A new international research report provides a competitive assessment of the hydroponic food production market and the forces shaping it, the technologies and skill sets involved, and some key players and their prospects. It also covers important issues and trends affecting agriculture and food security that make hydroponics a viable and growing market.
Report by Mauricio Mathias, MSc.
It’s no news that hydroponic vegetable production worldwide has enjoyed consistent growth over recent decades, so much so that growers and companies in the sector periodically ask themselves how much longer can expansion continue before market saturation. While the answer will always depend on local market specifics, the general international outlook is still very positive according to a recent study by Manifest Mind, LLC, a US-based team of experts focused on sustainable technologies.
The 142-page report, The Emerging Hydroponics Industry: Hydroponics Systems, Issues, Crop Values, and Global Market Forecasts, breaks down reasons why hydroponics can be one way out for some of today’s top issues such as climate change, healthy-eating and labour. However, it also warns that it is not the end-all solution. There are not only barriers to be overcome, but also potential pitfalls such as more investments and higher need of technical knowledge.
The background to the study is the inescapable scenario of an increasing world population that has to be fed, estimated to reach 9 billion by 2050. To add to that, the per capita daily intake of fruit and vegetables is on the rise in most developed, and some emerging markets. Another worldwide trend, albeit with varied intensities, are those of increased awareness of climate change and healthy-eating habits. The combination of these ingredients explains recent hydroponic industry growth, and sheds a positive light on its future.
The economics of greenhouse/hydroponic food production should continue to be one of its main drivers for its expansion. The combination of a growing urban population buying more fresh food, with a shrinking rural population, puts the stress on the need to increasing production per m2—be it in the field or under protection. Greenhouses do cost more to start up but the data compiled by the study shows production several times or more that of a corresponding field crop, and that’s not only in developing areas without access to knowledge. In one example, the yield difference of a hydroponic tomato greenhouse in the US southwest harvesting 55 kg/m2, is over 10 times larger than the average yield for open-field tomatoes in the US.
In computer-controlled greenhouses, commercial yields of 70 to 80 kg/m2 are not uncommon, while advanced technology, such as closed greenhouses, bring yields even higher. Not to mention that greenhouses also allow food production where it would not be possible in open fields, in places that are too cold for that, or in desert areas. The technological approach to each challenge is not always maximum technology, but the right combination for each market, climate, growers’ knowledge and pockets.
In tropical climates, that of many developing countries, even simple soil-grown crops in a greenhouse already multiply yields by a factor from two to five, without hydroponics. The study quotes a comparison of pepper production in India where shade-house cultivation (35% shade) increased yield to 95 kg/m2 from the 15 kg/m2 in open field. Such a jump in production is the result of reducing the detrimental effect of excessive sunshine, rain and wind. The micro-climate under protection allows better plant production, as long as the grower has enough knowledge to adapt to the new growing conditions.
Similar cases can be found in other BRIC countries (Brazil, Russia, India and China)—countries deemed to be at a similar stage of newly advanced economic development. Urban Brazilian consumers used to get their vegetables produced in close-by areas right next to their towns. Now facing city sprawling, growers have to either move further away or invest in technologies that pay back the increased cost of land and labour. And Russia, and some former Soviet republics, have become a major client for Dutch greenhouse technology for vegetable and flower production to supply a home market with increasing buying power.
As growers know, there is a spectrum of hydroponic solutions ranging from simple, affordable systems to multimillion-dollar, highly automated solutions with a much bigger energy bill. The pursuit in this choice should be to maximise profitable production, quality, and safety goals, rather than pursuing ‘maximum yields’ at any cost. Simple hydroponic systems that double or triple field production may be sufficient and even transformative, depending on the market.
Just like any good solution, hydroponics, too, brings a set of risks. The most obvious barrier is cost. It’s always more expensive to start up and operate a hydroponics operation than it is to plant seeds in fields. Depending on technological level, a greenhouse can cost “anywhere from two to 20 times more than soil-cultivation, and even more with some ultra-modern technologies that are gaining ground in the urban food production wave”, states the report. The infrastructure that is necessary to achieve high yields, and the increasing reliance on control systems and automation, require experience and education that unlike traditional farming, has not been handed down from generations. With higher costs and more need of expertise, the risk to prospective investors goes up.
Such yield potential can and has blinded prospective hydroponic growers and investors to the fundamental fact that it is not magic: it is the result of ‘green fingers’ as well as technical proficiency and years of experience learning about a place’s local climate and labour mindset.
Energy has been another key issue for the industry. Alternatives now in place include cogeneration (combined heat and power [CHP]), especially in areas with considerable greenhouse concentration, such as the Netherlands and Turkey. CHP produces electricity from waste heat from other industrial processes. Potential savings from cogeneration can be up to 30% of energy costs, through burning natural gas to create electricity and heat, as well as using carbon dioxide (CO2), the by-product, to supplement plant growth.
According to the report, another major energy-saver now being commercially implemented are LED, or light-emitting diodes, potentially cutting lighting energy costs in half for hydroponic producers in northern-latitude countries. The investment costs are still too high—and the technology too new—for many growers to adopt. But with the aging of greenhouses in Europe, the short lifetime of other lighting types, and the rising cost of energy, LEDs in time will be adopted by the industry. So while rising costs of fossil-fueled energy are clearly a risk to the industry, they are also creating innovation and creativity.
In a section analysing the “graying of agriculture”, the report describes the aging of the agricultural population in the world, which has declined from 46% in 1990 to 38 % in 2010. Forecasts predict another 4% decline by 2020. As far as agri-labour is concerned, there is the issue of availability as well as cost. The report notes a good part of greenhouse production in developed countries is manned by migrant or foreign workers. Around the world there are variations of the same trend: Mexican and Latin-American greenhouse workers in the USA, Moroccans in the Netherlands, and several African nationalities in Spain.
Fewer work hours go into producing a ton of greenhouse/hydroponic produce than field production, but it is still a major cost factor. There are examples of industry shifts to regions with lower-wages to supply the same consumer markets. In recent decades, the greenhouse area in the Almeria region grew much more than in northern Europe, supplying the same European target countries. Since the mid-90s, the shift in North America has been from growing regions along the US-Canada border to sunnier regions of southern California, Texas and Arizona. These places offer advantages of lower humidity, more sunlight, not so much greenhouse heating, and abundant labour.
The trend, however, has not stopped at the southern borderline. Mexico offers more of these same competitive advantages, now as part of NAFTA (North American Free Trade Agreement). The greenhouse area in the country has grown exponentially. And Europe now faces the dilemma of importing vegetables from Morocco, Egypt or Turkey, all outside the EU (European Union), with labour and climate advantages resulting in lower prices.
It’s important to note that this report does not advocate hydroponics at all costs, in all situations. Agricultural intensification and efficiency takes many paths. Although the report focuses on hydroponics alone, it acknowledges that in countries where overall development is low, simple soil-based greenhouses and more technical training in irrigation and nutrition practices are more appropriate.
The complete report with sector players, technical issues, crop-specific forecasts, and recommendations can be purchased from Manifest Mind.
More information at www.manifestmind.com/hydroponics
About Manifest Mind
Colorado-based Manifest Mind is an independent market research organisation that focuses solely on sustainability and clean technologies. The team of analysts is dedicated to helping entities such as multi-national corporations, regulators, public service providers, government institutions, product companies, non-governmental organisations, and service providers improve their outcomes and goals based on sustainable business practices. The team works with thought leaders who can bring perspective and practical experience to the conversation in an accessible manner.
Analysts, who come from backgrounds in finance, public policy, technology, and philosophy, perform both primary and secondary research, utilising both in-person and phone interviews with stakeholders along the value chain, including technology vendors, leading producers, retailers, community leaders, investors, government agency representatives, and other relevant organisations.
To support their primary research, Manifest Mind also conduct secondary research that includes, among other information, current news, scholarly reference materials, and industry courses and presentations.
About the author
Mauricio Mathias is a greenhouse vegetable consultant and international freelance writer based in Brazil. Email: firstname.lastname@example.org
PH&G June 2014 / Issue 144