Issue 06: Planning Commercial Hydroponics Part 1

Issue 06
September/October – 1992
Story Title: Planning Commercial Hydroponics Part 1
Author: Rick Donnan

To operate a commercial hydroponic enterprise Is to run a small business In the field of Intensive horticulture. Like any small business, careful planning Is essential for Its success.

“HYDROPONICS” is the growing of plants in systems isolated from the soil, and fed with the total water and nutrients required. Systems can be either recirculating or non-recirculating and do not necessarily use a growing medium. Another, perhaps better term is soilless culture.

Many people use hydroponics as a hobby. Hobby systems can be great fun as well as being educational and rewarding, and the enjoyment and satisfaction of growing your own produce can be easily achieved through hydroponics. However, to go from a hobby scale to commercial production is a major step as there are substantially different requirements for the two. A commercial enterprise must not only produce reliably, but must give an acceptable financial return as well.

You would be well aware that in general there is a substantial failure rate of small businesses. This is highest in the early years, specially in the first year of operation when typically one third of new businesses do not survive. Hydroponics is no different. Of the new commercial hydroponic ventures started in Australia, many have been successful. However, quite a few have failed, plus many more have proved to be far less profitable than expected.

Examining the causes in these cases usually shows that vital factors have been overlooked, or at least seriously underestimated when the enterprise was being planned. The most common mistake is to underestimate the skills involved, especially the horticultural and marketing skills needed. Generally, as in small business failures, the underlying cause has been a lack of good planning.

This article is intended to help you evaluate whether you should consider going commercial and to give you an outline of the important aspects of planning if you decide to proceed.

An important starting point is to realize that hydroponics is not magic. Despite the impression sometimes given, hydroponics does not “give total control of the plant”. The reality is that it takes considerable skill and experience to grow a commercial crop, especially to grow it to schedule and of the good quality required. This applies whether using soil or anything else. When using a hydroponic technique, additional skills are needed to manage the system. And, of course, once you’ve produced the crop you have to be able to sell it for a reasonable price.

You need to look closely at why you want to go into commercial hydroponic production. Take care that your expectations are realistic. If you have ideas of fantastically high yields and financial returns, automatic growing, a wonderful lifestyle, etc, then read on. This article was written for you.

To keep hydroponics in perspective, remember that it is merely a growing technique! The following example indicates the relative priorities you should keep in mind if you want to be Successful: if you plan to grow strawberries, then you will become a strawberry grower using a hydroponic technique, rather than a hydroponic grower growing strawberries.

Planning Sequence
Hydroponic systems are a form of intensive horticulture. They are only one of the options available when you are considering whether to grow a crop. Your planning should, therefore, follow the normal sequence for considering any horticultural enterprise. Any decision to use a hydroponic system comes well down the list. It should not be the starting point.

The planning sequence is a cyclic process, working through the following aspects:

the market
the crop
the growing environment
the growing system
financial analysis

As you gain some information at each stage, feed it back to an earlier stage and work the exercise through again. Continue this process until you select a crop, environment and growing system that suits your overall objectives and is economically viable. One possible decision that you could make is-not to proceed!

Why Hydroponics?
Here are some of the possible benefits that may be gained by growing a commercial crop hydroponically, rather than in soil:

Crop yields are usually slightly higher than those obtained in good soil used in the same environment. This can be financially significant.
Faster crop turnaround can give further increases in yield and perhaps extend cropping into higher priced periods.
Produce can also have a better vase or shelf life.
The soil may be unsuitable, or poorer, cheaper land can be used.
Water usage can be much lower than with most soil growing.
Fertilizer usage can be much lower than with soilgrowing.
Under hot conditions the better water availability to roots can reduce water stress on plants, giving better yields and longer plant life.
For crops vulnerable to soil diseases, crippling losses can be substantially reduced or eliminated.
Some crops, such as lettuce and strawberries, can be lifted from ground level to a much better height for planting, cultivation and harvesting. This gives much better working conditions and hence lower labour costs.
Some systems require less work in setting up and planting than growing in soil.
Weeds can be substantially reduced or eliminated.

The Market
This is where planning should start. If any small business is to prosper, it must be able to sell its produce and at a reasonable price.

You need to decide in detail exactly where you intend to market your crop. What are the requirements of the buyers? Where does your proposed market currently get its supply, and is the market static or developing?

Consider your competition and how you will handle it. People often underestimate their competitors and aim to capture an unrealistically high proportion of the market.

The Crop
When considering what crop you might grow you need to assess your knowledge of that crop. It is easy to underestimate the skills required to grow a good horticultural crop, particularly to produce it to schedule and of good quality. This is a major cause of failure. Experts consider it takes about three years to learn how to produce a premium crop.

Take care not to be fooled that ‘hydroponics gives total control of the crop’. This is nonsense. Hydroponics influences the root system of the plant, but the upper part is influenced by the environment. How a plant grows is influenced by factors such as temperature, light level, day length, competition, etc, and its genetic make up. It is often practically impossible to change the growth pattern of a plant. Where this can be done it is usually too costly for commercial production.

For any particular crop find out its environmental limitations. What varieties are available and what are their advantages and disadvantages? What is the optimum planting density? When should it be planted to harvest for premium prices?

The Growing Environment
For your crop consider the climate and whether you need a protective structure. Some factors to consider when comparing structures are: ability to perform as claimed; versatility; ease of construction; cost as dell ered; installed cost; maintenance cost; heating and/ovrcooling costs; and vulnerability to storm damage. Get suppliers to refer you to a satisfied customer. Check whether the structure is subject to any building regulations-do this before it is built.

For hydroponics a good reliable water supply is vital. Check the quantity available and whether this could change. Have the water analyzed both chemically and biologically. Water taken direct from farm dams or streams should be sterilized to reduce the risk of disease.

The Growing System
Don’t overlook soil growing. You need a worthwhile reason to use a hydroponic system instead of good soil.

Evaluate the systems available, looking at their advantages and disadvantages. Consider the system for each different crop separately as there is no universal system. For short term crops such as lettuce, the common choice is recirculating NFT or flood and drain gravel channels. For longer term crops or those very vulnerable to root disease, the common choice is non-recirculating, media-based systems.

Some factors to consider are: how successful has the system been for your crop, environment and water quality; what level of expertise is needed; reliability; versatility; life span; ease of control; ease of cultivation and harvesting; ability to improve crop turnaround; delivered cost installation cost; replacement cost; operating and maintenance costs including the costs of planting and removing each crop and sterilizing if necessary; availability of technical support and advice.

What is the overall cost versus productivity? Calculate this over a minimum of a full year. It is vital not to be over optimistic, so study carefully the comments later in this article under ‘production management’.

Check with growers who have successfully used the system to grow your crop, preferably for several seasons. Because a system is used elsewhere for a specific crop, specific climate and specific water quality, it does not guarantee success if any of these factors are different in your intended operation. Therefore, look carefully for any differences and estimate their effect on your operation.

Water quality is particularly important in this regard. Recirculating systems aren’t suitable for water with high dissolved salts. Worse quality water may only be usable by installing expensive reverse osmosis equipment. Another possibility is to collect rainwater if your rainfall is adequate.

If buying from suppliers be wary of their claims. Most suppliers are realistic but others tend to exaggerate, and unfortunately some make completely impossible claims.

Support Systems
As well as the basic structures and growing systems, what other support systems and equipment are needed? These could include: heating and cooling systems; shade; water handling systems such as collection, storage, treatment, distribution and recovery; harvesting equipment and facilities; cleaning and packaging equipment and facilities; warehousing and cold storage; transport and facilities.

Is there a need for back-up systems such as a backup generator for a continuous recirculating system?

Production Factors
One of the most important aspects of planning is to estimate the yield pattern of your crop with time and the expected total annual yield. This is the aspect where the most serious errors in planning are made.

Calculations should be done on the basis of yield per square metre (or per square foot, or per acre). The yield has three components:

Yield per sq. metre = the number of plants
per sq. metres (plant density)
x average yield per plant
x number of crops per year

For most crops grown in a specific environment there is a maximum yield obtainable per square metre regardless of the number of plants grown. In practice most crops grown in hydroponics are planted at plant densities similar to those used in soil. They usually give slight, but important, improvements in yield and quality compared to those obtained in good soil and the same environment. Where newcomers have often made a serious mistake is to take a high yield per plant (as obtained at a low plant density) and then greatly increase the number of plants per square metre. Simply multiplying these two figures together will predict impossibly high and unattainable yields. (For a typical example, refer to this issue’s Readers’ Inquiries.)

What usually happens in practice is that as the number of plants is increased, the yield per plant goes down in proportion. The result is, at best, no increase in total yield. Also, there is usually a loss in product quality (e.g. smaller product size, plus increased plant management difficulties and costs, harvesting costs and disease risk). In cases where densities have been pushed to extremes, the typical result is an outbreak of disease that cannot be controlled, leading to total crop failure.

Where dealing with short-term crops, be careful to allow for the effect of turnaround time. Also, seasonal differences can be quite severe (e.g. a winter crop may take twice as long, or yield half as much as a summer crop). Don’t take the most favourable conditions and extend these over the whole year or you will severely overestimate the total yield.

Other important production aspects you must consider are quality, harvesting and packaging, and your labour requirements.

… continued next issue

Next month, Part 2 of this article will examine financial planning and lifestyle factors, and take a look at Australian and overseas grower experiences.