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Controlled Environment Agriculture

An emerging system to grow fresh produce in the Northeastern U.S.

The sales of local fresh produce in the Northeast has increased substantially in the last 15 years, and demand will continue growing in the future. Meanwhile, the Northeast has a short growing season (about five months) which, according to mainstream views, limits the ability of the region to meet consumer demand for year-round locally grown produce. However, the rapid emergence of Controlled Environment Agriculture (CEA) enterprises is challenging this view.

CEA enterprises are able to provide year-round production through strict environmental controls combined with the use of hydroponic/soilless production systems. Thus, CEA systems allow growers to control all production factors (e.g. temperature, light, carbon dioxide, humidity) to achieve optimal plant health and growth. Moreover, CEA systems are about twenty times more efficient in water usage relative to field production by minimizing evaporation and waste. A CEA system also exhibits lower pest, weed and disease pressures, which results in less application of agrichemicals. Additionally, CEA systems are very flexible in terms of location as they could operate within or close to urban centers. In sum, CEA systems have a great potential to provide year-round fresh, pesticide-free, low carbon footprint, high-quality produce to Northeast consumers.

CEA enterprises are rapidly taking advantage of business opportunities throughout the United States. The number of greenhouse operations (including hydroponic operations) producing food crops in the U.S. increased modestly from 1,015 in 1998 to 1,476 in 2009. However, according to the most recent USDA Census of Horticultural Specialties, there were 2,521 CEA enterprises in 2014, an impressive 75 percent increase between 2009 and 2014.

Annual CEA sales were $797 million in 2014, a threefold increase from 1998. Total greenhouse vegetable production amounted to 260,966 tons in 2014, with hydroponic production accounting for one third of the total. Fresh tomatoes were the number one crop, accounting for 37 percent of production by volume and 50 percent of sales value. Cucumbers ranked second, accounting for 14 percent of total production volume and 10 percent of sales value, followed by herbs and lettuces.

Although the U.S. CEA industry has experienced rapid growth in recent years, its size is substantially smaller compared to Canada and Mexico. For example, the area planted in greenhouse vegetables in Canada and Mexico is three and six times greater than in the United States, respectively.1

New York is a good example of the growth of CEA enterprises in the Northeastern United States. New York ranked second nationwide in terms of greenhouse vegetable production in 2014. The number of CEA operations in the state tripled between 1998 and 2014, and CEA produce sales have increased tenfold during the same period. Yet, New York still imports over 90 percent of its produce on an annual basis, including lettuce, tomatoes, spinach and strawberries, which travel, on average, 2,500 miles from other states or foreign countries to New York.2 With appropriate business models targeting consumers with strong preferences for local products, CEA businesses in New York have tremendous potential for growth.

Recent economic research provides evidence of strong consumer support for local CEA-grown produce. Experimental data suggests that, on average, New York consumers are willing to pay as much as 30 percent and 18 percent price premiums for New York-grown tomatoes and lettuces, respectively, independent of the production system (field- versus CEA-grown).

Meanwhile, produce buyers across various market channels express a strong willingness to buy local produce. Similar to consumers, these buyers place high value on such attributes as ‘local’ and ‘fresh’, regardless of whether products are gown in the field or in CEA production systems. Therefore, wholesale produce buyers may be willing to pay price premiums for the year-round, local products that CEA systems are able to deliver.3

Looking to the future, produce buyers expect increases in supplies of beefsteak tomatoes and mixed greens produced in CEAs. They are also interested in new locally grown varieties of lettuces and tomatoes produced under controlled environments. Additionally, locally grown herbs, leafy greens (i.e., chard, spinach, kale and cabbage), peppers, radishes, eggplant and celery grown in CEA units are increasingly attractive to produce buyers and consumers.

In conclusion, CEA production systems have some clear advantages in the marketplace and they have great potential in the market. However, the industry still faces important challenges, including intensive capital requirements, lack of production and management labor, inadequate post-harvest processing and marketing infrastructure, and relatively high energy costs. These are the primary issues that investors and entrepreneurs need to address for continued growth in the Northeast CEA industry.

Dr. Jie Li is a research associate in the Dyson School of Applied Economics and Management at Cornell University. She received her Masters and Ph.D. degree in agricultural economics from Cornell University. Her research interests are food and wine marketing as well as using experimental methods to explore consumer behavior.

 

Dr. Miguel Gómez is Associate Professor in the Dyson School of Applied Economics and Management, Cornell University. He concentrates his research and extension program on food marketing and distribution, with emphasis on fruit, vegetable and ornamental crops.
 
 
 

1 Presentations by Neil Mattson, Miguel Gómez, and Julie Stafford at the Controlled Environment Agriculture (CEA) Entrepreneur Conference, November 1, 2017 at Cornell University, Ithaca, New York.
2 Presentations by Neil Mattson, Miguel Gómez, and Julie Stafford at the Controlled Environment Agriculture (CEA) Entrepreneur Conference, November 1, 2017 at Cornell University, Ithaca, New York.
3 Presentations by Neil Mattson, Miguel Gómez, and Julie Stafford at the Controlled Environment Agriculture (CEA) Entrepreneur Conference, November 1, 2017 at Cornell University, Ithaca, New York.

 
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