 80,639 kcal each 28,427.71 0.65 10 2,842.77 0.07 Polyethylene convection tube (62 x 984 ft per roll) 732.45 0.02 3 244.15 0.01 Diesel tank (2,996 gal) with shading roof 1,982.56 0.05 8 247.82 0.01
Site diesel plumbing 1,652.13 0.04 10 165.21 0.00
Air circulation fans (60 units) 6,608.53 0.15 8 826.07 0.02 Total heating and ventilation systems 39,403.38 0.90 Irrigation and climate control systems Water well and pumps 5,507.11 0.13 15 367.14 0.01 Water tanks (2 x 14,979 gal) 14,318.49 0.33 15 954.57 0.02 Nutrient injector and climate control systems 14,591.09 0.33 10 1,459.11 0.03 Nutrient solution tanks (8 x 528 gal) 2,808.63 0.06 10 280.86 0.01 Weather station and temperature and humidity sensors 4,405.69 0.10 10 440.57 0.01 Computer and software 2,147.77 0.05 5 429.55 0.01 Training for using control systems 1,591.50 0.04 Water filters 385.50 0.01 10 38.55 0.00 Valves and pressure regulators 1,589.90 0.04 5 317.98 0.01 Irrigation emitters, stakes, and tubing 12,432.30 0.29 5 2,486.46 0.06 Polyethylene pipe (18,700 ft) 871.78 0.02 5 174.36 0.00
133
Table 4-11 Continued
Cost Projected
Life Depreciation per year
Invested item ($/acre) ($/ft2) (years) ($/acre) ($/ft2)
Pipe connectors and adaptors 302.89 0.01 5 60.58 0.00 Other irrigation parts and labor 2,753.56 0.06 5 550.71 0.01 Growing System Z Hanging bed-pack troughs (65,551 ft) 24,267.21 0.56 7 3,466.74 0.08 [270 rows, each 98.4ft long, spaced 1.64 ft apart] Materials to set up growing system (steel wire, etc.) 1,417.00 0.03 7 202.43 0.00 Labor to set up and hang the growing system 8,089.07 0.19 7 1,155.58 0.03 (based on 4 hr per 98.4 ft long row @ $7.50/h) Total irrigation, growing system and climate control systems 97,479.48 2.24 Electrical 44,056.89 1.01 10 4,405.69 0.10 Drainage system (troughs, pipes, pump) 1,718.22 0.04 5 343.64 0.01 Bulk storage tanks (three tanks of 2008 gal each) 6,773.75 0.16 10 677.37 0.02 Trellis accessories Cables for plant support (17,717 ft) and "U" clamps 3,083.98 0.07 10 308.40 0.01 Poles for plant support (13 per row) 3,579.62 0.08 10 357.96 0.01 Stem ring clips 578.25 0.01 2 289.12 0.01 Total trellis accessories 7,241.85 0.17 Automotive (medium-duty delivery truck) 42,440.00 0.97 10 4,244.00 0.10 Fork lift 12,732.00 0.29 10 1,273.20 0.03 Other durables X Scales 1,591.50 0.04 5 318.30 0.01
134
Table 4-11 Continued
Cost Projected
Life Depreciation per year
Invested item ($/acre) ($/ft2) (years) ($/acre) ($/ft2)
Sprayer and fogger 2,122.00 0.05 5 424.40 0.01 pH meter 159.15 0.00 5 31.83 0.00
Electrical conductivity meter 265.25 0.01 5 53.05 0.00 Ion meters for nitrate and potassium 742.70 0.02 4 185.68 0.00 Harvest trolleys 1,591.50 0.04 6 265.25 0.01
Harvest bins 8,161.54 0.19 6 1,360.26 0.03 Tools 4,244.00 0.10 4 1,061.00 0.02 Total other durables 18,877.64 0.43
Total investment $508,367.95 11.67 $47,736.13 $1.10 X (Jovicich et al., 2004) Y (Average estimated land rent per acre) (Appendix A-2) Z (Paranjpe et al., 2004)
135
Table 4-12 Simulation results from a 1.0 acre greenhouse strawberry operation in North Central Florida
Price ($/lb.)V Organic Z Non-Organic Z
Mean $2.66 $1.76 StDev 0.480 0.509
CVX 18.031 28.912 Min $1.37 $1.13 Max $3.46 $2.56
Yield (lb./ft2)W
Mean 1.577 2.253 StDev 0.144 0.204
CVX 9.124 9.072 Min 1.146 1.663 Max 2.006 2.852
Net Profit (1.0/acre)
Mean $23,316.28 $3,854.71 StDev 31317.678 51884.969
CVX 134.317 1346.013 Min ($57,990.65) ($75,861.47) Max $103,161.98 $137,669.11
NPV Y
Mean ($281,501.60) ($468,565.64) StDev 297335.034 492704.833
CVX -105.625 -105.152 Min ($1,058,088.23) ($1,229,069.25) Max $467,848.70 $788,095.07 V Simulated prices are a derivative of average historical wholesale market prices from New York, Atlanta and Miami terminal markets, 1998-2005, (U.S. Department of Agriculture, 2005) W Simulated organic yield is a 30% reduction in non-organic yield (Ames et al., 2006), non-organic yield (Paranjpe et al., 2004) X CV equals coefficient of variation Y NPV equals net present value Z All variables were simulated using SIMETAR© at n=500 iterations
136
Table 4-13 Sensitivity analysis for a 1.0 acre organic greenhouse strawberry operation in North
Central Florida Yield Market Price ($/lb.)
(lbs/ft2) $1.51 $1.76 $2.02 $2.52 $2.77 $3.02 $3.28
----------------------------------Net Revenue ($/ft2)--------------------------------- 0.10 (3.21) (3.18) (3.16) (3.11) (3.08) (3.06) (3.03) 0.20 (3.06) (3.01) (2.96) (2.86) (2.81) (2.76) (2.70) 0.30 (2.91) (2.83) (2.76) (2.60) (2.53) (2.45) (2.38) 0.40 (2.76) (2.65) (2.55) (2.35) (2.25) (2.15) (2.05) 0.50 (2.60) (2.48) (2.35) (2.10) (1.97) (1.85) (1.72) 0.60 (2.45) (2.30) (2.15) (1.85) (1.70) (1.55) (1.39) 0.70 (2.30) (2.13) (1.95) (1.60) (1.42) (1.24) (1.07) 0.80 (2.15) (1.95) (1.75) (1.34) (1.14) (0.94) (0.74) 0.90 (2.00) (1.77) (1.55) (1.09) (0.87) (0.64) (0.41) 1.00 (1.85) (1.60) (1.34) (0.84) (0.59) (0.34) (0.08) 1.10 (1.70) (1.42) (1.14) (0.59) (0.31) (0.03) 0.24 1.20 (1.55) (1.24) (0.94) (0.34) (0.03) 0.27 0.57 1.30 (1.39) (1.07) (0.74) (0.08) 0.24 0.57 0.90 1.40 (1.24) (0.89) (0.54) 0.17 0.52 0.87 1.23 1.50 (1.09) (0.71) (0.34) 0.42 0.80 1.18 1.55 1.60 (0.94) (0.54) (0.13) 0.67 1.08 1.48 1.88 1.70 (0.79) (0.36) 0.07 0.92 1.35 1.78 2.21 1.80 (0.64) (0.18) 0.27 1.18 1.63 2.08 2.54 1.90 (0.49) (0.01) 0.47 1.43 1.91 2.39 2.86 2.00 (0.34) 0.17 0.67 1.68 2.18 2.69 3.19 2.10 (0.18) 0.34 0.87 1.93 2.46 2.99 3.52 2.20 (0.03) 0.52 1.08 2.18 2.74 3.29 3.85 2.30 0.12 0.70 1.28 2.44 3.02 3.60 4.17 2.40 0.27 0.87 1.48 2.69 3.29 3.90 4.50 2.50 0.42 1.05 1.68 2.94 3.57 4.20 4.83 2.60 0.57 1.23 1.88 3.19 3.85 4.50 5.16 2.70 0.72 1.40 2.08 3.44 4.12 4.80 5.49 2.80 0.87 1.58 2.28 3.70 4.40 5.11 5.81 2.90 1.02 1.76 2.49 3.95 4.68 5.41 6.14 3.00 1.18 1.93 2.69 4.20 4.96 5.71 6.47
137
Table 4-14 Sensitivity analysis for a 1.0 acre non-organic greenhouse strawberry operation in
North Central Florida Yield Market Price ($/lb.)
(lbs/ft2) $1.17 $1.44 $1.62 $1.80 $1.98 $2.16 $2.34
----------------------------------Net Revenue ($/ft2)--------------------------------- 0.10 (3.46) (3.44) (3.42) (3.40) (3.38) (3.36) (3.35) 0.20 (3.35) (3.29) (3.26) (3.22) (3.18) (3.15) (3.11) 0.30 (3.23) (3.15) (3.09) (3.04) (2.99) (2.93) (2.88) 0.40 (3.11) (3.00) (2.93) (2.86) (2.79) (2.72) (2.65) 0.50 (3.00) (2.86) (2.77) (2.68) (2.59) (2.50) (2.41) 0.60 (2.88) (2.72) (2.61) (2.50) (2.39) (2.29) (2.18) 0.70 (2.76) (2.57) (2.45) (2.32) (2.20) (2.07) (1.94) 0.80 (2.65) (2.43) (2.29) (2.14) (2.00) (1.85) (1.71) 0.90 (2.53) (2.29) (2.12) (1.96) (1.80) (1.64) (1.48) 1.00 (2.41) (2.14) (1.96) (1.78) (1.60) (1.42) (1.24) 1.10 (2.29) (2.00) (1.80) (1.60) (1.40) (1.21) (1.01) 1.20 (2.18) (1.85) (1.64) (1.42) (1.21) (0.99) (0.78) 1.30 (2.06) (1.71) (1.48) (1.24) (1.01) (0.78) (0.54) 1.40 (1.94) (1.57) (1.31) (1.06) (0.81) (0.56) (0.31) 1.50 (1.83) (1.42) (1.15) (0.88) (0.61) (0.34) (0.07) 1.60 (1.71) (1.28) (0.99) (0.70) (0.42) (0.13) 0.16 1.70 (1.59) (1.13) (0.83) (0.52) (0.22) 0.09 0.39 1.80 (1.48) (0.99) (0.67) (0.34) (0.02) 0.30 0.63 1.90 (1.36) (0.85) (0.51) (0.16) 0.18 0.52 0.86 2.00 (1.24) (0.70) (0.34) 0.02 0.38 0.74 1.09 2.10 (1.13) (0.56) (0.18) 0.20 0.57 0.95 1.33 2.20 (1.01) (0.42) (0.02) 0.38 0.77 1.17 1.56 2.30 (0.89) (0.27) 0.14 0.56 0.97 1.38 1.80 2.40 (0.78) (0.13) 0.30 0.74 1.17 1.60 2.03 2.50 (0.66) 0.02 0.47 0.92 1.36 1.81 2.26 2.60 (0.54) 0.16 0.63 1.09 1.56 2.03 2.50 2.70 (0.42) 0.30 0.79 1.27 1.76 2.25 2.73 2.80 (0.31) 0.45 0.95 1.45 1.96 2.46 2.96 2.90 (0.19) 0.59 1.11 1.63 2.16 2.68 3.20 3.00 (0.07) 0.74 1.27 1.81 2.35 2.89 3.43
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Table 4-15 Estimated break-even prices for a range of
marketable strawberry fruit yields 1.0-3.0 lb./ft2
Yield X Price
Organic Non-Organic
(lbs/ft2) ---------($/lb.)---------
1.00 $3.63 $3.88
1.30 $2.79 $2.98
1.58Y $2.30 $2.45
1.76 $2.06 $2.20
1.79 $2.03 $2.17
2.25Z $1.61 $1.72
2.50 $1.45 $1.55
2.75 $1.32 $1.41
3.00 $1.21 $1.29 X Yield is based on a useable area of 43,560/ft2 Y Estimated annual yield for organic strawberries Nov-May Z Estimated annual yield for non-organic strawberries Nov-May
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Table 4-16 Surface area of a 1.0 acre greenhouse of a
saw-tooth design Surface Area of Greenhouse (ft2)
End Walls in ft2 5,640
Side Walls 4,416 Roof 43,347 Vent End 776 Vent Side 6,336 GH Total Surface Area 60,515
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Table 4-17 Heat loss calculations required for a 1.0 acre saw-tooth greenhouse
Q=A(Ti-To)/R
Q = Heat loss, BTU/hr
A = Area of greenhouse surface, sq ft
R = Resistance to heat flow
(Ti-To) = Air temperature difference between inside and outside
Conduction Heat Loss, Qc:
Qc = Area x ∆T/R
507,818.18 BTU/hr
Volume ft3: 589,199.52
Air Infiltration Losses, QA:
QA: 0.20 x Volume x C x ∆T
C = Number of air exchanges per hour
106,055.91 BTU/hr
Perimeter Heat Loss, QP:
QP: P x L x (∆T)
P = Perimeter heat loss coefficient, BTU/ft ºF hr L = Distance around perimeter
8,083.20 BTU/hr
Total Heat Loss, QT:
QT = QC + QA + QP Heat Required: 621,957.30 BTU/hr Heat Required for 1 acre: 621,957.30 BTU/hr
182,231.85 Watts or
182.23 kWh
Heat required is based on an Average Minimum daily January temperature of 44°F and keeping the temperature at a level of 41°F
141
Table 4-18 Cost to Obtain Required BTU for 1.0 acre Greenhouse in North Central Florida Based on Historical Temperature Data Months Hours Heat is Needed BTU Required T Gallons of Diesel V Cost of Diesel Y Jan 147.17 91,533,455.17 663.29 $1,459.23 Feb 62.83 39,077,576.87 283.17 $622.98 Mar 30.17 18,764,451.60 135.97 $299.14 Apr 9.5 5,908,594.31 42.82 $94.19 May 0 0.00 0.00 $0.00 Jun 0 0.00 0.00 $0.00 Jul 0 0.00 0.00 $0.00 Aug 0 0.00 0.00 $0.00 Sep 0 0.00 0.00 $0.00 Oct 7.5 4,664,679.72 33.80 $74.36 Nov 36.2 22,514,854.09 163.15 $358.93 Dec 128.17 79,716,266.55 577.65 $1,270.84 Annual 421.54 262,179,878.31 1,899.85 $4,179.68
Months Hours Heat is Needed BTU Required T kWh Required W Cost of Electricity Z Jan 147.17 91,533,455.17 26,819.06 $2,145.52 Feb 62.83 39,077,576.87 11,449.63 $915.97 Mar 30.17 18,764,451.60 5,497.93 $439.83 Apr 9.5 5,908,594.31 1,731.20 $138.50 May 0 0.00 0.00 $0.00 Jun 0 0.00 0.00 $0.00 Jul 0 0.00 0.00 $0.00 Aug 0 0.00 0.00 $0.00 Sep 0 0.00 0.00 $0.00 Oct 7.5 4,664,679.72 1,366.74 $109.34 Nov 36.2 22,514,854.09 6,596.79 $527.74 Dec 128.17 79,716,266.55 23,356.66 $1,868.53 Annual 421.54 262,179,878.31 76,818.01 $6,145.44
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Table 4-18 Continued Months Hours Heat is Needed BTU Required T Gallons of Propane U Cost of Propane X Jan 147.17 91,533,455.17 994.93 $1,641.63 Feb 62.83 39,077,576.87 424.76 $700.85 Mar 30.17 18,764,451.60 203.96 $336.54 Apr 9.5 5,908,594.31 64.22 $105.97 May 0 0.00 0.00 $0.00 Jun 0 0.00 0.00 $0.00 Jul 0 0.00 0.00 $0.00 Aug 0 0.00 0.00 $0.00 Sep 0 0.00 0.00 $0.00 Oct 7.5 4,664,679.72 50.70 $83.66 Nov 36.2 22,514,854.09 244.73 $403.80 Dec 128.17 79,716,266.55 866.48 $1,429.69 Annual 421.54 262,179,878.31 2,849.78 $4,702.14 S Hours based on historical weather temperatures taken from Citra, FL 2000-2006 T BTU figures are based on the heat need to heat 2.47 acres of greenhouse U Estimated Propane Efficiency is 80% with a heat value of 92,000 BTU/gal (Buffington et al., 2002) V Estimated Diesel Fuel Efficiency is 70% with a heat value of 138,000 BTU/gal (Buffington et al., 2002) W Estimated Electricity Efficiency is 100% with a heat value of 3,413 BTU/kWh (Buffington et al., 2002) X Price of Propane = $1.65/gal (Energy Information Administration, 2006) Y Price of Diesel Fuel = $2.20/gal (Grimsely Oil, 2005) Z Price of Electricity = $0.08/kWh (FPL, 2005)
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Table 4-19 Probability of obtaining select prices for organic and non-organic strawberries
Price Organic Y Non-Organic Z x1-value $0.00 $0.00
Prob(X<=x1) 0% 0% x2-value $1.10 $1.10 Prob(X<=x2) 0% 0% x3-value $2.00 $2.00 Prob(X<=x3) 7% 72% x4-value $2.50 $2.50 Prob(X<=x4) 46% 79%
x5-value $3.40 $3.40
Prob(X<=x5) 92% 100% Y Probability of obtaining select price or lower based on simulated distribution of a minimum of $1.37/lb. and a maximum of $3.46/lb. Z Probability of obtaining select price or lower based on simulated distribution of a minimum of $1.13/lb. and a maximum of $2.56/lb.
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Table 4-20 Probability of obtaining select yields for
organic and non-organic strawberries Yield Organic Y Non-Organic Z x1-value 0 0 Prob(X<=x1) 0% 0% x2-value 1.5 1.5 Prob(X<=x2) 30% 0% x3-value 2 2 Prob(X<=x3) 100% 11%
x4-value 2.25 2.25
Prob(X<=x4) 100% 50%
x5-value 2.5 2.5
Prob(X<=x5) 100% 89% Y Probability of obtaining select yield or lower based on simulated distribution of a minimum of 1.15 lbs/ft2, mean of 1.58 lb./ft2, maximum of 2.01 lb./ft2 Z Probability of obtaining select yield or lower based on simulated distribution of a minimum of 1.66 lbs/ft2, mean of 2.25 lb./ft2, maximum of 2.85 lb./ft2
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Table 4-21 Probability of obtaining select net profits
for 1.0 acre greenhouse operation growing: organic and non-organic strawberries
Net Profit Organic Y Non-Organic Z
x1-value $0.00 $0.00
Prob(X<=x1) 22% 51%
x2-value $50,000.00 $50,000.00
Prob(X<=x2) 79% 78% x3-value $75,000.00 $75,000.00
Prob(X<=x3) 93% 87% x4-value $100,000.00 $100,000.00 Prob(X<=x4) 100% 96% x5-value $150,000.00 $150,000.00
Prob(X<=x5) 100% 100% Y Probability of obtaining select net profit or lower based on combinations of simulated price and yield variables Z Probability of obtaining select net profit or lower based on combinations of simulated price and yield variables
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Table 4-22 Estimated costs of producing one acre of field strawberries for fresh market, in Florida Y Quantity Unit $/Unit Total
GROSS RETURNS X X Strawberries (Flats) 2763.50 flat $ 10.26 $28,348.20 (Flat=12 lb.) OPERATING COSTS ----Dollars---- Transplants 1,837.50 Fertilizer 468 Fumigant 883.2 Fungicide 547.44 Herbicide 125.07 Insecticide 559.38 General Farm Labor 44.5 Machinery Variable Cost 491.3 Tractor Driver Labor 283.59 MISCELLANEOUS Transplant Labor 330 Plastic Disposal 100 Cut Runners, Hoe and Hand Weed 150 Farm Vehicles 116.31 Drip Tube 400 Plastic Mulch 320 Scouting 55 Predatory Mites 150 Crop Insurance 100 Interest on Operating Capital 651.07 Total Operating Cost 7,612.36 FIXED COSTS
Land Cash Rent Z 571.88
Machinery Fixed Cost 173.65 Overhead 2,684.53 Total Fixed Cost 3,430.06 TOTAL PREHARVEST COST 11,042.42
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Table 4-22 Continued HARVEST AND MARKETING COSTS Pack and Sell 8,060.00 Harvest Berries 6,500.00 Total Harvest and Marketing Cost 14,560.00 TOTAL COST 25,602.42 RETURN TO OPERATOR LABOR, LAND, CAPITAL, & MGT. $2,745.78 Operator and Unpaid Family Labor hrs. 40 $8.00 320.00 RETURN TO OPERATOR LABOR, LAND, CAPITAL, & MGT. $2,425.78 X (Florida Agricultural Statistical Directory, 2005) Y (Smith, 2005) Z (Average estimated Florida land rent) (Appendix A-2)
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Table 4-23 Simulated net profit for 1.0 acre of field strawberries
harvested on land in different regions of Central FloridaNet Profit ($/acre)
Mean Y $2,419.14
StDev 3413.992
CVZ 141.124
Min ($4,482.34)
Max $14,627.22 Y Average simulated net present value of a 1.0 acre field strawberry operation Z
Coefficient of Variation
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Table 4-24 Probability of obtaining select net profit from field production of strawberries on 1.0 acre of land in three regions in Central Florida
Net Profit ($/acre) Z
x1-value $0.00
Prob(X<=x1) 25%
x2-value $500.00
Prob(X<=x2) 32% x3-value $1,000.00
Prob(X<=x3) 41% x4-value $2,000.00
Prob(X<=x4) 54%
x5-value $5,000.00
Prob(X<=x5) 79% Z Probability of obtaining select net profit or lower based on combinations of simulated price and yield variables
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Italy3% Japan
7%
Spain11%
Mexico6%
Canada1%
United States41%
China25%
Poland6%
Source: Foreign Agricultural Service, Counselor and Attache Reports, Official Estimates, USDA Estimates, 2006
World Fresh Strawberry Production2005/2006 = 2,623,000 Metric Tons
Figure 4-1 Shares of world fresh strawberry production by country, 2005/2006 growing season
0
50000
100000
150000
200000
250000
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Years
Vol
ume
of F
resh
& F
roze
n St
raw
berr
ies .
(1,0
00 P
ound
s)
Mexico Chile China Argentina Ecuador Others World
Figure 4-2 Volume of U.S. imports of strawberries from top countries, 1994-2004
0
5000
10000
15000
20000
25000
Jan. Feb. Mar. Apr. May June July Aug. Sep. Oct. Nov. Dec.
Months
U.S
. Fre
sh S
traw
berr
y im
port
s (1,
000
poun
ds)
Strawberries
Figure 4-3 Monthly U.S. fresh strawberry imports, 2003
0
0.5
1
1.5
2
2.5
3
3.5
4
Jan Feb March April May June July Aug Sept Oct Nov Dec
Months
Mon
thly
dol
lar
per
poun
d Pr
ice
($/lb
)
Non-OrganicOrganic
Figure 4-4 Organic vs. non-organic monthly average wholesale strawberry prices, 1998-2005
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CHAPTER 5
THE ECONOMIC FEASIBILITY OF GREENHOUSE-GROWN CUCUMBERS AS AN ALTERNATIVE TO FIELD PRODUCTION IN NORTH-CENTRAL FLORIDA
In Florida’s 2003-2004 growing season, 10,700 acres of fresh slicing cucumbers were
harvested primarily from fields with raised beds using sub-seepage and some drip irrigation
(Florida Agriculture Statistical Directory, 2005). The term “slicing” refers to cucumbers that are
sold fresh for immediate consumption as a salad item. Slicing cucumbers are grown as a first
crop on raised soil beds in the field or as a second crop, generally following a Solanaceae crop
(Jovicich et al., 2005). Both consumption and imports of fresh cucumbers are on the rise in the
United States (U.S. Department of Agriculture, 2005). Domestic consumption of fresh
cucumbers in 1970 was 577.9 million pounds and rose to 1,851.6 million pounds in 2004, an
increase of 320%, while imports have increased 651% from 1970 to 2004 [143.3 million lb. to
933.3 million lb.] (U.S. Department of Agriculture, 2005). This increase can partially be
explained by the increase in popularity of the European long seedless type cucumber. Today
increase in public demand for fresh cucumbers has allowed other countries such as Canada,
Mexico, Honduras, Guatemala and the Netherlands to fill that demand in the U. S.
Many countries have begun growing high quality, high yielding, long, seedless, European
greenhouse cucumber types, at a premium price. In 2002, the estimated greenhouse cucumber
area was 61.78 acres in the U.S., 291.58 acres in Mexico and 491.73 in Canada (Ministry of
Agriculture, Food and Fisheries Industry Competitiveness Branch, 2003).
Even though greenhouse-grown cucumbers command a higher price than field-grown
cucumbers, consumers are willing to pay for the higher quality and seasonal availability the
greenhouse cucumbers offer. Countries that produce high quality greenhouse cucumbers acquire
a high annual average price per pound of product. From 1998-2005, greenhouse cucumbers from
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Canada acquired a 465% higher average price [$0.93/lb.] than Florida’s [0.20/lb.] field
cucumber. Greenhouse-grown cucumbers from Mexico received a 241% higher price [$0.82/lb.]
than field cucumbers [$0.34/lb.] from Mexico (Table 5-1) (U.S. Department of Agriculture,
2005).
Canada competes with Florida cucumber production due to overlapping seasons in the
spring and fall crops. Mexican cucumber production is dominant in the winter, when it is not
economical for Canada to produce, due to the high costs required to heat greenhouses. In 2004,
50% of domestic consumption in the U.S. was imported. In 2004 the value of all U.S. cucumber
imports, was $348,689,000 (U.S. Department of Agriculture, 2005).
In 2004, imports from Mexico had a value of $279,760,000 which accounted for 80% of
the total value of imported fresh cucumbers into the U.S. The second largest exporter of fresh
cucumbers to the U.S. was Canada, which accounted for 17% of the total imported valued at
$59,537,000 and the Netherlands came in third with a value of $8,552,000 [2% of total] (Table
5-2) (U.S. Department of Agriculture, 2005).
Field Production of Cucumbers in Florida
In Florida, cucumber production is primarily on raised polyethylene-mulched beds using
drip irrigation and fumigated with the now restricted chemical methyl-bromide. Florida has been
a principal winter supplier of cucumbers to the United States. In 2005, Florida was the leading
producer of fresh cucumbers [283,500,000 lb.] in the United States ahead of Georgia
[280,000,000 lb.]; together they produce 55% of the U.S. cucumber output (U.S. Department of
Agriculture, 2005). In the 2002-2004 growing season, Florida harvested 10,700 acres producing
251,515,000 lb. [4,573,000 bushels]. Total U.S. production of cucumbers is valued at
$212,734,000. The value of Florida’s production [$50,552,000] accounts for 24% of the total
value of the U.S. fresh cucumber production (U.S. Department of Agriculture, 2005) (Florida
156
Agricultural Statistical Directory, 2005). Florida fresh cucumber producers harvest from
November – May, with the bulk of the harvests being done in November, April and May.
Historical annual average field price offered to producers is $0.28/lb. ± .10 for slicer cucumbers.
The objective of this study was to determine the economic feasibility of growing European
long-seedless cucumbers in a greenhouse, as well as make a comparison of the profitability
between greenhouse and field production of cucumbers, in North Central Florida. This will be
accomplished through the use of simulation models, using stochastic variables. For detailed
explanations for the use of simulation modeling and stochastic variables see Chapter 3.
Methods
This study describes and applies stochastic simulation to a financial model of a 1.0 acre
cucumber greenhouse operation in North Central Florida (see Chapter 3 for detailed
information)2.
The Use of Stochastic Variables in a Simulation Model to Estimate Key Output Variables (KOV)
Price was simulated using a normal probability distribution, a distribution function in
SIMETAR©. The normal distribution produces a bell shaped probability distribution function
with set probabilities. The normal function reaches to plus and minus infinity so it is an open
distribution. This model used a truncated normal distribution, since it is unlikely that a negative
price will ever be obtained. By truncating the normal distribution function the minus infinity was
replaced with a variable of zero. The parameters for the normal probability distribution [PDF]
are the mean of the distribution, the standard deviation of the distribution and the uniform
standard deviate [USD]. Normal distribution function is simulated in SIMETAR© using the
2 “SIMETAR© was developed by Richardson, Schumann, and Feldman in the Department of Agricultural Economics, Texas A&M University. It is an add-on to Microsoft Excel© that was developed in Visual Basic for applications. It consists of both menu-driven and user-defined functions in Microsoft Excel©” (Gill, Richardson, Outlaw, Anderson, 2003).
157
command =NORM(Mean, Std Dev, [USD]) The PDF for the normal distribution given µ (mean)
and σ (standard deviation) can be explained through the function:
In the function above ƒ (x) describes the distribution function, µ is equal to the mean wholesale
price and σ is equal to the standard deviation of the wholesale price, x describes the independent
variable, е describes the residual error and the Ε is an error term or an arbitrarily small positive
number used in regression. Since this model is based three crop cycles annually the function
=(NORM(Mean, Std Dev, [USD]))+ (NORM(Mean, Std Dev, [USD]))+ (NORM(Mean, Std
Dev, [USD])), was used to simulate an annual three crop cycle yield.
The uniform standard deviate variable X is distributed over the range of 0 to 1 and is
denoted as X ~ U (0, 1). Uniform standard deviate is simulated in Simetar using the command
=UNIFORM ( ). The uniform probability distribution function for the uniform distribution given
a and b can be explained through the function:
In the function above, ƒ(x) describes the distribution function, a is equal to the minimum
wholesale price, b is equal to the maximum wholesale price and x describes the independent
variable. The wholesale price input variables [min, max, USD] for conducting a normal
probability distribution for cucumbers are shown in Table 5-3.
Yield was simulated using the GRKS distribution (Richardson et al., 2006). The yield [lb.
/ft2] input variables [min, mid, max] for constructing a GRKS distribution for cucumbers can be
found in Table 5-4. For detailed information on stochastic models, key output variables (KOV)
and GRKS distributions refer to Chapter 3.
158
Greenhouse Structure Used in the Production of Greenhouse-Grown Cucumbers in North Central Florida
Experiments by Shaw et al., (2000) and Shaw et al., (2004) were performed in a passively
ventilated high roof greenhouse unit, of a saw-tooth design, located at the Protected Agriculture
Center, part of the University of Florida Horticultural Research Unit in Gainesville, Florida.
These trials consisted of both Beit Alpha or mini cucumber and the European long-seedless
cucumber. This study was based on the European long-seedless cucumber. For additional
information on total floor area of greenhouse or heaters used see Chapter 3).
Large portions of data (including planting, yield, crop cycle and fertilization) used in this
enterprise budget and model are based on research trials done at the University of Florida’s
Horticultural Research Unit, Gainesville, Florida (Shaw et al., 2000, Shaw et al.,2004). The
Shaw et al., (2000) trials consisted of a fall and spring crop cycle. This study used a third winter
crop cycle and yields will be derived by taking a 60% reduction from the spring crop cycle of
long-seedless type cucumbers, this is based on personal communication with a commercial
grower Bellibasis, (2005). Crop cycles lasted 105 days from seeding to removal of the crop.
Plug transplants were grown in evaporative-cooled pad and fan glasshouse and transplanted in
February, June and October (Shaw et al., 2004).
Wholesale Greenhouse Cucumber Fruit Prices
Historical fruit prices for greenhouse-grown fruit were gathered from the U.S. Department
of Agriculture’s USDA Fruit and Vegetable Market News Portal (U.S. Department of
Agriculture, 2005). Daily price data was gathered for the last seven years (1998-2005) from
three different terminal markets (New York, Atlanta and Miami) to calculate a maximum,
minimum and mean dollar per pound wholesale fruit price used in the budget analysis model.
Fruit prices were sorted by variety [greenhouse verses field], origin and weight of packaging.
159
Prices of greenhouse fruit were taken from Canada, Honduras, Mexico, the Netherlands, Spain,
Ohio and Florida.
Once historical daily prices for greenhouse cucumbers were collected, the data was sorted,
matched and cropped from January 1998 to December 2005. An annual model is used in this
study so the daily data were averaged to generate an annual average dollar per pound price for
greenhouse-grown cucumbers.
Historically, prices of greenhouse-grown long-seedless cucumbers have been three times
higher than those of field-grown cucumbers. Annual average wholesale price of greenhouse-
grown cucumbers is $0.87/lb., versus average annual field prices of $0.28/lb. (Figure 5-1).
Monthly greenhouse prices peak between November and February, with the highest price in
January [$1.06/lb.]. Monthly greenhouse prices are at their lowest April, May, July and October
(Figure 5-1). Greenhouse-grown cucumbers demand a $0.59/lb. greater price than that of field
production (U.S. Department of Agriculture, 2005).
Enterprise Budget Analysis of Greenhouse-Grown Cucumbers
Common financial statements were developed and used for greenhouse type of cucumber.
An enterprise budget was constructed consisting of gross revenue, costs [initial investment,
variable and fixed] and profit that is associated with a 1.0 acre cucumber greenhouse operation in
North Central Florida. Budget tables consisted of items, quantities, units and prices used.
Annual receipts [gross revenue] were derived by multiplying the annual stochastic dollar
per pound price by the volume of cucumbers produced [gross revenue = sales volume x price,
sales volume = yield x usable greenhouse area] for the fall [August – October], winter
[December – February] and spring [April – June] harvest periods (Table 5-5). Total fruit yield
for three crop cycles were estimated to be 9.98 lb./ft2 based on the technology and practices used
and the length of the crop cycle (Shaw et al., 2000). Fruit yields, costs and revenue were based
160
on unit area of the total greenhouse area [1.0 acre]. The formula used to calculate gross revenue
was: gross revenue ($/ft2) = yield (weight per ft2) x stochastic price ($/lb.).
Estimated Costs of Production for Growing Greenhouse Cucumbers
Fixed costs are defined as costs that the producer would incur even if no crop was being
grown in the greenhouse at the time. All items have been depreciated over their expected useful
life, with a straight line depreciation method. Straight line depreciation is defined as a procedure
for depreciating long-lived assets that recognizes equal amounts of depreciation in each year of
the asset’s useful life. Useful life of an asset is defined as the number of years an asset can be
used before the asset deteriorates to the point when repairs are not economically feasible. The
usefulness of a long-lived asset is largely determined by technological advancements, which
could, at any time, render certain long-lived assets obsolete. For this reason, all items in this
study were assumed to have zero salvageable value at the end of their useful life. Fixed
production costs were derived from the sum of depreciation and other costs. Annual fixed costs,
for the 3 crop cycles, came to $46,762 [$1.07/ft2] (Table 5-6).
The fixed costs to depreciate [initial] investment required for a 1.0 acre greenhouse venture
was determined by compiling all construction, materials, equipment, labor, and durables needed
up front to start a greenhouse enterprise. Initial investment is part of the estimated annual fixed
cost. Initial investment cost consisted of the land, greenhouse structure and cover materials, site
preparation costs, greenhouse permits, construction supervision, head house structure, backup
generator, heating and ventilation systems, nutrient injector and climate control systems, nutrient
solution tanks, weather station, computer software, training to use computer software, water
filters, valves and pressure regulators, irrigation emitters, stakes, tubing, polyethylene pipe, pipe
connectors, nursery pots, electrical, drainage system, bulk storage tanks, trellis accessories,
161
automobile, and a fork lift. A summary of these initial investment costs can be found in Table 5-
6.
Variable costs are defined, as it pertains to this model, as operating costs that would be
incurred only if the crop was grown. Variable production costs [$/ft2] were taken from Table 5-7
except for electricity and gas costs, which will be discussed later in the chapter. Variable costs
were derived by summing pre-harvest costs, harvest costs, and package and marketing costs for
the 3 crop cycles. Annual variable costs for a 1.0 acre greenhouse operation, producing 3 crops,
came to $345,160 [$7.92/ft2] (Table 5-7).
Profit was calculated by subtracting total cost from gross revenue. The formula used for
calculating profit was: profit = gross revenue [yield (weight per ft2) x stochastic price ($/lb.)] –
total costs [variable + fixed (depreciation + other durables)]. Annual net profit for a 1.0 acre
greenhouse operation, producing 3 crops, came to $72,775. Net present value [NPV] is defined
as the present value of cash inflows less present value of cash outflows. It is also said to be the
increase in wealth accruing to an investor when he or she undertakes an investment. Net present
value was calculated using Excel ©. The function used was: =NPV ((interest rate, Cash Flow
[array t=1 thru t=20]) + Initial Investment). Cash flows were calculated using an initial
investment of $441,684, with a book value at the end of its 20 year life expectancy of $22,084
with an assumed interest rate of 8.35% (Farm Credit, 2006). After tax cash flows were then
calculated with the following formula: ATCF = (profits [$72,588] – depreciation [$46,762] =
Earnings before taxes [EBT= $25,826] – taxes [$775] + depreciation [$46,762]) = $71,813. Net
present value [NPV] was then calculated to using the formula: NPV = sum (cash flows x present
value interest factor [PVIF]). Net present value was simulated using SIMETAR©, after
simulating greenhouse cucumber scenario n=500 iterations, it was determined that the average
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simulated NPV of a 1.0 acre greenhouse cucumber operation, was $85,928. The results can be
found in Table 5-8.
The internal rate of return [IRR] is defined as the discount rate at which the investment’s
net present value [NPV] equals zero. As it pertains to this model, IRR was calculated using
Excel©. IRR was calculated as being 15% for this model with an assumed interest rate of 8.35%
(Farm Credit, 2006).
Sensitivity Analysis for the Production of Greenhouse-Grown Cucumbers
Sensitivity analysis was used to analyze the effect on income when a change in one of the
input variables is invoked. Net returns were calculated in the sensitivity analysis with
marketable fruit yields ranging from 1 – 30 lb. /ft2 and wholesale market prices ranging from
$0.63 - $1.17/lb. (Table 5-9). These prices reflect the average wholesale prices that could be
obtained during the fall, winter spring harvest periods.
Break-Even Analysis for the Production of Greenhouse-Grown Cucumbers
A break-even analysis was created to show the different combinations of yield and the
price required to break-even in a 1.0 acre cucumber greenhouse venture. For example, a yield of
10 lb./ft2 would require a price of $0.90/lb. to break-even, anything over this price at 10 lb./ft2
would be considered profit or return to management, anything lower would make the venture
unprofitable (Table 5-10). The break-even analysis was calculated using the following formula:
break-even price = total cost [variable + fixed costs] / sales volume [yield x usable greenhouse
area (43,560 ft2)].
Heat Loss Calculations for a 1.0 Acre Greenhouse Cucumber Operation in North Central Florida
The two most expensive variables in greenhouse production are labor and energy. Just as
in chapter two of this study (The economic feasibility of greenhouse-grown bell peppers as an
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alternative to field production in North Central Florida), annual heat cost were estimated using
formulas to determine conduction, air infiltration and perimeter heat loss on a 1.0 acre
greenhouse in North Central Florida. This study used a minimum base temperature inside the
greenhouse of 60°F, for adequate plant growth.
Just as in chapter three, calculations, in this model, are based on the surface area of on 1.0
acre greenhouse. It was determined that, in order to maintain the 60°F minimum base
temperature, an estimated 1,311,863.64 BTU/hr was needed to offset conduction heat loss. Air
infiltration heat losses required 273,977.78 BTU/hr and perimeter heat loss required 20,881.60
BTU/hr. Total heat required to maintain the 60°F minimum bass temperature was 1,606,723.01
BTU/hr for a 1.0 acre saw-tooth greenhouse with a total surface area of 60,515 ft2 (Table 5-11
and 5-12). For calculation procedures refer to Chapter 3 of this study.
Based on historical temperature data it was determined that the temperature outside the
greenhouses in Citra, Florida, fell below the 60°F minimum base temperature for an average of
2,247.87 hours annually. Thus, an estimated 3,611,704,459.60 BTU’s are required annually to
heat the greenhouse (Table 5-13). This model used diesel heaters in order to lower costs. An
estimated 26,171.77 gallons of diesel fuel annually are required to generate the needed BTUs, at
a cost of $57,577.90 [$2.20/gallon or $0.000016/BTU (Grimesly Oil, 2005)] (Table 5-13). In
addition, estimated fuel costs for propane and electricity heaters are examined to determine the
most cost efficient fuel source to heat the greenhouses. Electric power source would require
1,058,219.88 kWh at a cost of $84,657.59 [$0.08/kWh or $0.000023/BTU (FPL, 2005)]. A
propane fuel source would require 39,257.66 gallons at a cost of $64,775.13 [$1.65/gallon or
$0.000018/BTU (Energy Information Administration, 2006)] (Table 5-13).
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Field Budget Analysis for Cucumbers in Florida
Common financial statements were created by the University of Florida, Food and
Resource Economics Department (Smith, 2005), for fresh field cucumbers production in the state
of Florida. These financial statements were modified to create a model using stochastic variables
and scenarios. As in the greenhouse model, the field budget has stochastic variables in place for
both yield and price. In addition, five scenarios were used to determining the effect of increased
land prices, in the state of Florida, on the estimated annual net profit that a grower will receive.
Gross revenue was calculated by multiplying average yield per acre by the average
wholesale market price taken from the “Florida Agricultural Statistical Directory 2005” from
1994–2004 (Table 5-16).
Variable costs, as defined previously, are those costs that a grower will incur only if a crop
is being grown. Variable costs for one acre of cucumbers in Florida were calculated to be
$1,521/acre (Table 5-16).
Fixed costs are costs that a grower will incur whether or not a crop is being produced.
Fixed costs were calculated to be $1,303/acre. Total harvesting and marketing costs were
calculated to be $2,824/acre. Total costs were calculated by summing total variable costs, fixed
costs, and harvest and marketing costs. Total costs equal $5,620/acre (Table 5-16).
Results
Simulation Analysis Used to Analyze a Greenhouse-Grown Cucumber Production System in North Central Florida
Price and yield were the only stochastic variables in the model; however the model was set
up so that as the stochastic yield and price moved along their defined distribution, the model’s
net profit and net present value moved accordingly. Each stochastic variable was simulated at
500 iterations (For more information on determining number of iterations refer to Chapter 3).
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Results from the simulation showed an annual mean price for greenhouse-grown long-seedless
cucumbers to be $0.90/lb. ± 0.12, mean yields equal to 10.23 lb./ft2 ± 2.75, annual net profit
mean equaled $72,775 ± 89,977 and net present value mean equaled $85,928 ± 652,295 for a 1.0
acre greenhouse producing cucumbers (Table 5-8). Average seasonal price for winter equaled
$1.04 ± 0.03, spring equaled $0.78 ± 0.05 and fall equaled $0.83 ± 0.04. Average monthly yield
for the winter harvest period equaled 0.59 lb/ft2, spring equaled 1.48 lb/ft2 and fall equaled 1.25
lb/ft2 (Table 5-5).
Probabilities and Risk for Greenhouse Cucumber Production Using SIMETAR© in North Central Florida
Stochastic simulation involves simulating uncertain economic systems that are a function
of risky variables, for the express purpose of making better decisions. This study assumes that
future risk mimics historical risk, so past variability is used to estimate parameters for the
probability distributions of risky variables in the model. Probability distributions are simulated a
large number of times to formulate probabilistic projections for the risky variables. The
interaction of the risky variables with other variables in the model allows the projection of how
risky a decision would likely be under alternative management strategies. In this way the model
can provide useful information about the likely outcomes of alternative management decisions
under risk (Richardson, 2006).
In greenhouse production, just as in all agricultural ventures, risk is a major variable to
consider. The higher the risk, in most instances, the greater the return, likewise the lower the
risk, in most instances, the lower the returns, however, the amount of risk a producer is willing to
take on is entirely up to the producer. Caution should be used when using this model to assess an
individual’s risk. This model is just a guide so that others may tailor it to their needs, in order to
measure risk of yield and price. No model can measure all risks including natural disasters,
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market prices, personal knowledge of plant production or management. All prices are based on
historical wholesale prices from New York, Atlanta and Miami terminal markets and are not
necessarily the prices that all growers have received.
SIMETAR© can be used to assess some risk, by estimating the probability that a simulated
variable might be achieved. Price and yield were set as stochastic variables in the model, with
defined parameters for the specific distribution function used. Table 5-14 shows select annual
prices within the distribution range that were used to calculate the probability of obtaining the
select price or lower, based on historical pricing data and the simulation software. The
probability that a grower would get a wholesale price for a greenhouse-grown, European, long-
seedless cucumber below the minimum end of the distribution [$0.54/lb.] or a price above the
maximum end [$1.26/lb.] is 0%. There is a 90% probability that the estimated price received
would be greater than $0.75/lb. and a 10% probability that it would be equal to or less than
$0.75/lb. There is a 19% probability that the price received will be greater than $1.00/lb. and an
81% probability that the price will be equal to or less than $1.00/lb. (Table 5-14). Since
cucumbers are a relatively short crop, it is possible to have up to 4 crop cycles per year, although
this study only used 3 crop cycles per year. Table 5-15 displays the probability of obtaining
select seasonal prices. In the winter [December, January, February] harvest season the average
wholesale price for long-seedless cucumbers was $1.04/lb. with a range of $1.01 - $1.07/lb.
During the winter harvest season simulation yielded a 12% probability of obtaining a price
greater than $1.05/lb and an 88% probability of obtaining a price less than or equal to $1.05/lb.
During the spring [April, May, June] harvest period the average wholesale price was $0.78/lb.
with a range of $0.63 - $0.93/lb. Simulation of spring prices resulted in a 36% probability of
obtaining a price greater than $0.80/lb. and a 64% probability of obtaining a price less than or
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equal to $0.80/lb. There is a 100% probability that the price will be smaller than $0.90/lb.
During the fall [August, September, October] harvest season the average wholesale price was
$0.83/lb. with a range of $0.79 - $0.86/lb. Simulation resulted in a 99% probability of a price
greater than $0.80/lb. and a 1% probability that the price will be equal to or less than $0.80/lb.
Additionally there is a 100% probability that the price will be less than $0.90/lb. (Table 5-15).
The method for determining the probability of yield works much in the same manner as it
did for price. Stochastic price used a normal probability distribution function [mean, standard
deviation, uniform standard deviant], whereas yield uses a GRKS distribution function
[minimum, middle, maximum value, uniform standard deviant]. Table 5-14 displays select
annual yields and their probabilities of obtaining those yields for European long-seedless
cucumbers. There is a 0% probability that the estimated yield for greenhouse-grown cucumbers
will fall outside the parameter range of 2.6 – 19.7 lb. /ft2. There is a 54% probability that the
yield will be greater than 10 lb./ft2 and a 46% chance that the yield would be equal to or less than
10 lb./ft2. There is a 4% probability that the yield will be greater than 15 lb. /ft2 and a 96%
probability that the yield will be equal to or less than 15 lb. /ft2 (Table 5-14). Table 5-15 shows
the probability of obtaining select seasonal yields. Simulation results for the winter harvest
season show that the average yield was 1.78 lb. /ft2. There was a 6% probability of obtaining a
yield of zero and a 76% probability of obtaining a yield greater than 1.0 lb/ft2 (Table 5-15). The
probability of obtaining a winter yield greater than 2.0 lb/ft2 was 42% with a 58% probability of
obtaining a yield less than or equal to 2.0 lb/ft2 (Table 5-15). During the spring harvest season
the average yield was 4.45 lb. /ft2 (Table 5-15). There is a 65% probability of obtaining a spring
yield greater than 4.0 lb. /ft2 and a 35% probability of obtaining a yield less than or equal to 4.0
lb/ft2. The average fall harvest season yield is equal to 3.75 lb. /ft2 (Table 5-15). There is a 94%
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probability of obtaining a fall yield greater than 2.0 lb. /ft2 and a 6% probability of obtaining a
yield less than or equal to 2.0 lb. /ft2 (Table 5-15). There is a 41% probability of obtaining a fall
yield greater than 4.0 lb. /ft2 and a 59% probability of obtaining a yield less than or equal to 4.0
lb. /ft2 (Table 5-15).
Table 5-8 states the mean net profit for 1.0 acre of greenhouse-grown cucumbers to be
$72,775. The probability that the net profit will be negative is 22%, with a 78% probability that
it will be positive. The probability of a net profit above $50,000 is 56%, above $100,000 is 46%
and above $150,000 is 21% (Table 5-14).
The probability of a negative net present value [NPV] for 1.0 acres greenhouse-grown
cucumbers is 50%. There is a 47% probability of an NPV greater than $100,000 and a 53%
probability of an NPV equal to or lower than $100,000. The probability of an NPV greater than
$500,000 is 26% and greater than $1,000,000 is 8% (Table 5-14).
Analysis of Florida Field Budget Simulation
The enterprise budget model was simulated using the average land cash rent price
representing the average rental price of irrigated cropland in Florida, as defined in Appendix A-
2. This field model used stochastic yield and price variables and was simulated at 500 iterations.
Simulated average yield per acre was 29,865 lb./acre [543 bushels/acre] and price an
estimated at $0.19/lb. [$10.48/bushel]. Estimated average net profit for a one acre field
operation in Florida was $60 ± 964 (Table 5-17).
Probabilities and Risk in Field Production Using SIMETAR©
As mentioned in the previous risk section, the program SIMETAR©, was used to assess
the probabilities and risk involved in field production of cucumbers in Florida. Just as in
greenhouse production, caution should be used when using any method of assessing risk. This
model does not assess the risk of losses due to natural disasters or lack of grower knowledge. In
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this model, the stochastic prices and yields are derivatives of average prices and yields that
Florida growers have obtained from 1995-2004 (Florida Agricultural Directory, 2005).
Both stochastic price and yield variables were set up using a GRKS distribution function.
The parameters needed for a GRKS distribution function, is a minimum, middle and a maximum
value. Simulation results display a 50% probability of a negative net profit in Florida. This also
calculates to a 50% probability of a positive net present value. There was a 29% probability of a
net profit greater than $500/acre. The probability for a net profit greater than $1,000/acre was
19% (Table 5-18).
Discussion
Due to new and ever changing trade policies, Florida cucumber producers must compete
with many other countries for market share. Countries such as Canada, Mexico and the
Netherlands are quickly filling the increasing demand for fresh cucumbers in the United States
(Cantliffe et al., 2001). Florida growers, which have predominantly grown slicer cucumbers in
fields on raised beds, must adapt to the shifting market demand for fresh market seedless
cucumbers in order to maintain a substantial market share.
In this model, budgets for both the greenhouse and field have been examined. A large
portion of cucumbers consumed in the U.S. are imported [50% of total consumption is imported]
(U.S. Department of Agriculture, 2005). Cucumbers from the greenhouse historically demand an
average annual price up to three times higher than that of field production (Figure 5-1).
Unlike field production, the greenhouse environment uses a soilless production system
which avoids weeds, soil-borne pathogens or plant parasitic nematodes. Screened structures
greatly reduce the presence of insects, and those that are present can be controlled using
biological control. Additionally, there is increased efficiency in use of fertilizer and water,
which can be recycled within the system (Smither-Kopperl et al. 2004). Methyl bromide is a soil
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fumigant that is used to control soil-borne pathogens, plant parasitic nematodes and weeds
(Smither-Kopperl et al., 2004). Field production in Florida is heavily dependant upon the use of
methyl bromide. The ban on methyl bromide and the greater demand for high quality fresh,
seedless cucumbers has created an opportunity for growers to produce cucumbers in a
greenhouse.
The most common greenhouse cucumber production season extends from September to
June (Larson et al., 2003). Florida’s temperate climate requires minimum heating for the
production of cucumbers in a greenhouse compared to other regions of the U.S. With ever
increasing fuel prices, this will allow Florida growers to stay competitive in the fresh market
cucumber production industry. This allows growers to produce over extended periods depending
on fruit prices and on the quality of the fruits harvested. These factors may allow production to
extend to year round production.
This project determined that greenhouse production of cucumbers can produce a net
profit 1,206 times greater than field production. Results from Smith (2005) were used to
compare to the findings in this project. Field budgets constructed by Smith (2005) were used to
compare field returns with this studies greenhouse production return. Results from the
comparison showed that greenhouse production of cucumbers [$72,775/acre] can be up to 1,206
times higher than returns from field production [$60/acre].
The break-even fruit yields and required prices for profit determined by this study are
attainable for Florida cucumber growers. Current experimental and commercial crops are
obtaining yields of 20 – 25 lb. /plant and historical prices of long seedless cucumbers range from
$0.54 - $1.26/lb. (Hotchmuth, 2001) (U.S. Department of Agriculture, 2006). Yields and market
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values such as these are sufficient to make greenhouse cucumber production profitable according
to the results of this study.
Greenhouse enterprises are variable in size, composition and management. Thus growers
seeking to undertake the production of cucumbers in a greenhouse setting should use this study
as a guide and calculate budgets for their own enterprise. This study used a greenhouse size of
1.0 acre, greenhouses with a different size, construction material or configuration may differ in
cost of initial investment and in cost of production. However, investment per unit area is always
considered high compared investments in field vegetable production.
Florida vegetable growers are currently faced with many challenges, from natural disasters
to international competition which is able to ship year round. Florida growers must find ways to
surmount obstacles such as urbanization [loss of warm weather, costal farm land], labor
shortages [labor shifting to steady higher-paying jobs such as construction], water restrictions,
and the loss of methyl-bromide. For some growers seeking to produce high value specialty
crops, such as long seedless cucumbers, soilless greenhouse production may be an alternative
that can overcome some of these obstacles.
Summary
Florida fresh market vegetable growers are faced with increased pressure from
urbanization, water and chemical restrictions, and foreign competition. Growers are in need of a
clear alternative to field production that can off-set these growing obstacles. Currently there has
been very little research performed to determine the economic feasibility of greenhouse
cucumber production. However, there have been studies that have examined the pressure on the
U.S. vegetable market from foreign countries. Additional research is needed to assess the risk
and potential earnings that growers can obtain in greenhouse vegetable production.
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The objective of this study was to determine the costs and benefits associated with
greenhouse cucumber production. Through the use of SIMETAR© and Excel© software, a
budget analysis model was created for the production of greenhouse-grown cucumbers. Using
this model, cost of production, net profit and risk have been simulated and compared to field
production.
This study found that although greenhouse production requires a significantly larger capital
investment [total cost: $391,922/acre] compared to field production [total costs: $5,620/acre],
potential profits have been determined to be as much as 1,206 times greater in greenhouse
production [$72,775/acre] than in the field [$60/acre]. These are significant findings for Florida
growers searching for alternatives to field production. Greenhouse production may allow them
to stay competitive in the U.S. fresh vegetable market. This study has determined that not only is
it economically feasible to grow cucumbers in a greenhouse setting, but it has also shown that
potential profit is significantly greater for greenhouse-grown cucumbers compared to field-
grown cucumbers.
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Table 5-1 Monthly average dollar per pound greenhouse-grown cucumber wholesale price; 1998-2005 Canada Florida Honduras Mexico Netherlands Ohio Spain Average -----------------------------------------------------$/lb.-------------------------------------------------------
Jan $1.14 $1.14 $0.77 $1.16 $1.10 $1.06
Feb $1.03 $1.03 $0.88 $1.03 $1.40 $0.71 $1.17 $1.04
Mar $0.85 $0.88 $0.69 $0.82 $1.18 $0.50 $0.82
Apr $0.79 $0.82 $0.73 $0.74 $0.92 $0.58 $0.76 May $0.80 $0.78 $0.73 $0.71 $0.73 $0.75
Jun $0.80 $0.80 $0.68 $1.06 $0.67 $1.04 $0.84 Jul $0.75 $0.75 $0.63 $0.71 $1.12 $0.63 $0.76
Aug $0.75 $0.70 $1.02 $0.82
Sep $0.79 $0.76 $1.03 $0.86
Oct $0.77 $0.73 $0.49 $1.13 $0.79 $0.84 $0.79
Nov $1.00 $0.87 $0.78 $1.23 $0.90 $0.96
Dec $1.08 $0.96 $0.90 $1.03 $1.33 $0.79 $1.01
Average $0.88 $0.85 $0.76 $0.82 $1.10 $0.66 $0.97 $0.87 Z Average dollar per pound long seedless greenhouse cucumbers from the New York, Atlanta and Miami terminal markets 1998-2005
(U.S. Department of Agriculture, 2005)
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Table 5-2 Value of U.S. imports, from various countries, of fresh cucumbers; 2000-2004
Year Canada Mexico Chile Netherlands Other World
---------------------------------------$1,000-----------------------------------------------
2000 22,417 150,040 58 782 3,999 177,296
2001 29,457 165,536 0 1,121 4,435 200,548
2002 26,468 168,565 0 298 5,436 200,767
2003 45,275 219,443 0 1,412 6,505 272,635
2004 59,537 279,760 0 839 8,552 348,689 (U.S. Department of Agriculture, 2005)
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Table 5-3 Wholesale price for greenhouse-grown cucumbers from New York, Atlanta and Miami terminal markets; 1998-2005
$/lb. GH Cucumbers X
Avg Price W $0.90
StDev 0.115
95 % LCIY 0.811 95 % UCIZ 0.990
Min $0.81 Median $0.85
Max $1.12 W Average annual wholesale price is in dollars per pound units X Greenhouse-grown prices of cucumbers are an average from Canada, Florida, Honduras, Mexico, the Netherlands, Ohio and Spain. Y LCI = Lower Confidence Interval Z
UCI = Upper Confidence Interval*(U.S. Department of Agriculture, 2005)
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Table 5-4 Annual yield of greenhouse-grown cucumbers used in the GRKS distribution function (Shaw et al., 2000)
lb./ft2 GH Cucumber W
Mean V 3.33
StDev 1.13
95 % LCIY 0.60
95 % UCIZ 6.05
CVX 33.98 Min 1.78
Median 3.75
Max 4.45 V Average annual yield in lb./ft2 W Annual marketable yield of Greenhouse European Long-Seedless Cucumbers X CV = Coefficient of Variation Y LCI = Lower Confidence Interval Z UCI = Upper Confidence Interval
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Table 5-5 Monthly marketable fruit yield, average wholesale market prices and gross revenues in a typical greenhouse-grown cucumber operation in Florida with total estimated yield of 9.98 lbs/ft2
Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sept Oct Annual
Yield X
(lb./ft2) 0.59 0.59 0.59 1.48 1.48 1.48 1.25 1.25 1.25 9.98
Price Y
($/lb.) $0.96 $1.01 $1.06 $1.04 $0.82 $0.76 $0.75 $0.84 $0.76 $0.82 $0.86 $0.79 $0.87 Gross Revenue
($/ft2) $0.57 $0.60 $0.63 $1.13 $1.11 $1.25 $1.03 $1.08 $0.99 $8.38 Gross Revenue
($/acre)Z $24,811.76 $26,104.04 $27,489.12 $49,303.22 $48,425.58 $54,322.09 $44,818.24 $46,954.02 $43,015.50 $365,243.58
W Winter crops harvested from December-February, Spring crops harvested April-June, and Fall crops harvested August-October. X Monthly fruit yields (Shaw et al., 2000) Y Average wholesale price (1998-2005) for greenhouse cucumbers at the New York, Atlanta and Miami terminal markets (U.S. Department of Agriculture, 2005) Z Gross Revenue $/acre is based on a usable area of 43,560/ft2
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Table 5-6 Estimated annual fixed cost of production for a 1.0 acre greenhouse growing cucumbers, in North Central Florida
Cost Projected
Life Depreciation per year Invested item ($/acre) ($/ft2) (years) ($/acre) ($/ft2) Land Cash Rent Y 871.88 0.02 1 871.88 0.02 Site preparation Z Labor leveling, compacting 11,056.80 0.25 Lime rock and milling 3,317.04 0.08 Water piping to greenhouse complex 2,764.20 0.06 Site electrical/communications to complex 11,056.80 0.25 Total site work 28,194.84 0.65 30 939.83 0.02 Greenhouse 829.26 0.02 20 41.46 0.00 Greenhouse structure and cover materials Z Columns, arch, gutters, polyethylene locking profiles 47,875.94 1.10 20 2393.80 0.05 Access gates, four pavilions 1,879.66 0.04 10 187.97 0.00 Side-wall and roof-vent motors 8,237.31 0.19 10 823.73 0.02 Insect proof netting, 50-mesh (all openings) 2,133.96 0.05 10 213.40 0.00 Polyethylene cover 4,831.82 0.11 3 1610.61 0.04 Thermal and shading screen 23,108.71 0.53 10 2310.87 0.05 Freight overseas-Gainesville 5,528.40 0.13 20 276.42 0.01 White ground cover 2,918.99 0.07 7 417.00 0.01 Total greenhouse structure and cover materials 96,514.80 2.22 Greenhouse erection and concrete (by contractor)Z 88,454.39 2.03 20 4422.72 0.10 Construction supervision 3,317.04 0.08 20 165.85 0.00 Head house structures (8x 33 ft) 5,897.98 0.14 20 294.90 0.01 Fruit size grading machine 2,764.20 0.06 0 Refrigeration room 11,056.80 0.25 20 552.84 0.01 Backup generator 2,211.36 0.05 12 184.28 0.00
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Table 5-6 Continued.
Cost Projected
Life Depreciation per year Invested item ($/acre) ($/ft2) (years) ($/acre) ($/ft2) Heating and ventilation systems Z Floor mounted heating units (diesel) 25 heating units 80,639 kcal each 28,537.60 0.66 10 2853.76 0.07 Polyethylene convection tube (19 x 300 m per roll) 735.28 0.02 3 245.09 0.01 Diesel tank (2,995 gal) with shading roof 1,990.22 0.05 8 248.78 0.01 Site diesel plumbing 1,658.52 0.04 10 165.85 0.00 Air circulation fans (60 units) 6,634.08 0.15 8 829.26 0.02 Total heating and ventilation systems 39,555.70 0.91 Irrigation and climate control systems Water well and pumps 5,528.40 0.13 15 368.56 0.01 Water tanks (2 x 14,975 gal) 14,373.84 0.33 15 958.26 0.02 Nutrient injector and climate control systems 14,647.49 0.34 10 1464.75 0.03 Nutrient solution tanks (8 x 528 gal) 2,819.48 0.06 10 281.95 0.01 Weather station and temperature and humidity sensors 4,422.72 0.10 10 442.27 0.01 Computer and software 2,764.20 0.06 5 552.84 0.01 Training for using control systems 829.26 0.02 Water filters 386.99 0.01 10 38.70 0.00 Valves and pressure regulators 1,596.05 0.04 5 319.21 0.01 Irrigation emitters, stakes, and tubing 12,480.36 0.29 5 2496.07 0.06 Polyethylene pipe (18,701 ft) 875.15 0.02 5 175.03 0.00 Pipe connectors and adaptors 304.06 0.01 5 60.81 0.00 Other irrigation parts and labor 2,764.20 0.06 5 552.84 0.01 3-Gal nursery pots 8,126.75 0.19 5 1625.35 0.04 Total irrigation and climate control systems Z 71,918.95 1.65
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Table 5-6 Continued.
Cost Projected Life Depreciation per year
Invested item ($/acre) ($/ft2) (years) ($/acre) ($/ft2) Electrical 44,227.19 1.02 10 4422.72 0.10 Drainage system (troughs, pipes, pump) 1,724.86 0.04 5 344.97 0.01 Bulk storage tanks (three tanks of 2,007 gal each) 6,799.93 0.16 10 679.99 0.02 Trellis accessories Z Cables for plant support (17,717 ft) and "U" clamps 3,095.90 0.07 10 309.59 0.01 Poles for plant support (13 per row) 3,593.46 0.08 10 359.35 0.01 Stem ring clips 580.48 0.01 2 290.24 0.01 Total trellis accessories 7,269.85 0.17 Automotive (medium-duty delivery truck) 14,539.69 0.33 10 1453.97 0.03 Fork lift 6,634.08 0.15 10 663.41 0.02 Other durables Z Media for pots (Pine Bark) 20,908.80 0.48 3 6,969.60 0.16 Seedling trays 181.66 0.00 5 36.33 0.00 Twine 57.25 0.00 2 28.63 0.00 Double hooks 88.08 0.00 2 44.04 0.00 Scales 829.26 0.02 5 165.85 0.00 Sprayer and fogger 1,105.68 0.03 5 221.14 0.01 pH meter 82.93 0.00 5 16.59 0.00 Electrical conductivity meter 138.21 0.00 5 27.64 0.00 Ion meters for nitrate and potassium 386.99 0.01 4 96.75 0.00 Harvest trolleys 829.26 0.02 6 138.21 0.00 Harvest bins 3,317.04 0.08 6 552.84 0.01 Tools 2,211.36 0.05 4 552.84 0.01 Total other durables 8,900.72 0.20 Total investment $441,683.50 10.14 $46,761.62 $1.07
Y Average Florida land rent (Appendix A-2) Z (Jovicich et al., 2004)
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Table 5-7 Estimated annual variable cost to produce 3 cucumber crops in a 1.0 acre greenhouse in North Central Florida
Items Unit Quantity Price Amount Total
(no. units) ($/unit) ($/acre) ($/acre) ($/ft2)
Percent of Total Variable
Cost Production Costs Preharvest
Fertilizer W 15,681.60 0.36 4.54% 15,681.60
Biologicals X 6,891.84 0.16 2.00% A. Colemani 9 releases/year x500 74.19 22.55 1,673.04 H. Convergens 9 release/year x4500 33.02 14.18 468.28 O. Insidious 6 releases/year x500 99.07 47.95 4,750.52 Pesticides 220.05 0.01 0.06% Fungicides (Azoxystrobin) oz 65.97 2.19 144.48 Fungicides (Myclobutanil) oz 14.99 5.04 75.57
Other material inputs Y 9,552.62 0.22 2.77% Bleach Gallon 21.00 1.06 22.26
Media seedlings ft3 22.00 2.10 46.20 Seeds unit 26136.00 0.33 8,624.88 Sticky cards (insect pest monitoring) box x 800 2.00 429.64 859.28 Energy 60,654.82 1.39 17.57% Diesel Gallon 26171.77 2.20 57,577.90 Electricity kWh 38461.54 0.08 3,076.92
Labor Z Times Total h 5,218.05 0.12 1.51% Seeding and seedling growing h 3.00 52.00 156.00 Preparation greenhouse h 3.00 156.00 468.00 Transplanting h 3.00 25.00 75.00
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Table 5-7 Continued.
Items Unit Quantity Price Amount Total
(no. units) ($/unit) ($/acre) ($/acre) ($/ft2)
Percent of Total Variable
Cost Plant support with twines and hooks h 35.00 50.00 1,750.00 Removal of cull fruits, old leaves and shoots h 35.00 60.00 2,100.00 Fertilizer preparation h 35.00 1.00 35.00 Solution monitoring and filter cleaning h 35.00 2.00 70.00 Scouting (pests, diseases and beneficials) h 35.00 3.00 105.00 Removal of plants and cleaning h 3.00 90.00 270.00 Polyethylene cover change (every 3 years) h 0.33 35.00 11.55 Pesticide application h 35.00 4.00 140.00 Empting and washing pots (every 2 years) h 0.50 75.00 37.50 Total Labor h 553.00 5,218.05 Total preharvest costs (Fall, Winter, Spring Crops) 98,218.98 2.25 28.46%
Harvest Z Pick & Pack labor (92 h/harvest x 81 harvests/yr) h 3000.00 8.00 24,000.00 Total harvest costs 24,000.00 0.55 6.95%
Marketing Y Cartons, dividers and labels lb 729945 0.08 58,395.60 Marketing and miscellaneous packing lb 729945 0.10 72,994.50 Vehicle operation Mile 12747 0.32 4,079.04 Sale transaction expenses (15% of total sales) 60,131.16 Total packing and marketing costs 195,600.30 4.49 56.67% Other Variable Costs Repairs and maintenance 8,161.54 Taxes and licenses 2,176.41 Greenhouse insurance 5,441.03 Vehicle insurance 2,040.38
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Table 5-7 Continued.
Items Unit Quantity Price Amount Total
(no. units) ($/unit) ($/acre) ($/acre) ($/ft2)
Percent of Total Variable
Cost Telephone 6,121.15 Other expenses 3,400.64 Total other variable costs 27,341.15 0.63 Total Production Costs $345,160.44 7.92 W (Chaudhary, 2001) X (Koppert Biological Systems, 2006) Y (Jovicich et al., 2004) Z (Bellibosi, 2006)
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Table 5-8 Comparison of select simulated variables of a 1.0 acre greenhouse-grown cucumber operation, in North Central Florida
Price V Yield W Net Profit NPV X Mean Y $0.90 10.230 $72,774.46 $85,928.05 StDev 0.115 2.752 89977.345 652294.661 CVZ 12.770 26.898 123.639 759.117 Min $0.54 2.610 ($134,747.09) ($1,438,988.04) Max $1.26 19.708 $390,880.40 $2,374,934.32 V $/lb. W lb./ft2, 3 crops annually X NPV = Net Present Value Y Mean equals average of simulated variables Z Coefficient of Variation
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Table 5-9 Sensitivity analysis for a 1.0 acre greenhouse-grown cucumber operation in North Central Florida
Yield Market Price ($/lb.)
(lb./ft2) $0.63 $0.72 $0.81 $0.90 $0.99 $1.08 $1.17
--------------------------------------Net Revenue ($/ft2)-------------------------------------- 1 (8.40) (8.30) (8.20) (8.10) (8.00) (7.90) (7.80) 2 (7.80) (7.60) (7.40) (7.20) (7.00) (6.80) (6.60) 3 (7.20) (6.90) (6.60) (6.30) (6.00) (5.70) (5.40) 4 (6.60) (6.20) (5.80) (5.40) (5.00) (4.60) (4.20) 5 (6.00) (5.50) (5.00) (4.50) (4.00) (3.50) (3.00) 6 (5.40) (4.80) (4.20) (3.60) (3.00) (2.40) (1.80) 7 (4.80) (4.10) (3.40) (2.70) (2.00) (1.30) (0.60) 8 (4.20) (3.40) (2.60) (1.80) (1.00) (0.20) 0.60 9 (3.60) (2.70) (1.80) (0.90) 0.00 0.90 1.80 10 (3.00) (2.00) (1.00) 0.00 1.00 2.00 3.00 11 (2.40) (1.30) (0.20) 0.90 2.00 3.10 4.20 12 (1.80) (0.60) 0.60 1.80 3.00 4.20 5.40 13 (1.20) 0.10 1.40 2.70 4.00 5.30 6.60 14 (0.60) 0.80 2.20 3.60 5.00 6.40 7.80 15 0.00 1.50 3.00 4.50 6.00 7.50 9.00 16 0.60 2.20 3.80 5.40 7.00 8.60 10.20 17 1.20 2.90 4.60 6.30 8.00 9.70 11.40 18 1.80 3.60 5.40 7.20 9.00 10.80 12.60 19 2.40 4.30 6.20 8.10 10.00 11.90 13.80 20 3.00 5.00 7.00 9.00 11.00 13.00 15.00 21 3.60 5.70 7.80 9.90 12.00 14.10 16.20 22 4.20 6.40 8.60 10.80 13.00 15.20 17.40 23 4.80 7.10 9.40 11.70 14.00 16.30 18.60 24 5.40 7.80 10.20 12.60 15.00 17.40 19.80 25 6.00 8.50 11.00 13.50 16.00 18.50 21.00 26 6.60 9.20 11.80 14.40 17.00 19.60 22.20 27 7.20 9.90 12.60 15.30 18.00 20.70 23.40 28 7.80 10.60 13.40 16.20 19.00 21.80 24.60 29 8.40 11.30 14.20 17.10 20.00 22.90 25.80 30 9.00 12.00 15.00 18.00 21.00 24.00 27.00
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Table 5-10 Estimated break-even prices for a range of marketable cucumber fruit yields of 1-22 lb./ft2
Yield X Price Z
(lb./ft2) ($/lb.)
1 $9.00 2 $4.50
3 $3.00 4 $2.25
5 $1.80
6 $1.50
7 $1.29
8 $1.12
9 $1.00
10Y $0.90
11 $0.82
12 $0.75 13 $0.69
14 $0.64 15 $0.60
16 $0.56
17 $0.53
18 $0.50
19 $0.47
20 $0.45
21 $0.43
22 $0.41 X Annual marketable greenhouse-grown cucumber yield ranged from 2.6-19.7 lb./ft2 (Shaw et al., 2000) Y Average yield per crop cycle for greenhouse-grown cucumbers was 10 lb./ft2 annually Z Wholesale fruit price for greenhouse-grown cucumbers ranged from $0.54-$1.26/lb. (U.S. Department of Agriculture, 2005)
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Table 5-11 Surface area of a 1.0 acre greenhouse of a saw-tooth design
Surface Area of Greenhouses (ft2)
End Walls in ft2 5,640.00 Side Walls 4,416.00 Roof 43,347.00 Vent End 776.00
Vent Side 6,336.00 GH Total Surface Area 60,515.00
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Table 5-12 Heat loss calculations required for a 1.0 acre saw-tooth greenhouse
Q=A(Ti-To)/R Q = Heat loss, BTU/hr A = Area of greenhouse surface, sq ft R = Resistance to heat flow
(Ti-To) = Air temperature difference between inside and outside
Conduction Heat Loss, Qc: Qc = Area x ∆T/R 1,311,863.64 BTU/hr
Volume ft3: 589,199.52 Air Infiltration Losses, QA: QA: 0.20 x Volume x C x ∆T C = Number of air exchanges per hour 273,977.78 BTU/hr Perimeter Heat Loss, QP: QP: P x L x (∆T) P = Perimeter heat loss coefficient, BTU/ftºF hr L = Distance around perimeter
BTU/hr 20,881.60 Total Heat Loss, QT: QT = QC + QA + QP
Heat Required: 1,606,723.01 BTU/hr Heat Required for 1 ha: 1,606,723.01 BTU/hr
470,765.61 Watts or 470.77 kWh
Heat required is based on an Average Minimum daily January temperature of 44°F and keeping the temperature at a level of 60°F
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Table 5-13 Cost to obtain required BTU for 1.0 acre greenhouse in North Central Florida based on historical temperature data Months Hours heat needed BTU Required T Gallons of Diesel V Cost of Diesel Y Jan 479.17 769,893,466.22 5,578.94 $12,273.66 Feb 379.67 610,024,526.41 4,420.47 $9,725.03 Mar 281.17 451,762,309.61 3,273.64 $7,202.01 Apr 184.4 296,279,723.63 2,146.95 $4,723.30 May 60.8 97,688,759.20 707.89 $1,557.36 Jun 0.00 0.00 0.00 $0.00 Jul 0.00 0.00 0.00 $0.00 Aug 0.00 0.00 0.00 $0.00 Sep 10 16,067,230.13 116.43 $256.14 Oct 112.83 181,286,557.58 1,313.67 $2,890.08 Nov 290.33 466,479,892.41 3,380.29 $7,436.64 Dec 449.5 722,221,994.42 5,233.49 $11,513.68 Annual 2,247.87 3,611,704,459.60 26,171.77 $57,577.90
Months Hours heat needed BTU Required T kWh Required W Cost of Electricity Z Jan 479.17 769,893,466.22 225,576.76 $18,046.14 Feb 379.67 610,024,526.41 178,735.58 $14,298.85 Mar 281.17 451,762,309.61 132,365.17 $10,589.21 Apr 184.4 296,279,723.63 86,809.18 $6,944.73 May 60.8 97,688,759.20 28,622.55 $2,289.80 Jun 0.00 0.00 0.00 $0.00 Jul 0.00 0.00 0.00 $0.00 Aug 0.00 0.00 0.00 $0.00 Sep 10 16,067,230.13 4,707.66 $376.61 Oct 112.83 181,286,557.58 53,116.48 $4,249.32 Nov 290.33 466,479,892.41 136,677.38 $10,934.19 Dec 449.5 722,221,994.42 211,609.14 $16,928.73 Annual 2,247.87 3,611,704,459.60 1,058,219.88 $84,657.59
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Table 5-13 Continued. Months Hours heat needed BTU Required T Gallons of Propane U Cost of Propane X Jan 479.17 769,893,466.22 8,368.41 $13,807.87 Feb 379.67 610,024,526.41 6,630.70 $10,940.66 Mar 281.17 451,762,309.61 4,910.46 $8,102.26 Apr 184.4 296,279,723.63 3,220.43 $5,313.71 May 60.8 97,688,759.20 1,061.83 $1,752.03 Jun 0.00 0.00 0.00 $0.00 Jul 0.00 0.00 0.00 $0.00 Aug 0.00 0.00 0.00 $0.00 Sep 10 16,067,230.13 174.64 $288.16 Oct 112.83 181,286,557.58 1,970.51 $3,251.33 Nov 290.33 466,479,892.41 5,070.43 $8,366.22 Dec 449.5 722,221,994.42 7,850.24 $12,952.89 Annual 2,247.87 3,611,704,459.60 39,257.66 $64,775.13 S Hours based on historical weather temperatures taken from Citra, FL 2000-2006 T BTU figures are based on the heat needed to heat a 1 acre greenhouse U Estimated Propane Efficiency is 80% with a heat value of 92,000 BTU/gal (Buffington et al., 2002) V Estimated Diesel Fuel Efficiency is 70% with a heat value of 138,000 BTU/gal (Buffington et al., 2002) W Estimated Electricity Efficiency is 100% with a heat value of 3,413 BTU/kWh (Buffington et al., 2002) X Price of Propane = $1.65/gal (Energy Information Administration, 2006) Y Price of Diesel Fuel = $2.20/gal (Grimsely Oil, 2005) Z Price of Electricity = $0.08/kWh (FPL, 2005)
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Table 5-14 Probability of obtaining select annual prices, yield, net profit and net present value for a 1.0 acre greenhouse-grown cucumber operation in North Central Florida
Price W Yield X Net Profit Y NPVZ x1-value $0.00 0 $0.00 $0.00 Prob(X<=x1) 0% 0% 22% 50% x2-value $0.75 5 $50,000.00 $50,000.00 Prob(X<=x2) 10% 3% 44% 53% x3-value $1.00 10 $100,000.00 $100,000.00 Prob(X<=x3) 81% 46% 64% 55% x4-value $1.10 15 $150,000.00 $500,000.00 Prob(X<=x4) 96% 96% 79% 74% x5-value $1.30 20 $200,000.00 $1,000,000.00 Prob(X<=x5) 100% 100% 92% 92%
W Probability of obtaining select price or lower based on simulated distribution of a minimum of $0.54/lb and a maximum of $1.26/lb. X Probability of obtaining select yield or lower based on a simulated distribution of a minimum of 2.6 lb./ft2 and a maximum of 19.71 lb./ft2 Y Probability of obtaining select net profit or lower based on simulated distribution of a minimum of ($134,747) and a maximum of $390,880 Z Probability of obtaining select net present value or lower based on simulated distribution of a minimum of ($1,438,988)and a maximum of $2,374,934
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Table 5-15 Probability of obtaining select seasonal prices and yield for a 1.0 acre greenhouse-grown cucumber operation in North Central Florida
Price Yield
Winter U Spring V Fall W Winter W Spring Y Fall Z
x1-value $0.70 $0.70 $0.70 0.00 0.00 0.00
Prob(X<=x1) 0% 3% 0% 6% 0% 0% x2-value $0.80 $0.80 $0.80 1.00 1.00 1.00
Prob(X<=x2) 0% 64% 1% 24% 0% 1% x3-value $0.90 $0.90 $0.90 1.50 1.50 1.50
Prob(X<=x3) 0% 100% 100% 40% 1% 2%
x4-value $1.00 $1.00 $1.00 2.00 2.00 2.00
Prob(X<=x4) 0% 100% 100% 58% 2% 6%
x5-value $1.05 $1.05 $1.05 4.00 4.00 4.00
Prob(X<=x5) 88% 100% 100% 98% 35% 59%
U Probability of obtaining select seasonal price or lower based on simulation distribution range of $1.01 - $1.07/lb., Winter months consist of Dec, Jan and Feb. V Probability of obtaining select seasonal price or lower based on simulation distribution range of $0.63 - $0.93/lb., Spring months consist of Apr, May and June.W Probability of obtaining select seasonal price or lower based on simulation distribution range of $0.79 - $0.86/lb., Fall months consist of Aug, Sept and Oct. X Probability of obtaining select seasonal yield or lower based on a simulated distribution range 0.0 - 5.111 lb./ft2 Y Probability of obtaining select seasonal yield or lower based on a simulated distribution range 0.803 - 7.759 lb./ft2 Z Probability of obtaining select seasonal yield or lower based on a simulated distribution range 0.315 - 7.208 lb./ft2
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Table 5-16 Estimated costs of producing one acre of field cucumbers for fresh market, in Florida Y
CATEGORY Quantity Unit $/Unit Total GROSS RETURNS Fresh Cucumber: 542.77X 55 lb. Bushel $10.48X 5687.17 OPERATING COSTS -------------Dollars------------- Seed Fertilizer $83.94 Fungicide $292.00 Herbicide $146.15 Insecticide $20.77 General Farm Labor $219.79 Machinery Variable Cost $95.40 Tractor Driver Labor $325.70 $45.85 MISCELLANEOUS Farm Vehicles Plastic Mulch Disposal $18.22 Clean Ditches $163.35 Bee Hive Rental $20.00 Interest on Operating Capital $30.00 $60.05 Total Operating Cost $1,521.22 FIXED COSTS Land Cash Rent Z $571.88 Machinery Fixed Cost $50.84 Farm Management $302.40 Overhead $378.00 Total Fixed Cost $1,303.12 TOTAL PREHARVEST COST $2,824.34
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Table 5-16 Continued. CATEGORY Quantity Unit $/Unit Total HARVEST AND MARKETING COSTS Sell Cucumbers $150.00 Pack Cucumbers $1,110.00 Harvest and Haul Cucumbers $1,080.00 Cucumber Boxes $456.00 Total Harvest and Marketing Cost $2,796.00 TOTAL COST $5,620.34 RETURN TO OPERATOR LABOR, LAND, CAPITAL, & MGT. $66.83 X (Florida Agricultural Statistical Directory, 2005) Y (Smith, 2005) Z (Appendix A-2)
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Table 5-17 Simulated Florida field-grown cucumber
return to land and owner for one acre Yield X Price Net Profit
Mean Y 542.763 $10.48 $60.36 StDev 70.907 1.208 964.08434
CVZ 13.064 11.532 1597.2467 Min 357.672 $5.48 ($2,325.25) Max 798.198 $12.81 $2,853.03 X 55-lb bushels/Acre Y Average annual simulated yield (bushel/acre), price ($/bushel) and return to land and owner/acre Z CV = Coefficient of Variation
196
Table 5-18 Probability of obtaining select net profit for a one acre of field cucumber production in Florida
Yield X Price Y Net Profit Z x1-value 0 $5.50 $0.00 Prob(X<=x1) 0% 0% 50% x2-value 400 $7.00 $500.00 Prob(X<=x2) 1% 1% 71% x3-value 500 $9.00 $700.00 Prob(X<=x3) 29% 13% 77% x4-value 600 $10.00 $900.00 Prob(X<=x4) 79% 30% 80% x5-value 700 $11.00 $1,000.00 Prob(X<=x5) 98% 57% 81% X 55-lb bushels/Acre, distribution range of 358-798/bushels/acre Y Price ($/bushel), distribution range of $5.48-$12.81/bushel Z Net Profit/acre, distribution range of ($2,105) - $3,072
197
$0.00
$0.20
$0.40
$0.60
$0.80
$1.00
$1.20
$1.40
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Months
Pric
e (D
olla
rs p
er P
ound
)
FIELDGREENHOUSE
Figure 5-6 Comparison of monthly wholesale price between field and greenhouse production of cucumbers; 1998-2005
198
CHAPTER 6 CONCLUSION
This study offers an economic analysis of one solution for Florida growers that are actively
seeking out economically viable alternatives to field production. There are many benefits of
greenhouse vegetable production for Florida growers, the primary benefit being increased
profits. Other benefits include: controlled climate, reduced dependence on insecticides, no
methyl bromide, water conservation, increased quality and increased marketable yield, greater
number of sunny days, low fuel costs or no fuel costs if producing in south Florida, and
proximity to market. This study includes an economic analysis of growing bell peppers,
strawberries and cucumbers in a greenhouse compared to field production. In addition, based on
historical data probabilities, or likely-hood of obtaining select variables such as: price, yield and
net profit, were examined in order to give growers a better understanding of the risk and benefits
of greenhouse production compared to field production.
The results from the simulation models of greenhouse-grown bell peppers, strawberries
and cucumbers suggest that the risk of production, market price and return to management can be
analyzed through the use of simulation software, but most importantly they show that even with
the high capital investment needed for greenhouse production in Florida, growers can increase
their net profit per acre dramatically over conventional field production. Florida greenhouse
vegetable producers would have an advantage over greenhouse producers from other regions of
the country, due to Florida’s warm winter climate, high number of sunny days and proximity to
distribution markets. Fuel costs are lower or non-existent for south Florida compared to other
regions in the U.S., due to the warm winter climate in Florida. In addition, Florida greenhouse
growers’ costs are lower due to the increased number of sunny days over other regions in the
country, which allows them to start or extend growing seasons without the need for supplemental
199
lighting, this allows them to produce during times when market prices are high. Florida
greenhouse producers also have an advantage of lower transportation costs. Ever increasing fuel
costs gives Florida producers an advantage, due to the proximity to the Mid-Western and Eastern
U.S. markets.
Greenhouse production of bell peppers, strawberries and cucumbers is an effective way for
Florida growers to increase net profit, in a state that is plagued by rapid urbanization and rising
land prices, along with increasing water and environmental restrictions. Furthermore, the
probability of obtaining a positive annual net profit is significantly greater in greenhouse
production versus field production of bell peppers, strawberries and cucumbers. When net
profits of greenhouse production are compared to field production for the three commodities
analyzed, it was determined that greenhouse-grown colored bell peppers [net profit of
$15,166/acre for yellow greenhouse bell peppers] can have returns up to four and half times
greater than field production [net profit of $3,289/acre]. Net profit for greenhouse-grown
organic strawberries [$23,316/acre] can be to nine and half times greater than field-grown
[$2,419/acre] and non-organic greenhouse-grown strawberries [$3,855/acre] can be up to one
and half times greater than the net profit of field-grown strawberries. Net profit for greenhouse-
grown long-seedless cucumbers [$72,775/acre] can be up to 1,206 times greater than the net
profit of field-grown slicer cucumbers [$60/acre]. This suggests that even with the significantly
higher capital investment required for greenhouse production, the risk of failure is significantly
lower than that of field production, excluding natural disasters and technical knowledge of
production. Total production costs of greenhouse-grown colored bell peppers [$167,019/acre]
can be up to 20 times greater than that of field production [$8,468/acre], organic greenhouse-
grown strawberries [$158,076/acre] are up to six times higher than that of field production
200
[$25,602/acre] and non-organic greenhouse-grown strawberry total production costs
[$168,951/acre] can be up to six and a half times greater than field production costs. Total cost
for greenhouse-grown long-seedless cucumbers [$391,922/acre] can be up to 70 times greater
than that of field-grown slicer cucumber costs [$5,620/acre].
Whether or not growers should adopt the new technology of greenhouse production
depends heavily on grower knowledge, location, proximity to market and market prices. The
results of budget analysis simulation models suggest that adoption of the new technology of
greenhouse production depends not only on the possibility of a better net profit, but also on the
cost of the technology and grower production of using this technology. The bottom line is that
Florida growers will have a greater chance of earning more money and enlarging their market
share if greenhouse technology is adopted for the production of bell peppers, strawberries and
cucumbers.
Overall, this research suggests that the opportunity for Florida growers to increase quality
and yields, leading to more marketable volume, will result in higher revenues and margins if
Florida growers decide to adopt greenhouse production technology. These findings will prove to
valuable to growers that are faced with tighter restrictions and increasing land prices.
Implications. The volume and value of colored bell peppers, strawberries and cucumbers
sold and consumed in the U.S. is substantial. The shift of consumer demand to high quality, year
round supply of fresh vegetables has significantly increased over the last decade. Therefore, the
opportunity to fill U.S. market demand with Florida greenhouse-grown vegetables exists.
However, one key thing Florida producers will have to pay attention to is the supply of fresh
vegetables from foreign countries, which could result in depressed market prices and could have
201
an adverse result on the profitability of Florida greenhouse production, since capital investment
is so high compared to field production.
This research quantifies the costs and benefits associated with effectively implementing
greenhouse production of bell peppers, strawberries and cucumbers in Florida. These methods
can also be adopted for the use of other fresh vegetable commodities that have a demand for high
quality. This budget analysis simulation model can be adapted and applied to other
commodities.
Finally, further research, using the simulation approach, is warranted to study different
sized operations and combinations of commodities that would yield an increased net profit.
Suggestions for further research would be to expand the model to measure the risk and
profitability of production at different economies of scale, through the simulation of different
sized greenhouse operations. Additionally, suggestions for future research would be to adapt the
model to determine a combination of commodities, in a double cropping operation, that would
yield growers the highest potential net profits.
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APPENDIX ASSUMPTIONS
Appendix A-1 Average wholesale colored greenhouse vs. field pepper prices; 1998-2005
$/lb Green Red Yellow Orange Annual Average
Month Field Y GH X Field Y GH X Field Y GH X Field Y GH X Field Y
Jan $0.49 $1.95 $0.77 $1.99 $0.93 $2.22 $1.03 $2.05 $0.91
Feb $0.45 $1.87 $0.82 $2.05 $1.02 $2.20 $1.42 $2.04 $1.09
Mar $0.49 $2.07 $0.87 $2.26 $1.11 $2.49 $1.89 $2.27 $1.29
Apr $0.38 $2.34 $0.97 $2.45 $1.16 $2.66 $1.65 $2.48 $1.26
May $0.40 $2.20 $0.94 $2.22 $1.18 $2.27 $1.81 $2.23 $1.31
Jun $0.39 $1.87 $0.83 $1.95 $1.01 $1.99 $1.10 $1.94 $0.98
Jul $0.44 $1.76 $0.86 $1.80 $1.15 $1.88 $1.53 $1.81 $1.18
Aug $0.42 $1.59 $0.76 $1.68 $0.98 $1.69 $1.65 $0.87
Sep $0.39 $1.54 $0.62 $1.69 $0.82 $1.72 $1.65 $0.72
Oct $0.41 $1.60 $0.66 $1.78 $0.91 $1.85 $1.74 $0.78
Nov $0.47 $1.84 $0.86 $1.97 $0.98 $2.18 $0.79 $1.99 $0.88
Dec $0.38 $2.05 $1.03 $2.16 $1.06 $2.27 $1.67 $2.16 $1.25 X Wholesale Colored Greenhouse Pepper Prices Canada, Israel, Netherlands and Spain 1998-2005 Y Wholesale Colored Field Pepper Prices California, Florida, Georgia and Mexico 1998-2005 Z Average monthly wholesale prices were taken from Miami, New York and Miami terminal markets (U.S. Dept. of Agriculture, 2006)
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Appendix A-2 Average Florida land cash rent
County Average
Cash Land Rent/Acre
Source
Charlotte $375 Gene McAvoy, Extension Specialist Collier $375 Gene McAvoy, Extension Specialist Glades $375 Gene McAvoy, Extension Specialist Hendry $375 Gene McAvoy, Extension Specialist Lee $375 Gene McAvoy, Extension Specialist Palm Beach $1,175
Darin Parmenter, Arthur Kirstein, Extension Specialist
Manatee $275 Phylis Gilreath, Extension Specialist Hillsboro $1,250 Alicia Whidden, Extension Specialist Average $572
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BIOGRAPHICAL SKETCH
James E. Webb grew up in the small town of Wauchula, Florida. He pursued a bachelor of
science degree at the University of Florida in Food and Resource Economics and graduated in
December of 2000. He returned to school in 2004, after teaching two years of high school
agriculture, to pursue a Master of Science in Horticultural Sciences.