Investment analysis and future potential of controlled-environment agriculture hydroponic production systems for Boston lettuce

Cornell University's Controlled Environment Agriculture (CEA) program has been involved in greenhouse hydroponic vegetable production research since 1991. The unique aspect of the CEA system developed by Cornell University is accurate greenhouse climate control and integration of supplemental lighting to provide consistent year-round rapid plant growth, which results in higher yield than any other existing systems.;Boston lettuce, Lactuca sativa cv. 'Vivaldi ', grown under CEA conditions achieves the same quality and quantity of product everyday of the year. The CEA system creates many advantages, providing efficient use of nutrients, water, and labor while assuring better control of the plant development that results in earlier production, higher yields, and a qualitatively better product.;The product, hydroponic lettuce, will be marketed as great tasting, fresh, locally-grown, safe (produced following the Hazard Analysis and Critical Control Point, HACCP, principles) and pesticide-free. These features, combined with year-round constant quantity and quality production, indicate potential for success. In the introductory stage of this CEA technology, it is crucial to determine the economic feasibility of the system, as it requires a large capital investment and sophisticated technical knowledge to operate.;This study assessed production costs and economic viability of the production system in nine different US locations under different climatic conditions. This research is expected help the prospective owner or operators to make a more informed investment decision. A commercial-sized CEA demonstration greenhouse in Ithaca, NY is used as a reference for input data.;A net present value analysis (NPV) is performed to determine the profitability of the system. The NPV analysis also provided the minimum price at which the product should be sold in order to receive enough revenue to cover all of the associated production costs and provide the rate of return required for the capital invested. The highest grower price required for economic feasibility of CEA system was in Ithaca, NY whereas the lowest price needed was in Miami, FL.;The effects of various inputs including product price, electricity, and heating costs on economic feasibility of CEA hydroponic lettuce operations were also evaluated. The results of the one-way sensitivity analysis showed the product price, production level, and initial investment were the most important variables on the profitability of the all potential locations.;A quantitative risk analysis of Monte Carlo simulation was also incorporated into the CEA hydroponic system investment analysis. The risk level of the investment was the highest in Los Angeles, CA while lowest in Miami, FL. The results revealed that, under uncertainty, grower prices to receive a minimum positive mean net present value have to be a couple cents higher than the grower price required for economic feasibility.;The implications of economic pressure created by other hydroponic lettuce producing locations if a price premium can not received be for the local producer was studied. The results indicated that all selected locations except for Chicago, Ithaca, and Los Angeles markets provided the cheapest hydroponic lettuce to their own local market.