Miguel Gomez has exemplified the way an academic can engage with industry to share the latest and most important new research with the trade. Speaking at The New York Produce Show and Conference and The London Produce Show and Conference, he has dealt with topics such as these:
Professor Gomez also was a Charter Member of the faculty of our Foundational Excellence program, which was launched last year to wide acclaim:
This year, Professor Gomez delivers a one-two punch combination, speaking at both the Foundational Excellence program and on the main trade show day in one of our Micro-sessions.
We asked PRODUCE BUSINESS contributing editor Kayla Young to find out more:
Miguel Gomez
Associate Professor
Charles H. Dyson School of Applied Economics and Management
Cornell University
Ithaca, New York
Q: To start, let’s talk about the greenhouse research you’ve been doing, if you could give us some background. What’s interests you about greenhouse lettuce and micro greens?
A: It’s very important to mention two people, Neil Mattson from plant science at Cornell and Julie Stafford, director of the food systems groups here at Cornell. They lead a group at Cornell called, Controlled Environment Agriculture. It’s a group that puts together academics like me, Neil and Julie, but industry as well. … We have been working for about two years, meeting regularly with stakeholders about the interest in investments in production and demand for locally grown, year-round fruits and vegetables. It’s also to grow this industry in the Northeast. So that’s why I decided to share this topic at the show.
I chose (baby mix) lettuce and tomatoes as examples because … these are products that are starting to take off in New York state in particular, and in the Northeast, in general.
Q: I imagine this is something that would greatly expand the growing season and the availability of those products in the Northeast.
A: Definitely, because one of the limitations of local products is not having year-round supply. But having production in greenhouses ensures we have year-round availability of these products for consumers.
Q: Do we see consumers interested in locally grown warming up to the idea of year-round supply?
A: Yes, that is exactly why we are doing the experiment. … We run several experiments with consumers trying to piece out the willingness to pay for these two products, tomatoes and baby mixed lettuce, in a controlled setting. So we offer them different combinations of field-grown and greenhouse-grown products, both locally produced and coming from far away, coming from California or Mexico.
Then we use our economic techniques to elicit the willingness to pay…
One of our interests is if people penalize or are reluctant to buy a local product, if it is not associated with the natural way to produce, in the field. What we found is people care about the product being local. We see this, for example, when the product is grown in New York state versus out-of-state — so for both tomatoes and lettuce, these price premiums are about between 15 and 20 percent of the retail price … We also found that for consumers, they are indifferent between whether the tomato or baby lettuce was grown in the field or the greenhouse. So I think this is good news for the industry. We have the opportunity to have an industry that is able to supply product year-round locally and is still going to be valued by consumers.
Q: Let’s get into the consumer price points. Is there much of a difference in the cost of bringing greenhouse produce to market?
A: I think that’s an excellent point and the first part of the presentation. If you look at the state of the sector today in the Northeast, yes … In particular there are two aspects. First is that electricity in the Northeast is relatively expensive, and we will need more electricity for producing greenhouse tomatoes or lettuce here than elsewhere because our days in the winter are shorter. We have less amounts of sunlight.
With new technologies in greenhouse lighting and systems engineering, there are advances in dynamics and control of lights and CO2, and improvements in light efficiency. We know that light is key in the development of the product. Basically, if we use light more efficiently, the cost of production goes down substantially over time. We are also becoming much more efficient in CO2 produced by plants in a greenhouse. …
Energy is the second-largest input after labor. In the past, if you compared imported products from the West Coast and locally grown greenhouse goods, the ratio of pounds of CO2 per pound produced was almost 1 to 3. With new advances in lighting, in reducing heat loss and greenhouse control, it is possible to have the same carbon footprint. That means more efficient use of resources and lower cost.
Over time, as we adopt the technologies, we are able to reduce the cost of product, as such we are able to be competitive with products coming from elsewhere. It may be still a little more expensive to produce, but the idea is you have a buffer because you have transportation costs from far-away places, which account for between 13 and 15 percent of retail value, therefore you can get close to the cost of production in the West Coast and you can compete with a product that is locally grown, which will be preferred by retailers in both the foodservice and supermarket sectors.
Q: Say more greenhouse production takes off, what benefits do you see for the consumer?
A: For the consumer, there are several benefits. One is a fresher product because from the moment of harvest to having the product on the shelves, you will have less time because you are saving four or five days for transportation.
Second, you can control food safety better in a greenhouse than in the field. The process through the supply chain is shorter, so that helps you to have a fresher product but also is better for food safety, to make sure the product complies with food safety requirements.
Consumers will be happy to consume a product that is locally produced and that is generating employment in the local economies, in this case New York. If new greenhouses adopt these advances in lighting, in more efficient greenhouse production, you are also having a smaller carbon footprint.
Q: We’ve seen locally grown take off in consumer popularity. Is greenhouse production perceived in the same way?
A: No. There are many perceptions from the consumer that are associated with a local product — higher quality, freshness. We don’t know if all of those attributes are true, but the consumers perceive that from a local product.
What we wanted to test in these experiments was, would consumers penalize the product because it is grown in a non-natural environment? A greenhouse is a structure that is not natural in the sense of thinking of product in the field. The environment the product is grown in is totally controlled.
Combining the local attributes of the product with the fact that a greenhouse system (was used) allows you to have the local products year-round. That’s very attractive to consumers. Even though this product doesn’t carry the sense of a natural product that a “local” product has, it is clear you can communicate the fact that the supply chain is very short. It’s a product that’s providing benefits and employment to the local economy.
Q: Will we need to have more consumer education on greenhouse production?
A: Yes, definitely. I think one of the points of education is the fact that this product allows the supply chain to ensure food safety. That is an important attribute that is difficult to convey to consumers because bad episodes of food safety problems happen only once in a while. It’s not frequent.
You go to the supermarket, and if the product is not good quality, that is something you see right away. Food safety episodes are not common.
So, I think there is a lot of education to be done in terms of the benefits of a product produced in greenhouses, because you can control much better what goes into greenhouses. You minimize the application of pesticides because you are in a controlled environment. You are much less susceptible to pests than you would be in the field.
Q: Are there any other benefits on the producer end that you would highlight?
A: I would say one, in particular in the Northeast… we have a huge dairy industry and this industry is producing a lot of CO2, that is just thrown into the atmosphere. There are techniques and technologies that are now readily available and in the infancy stages of commercialization, in which you can use the manure from cows with digesters and use digesters to produce CO2 to heat up greenhouses. That’s a beautiful system because it’s really a system that’s using a bad thing — CO2 emissions —to produce a good thing.
I think the possibility as an industry is to be more sustainable.
Q: Are there any government subsidies to support the greenhouse industry?
A: In New York state, Governor Cuomo has several programs to support industries that are key to the state, and one of them is what they call “high-tech agriculture,” and greenhouse production of vegetables is one of those. So, there are some programs to support the development of this industry. Now, the nature of those programs is mostly focusing on research, supporting research like what I’m sharing with you.
Q: How would you describe the state of the greenhouse industry in the Northeast now?
A: It’s an industry that is in its infancy. Twenty years ago, it was considered unfeasible because of the high cost of production. As technology evolves, we see, first of all, real investments in production of tomatoes, for example, in the state and in the production of micro greens. One example of this is Gotham Greens in New York City. But also not in the city, you see the example of InterGrow, the Belgium company, investing in greenhouse production. We see interests from agri-business in the Midwest and West Coast, interested in investing in greenhouses in New York and in the Northeast in general.
What I see is that we are in an early stage. It’s like all the planets are aligning, so the cost of production is right and the consumer demand for local product is right. I think this industry’s voice will grow substantially over the next 15 years in New York.
In New York state, just comparing 2007 to 2012, the number of operations of greenhouse vegetables doubled from 200 to 435. The wholesale value is increasing, and the acreage is increasing dramatically. I think these numbers are still very small but are likely to continue growing.
Q: Do you see a strong future for the greenhouse industry in the Northeast?
A: Absolutely. I think this is going to be one of the most exciting developments in vegetable production in years to come in the U.S. I think the costs of production are going to be
Q: Let’s switch gears to your Foundational Excellence presentation. You’ll be presenting on the reach of the U.S. produce industry.
A: I will be focusing on the global produce industry: trends, issues, opportunities, challenges, and what the implications are for the U.S. produce industry in this global environment.
Q: Why is this topic interesting for new members of the industry who will attend the program?
A: I think this is a topic of interest because today most businesses in the produce industry are either multinational or linked to global supply chains. When you think about the blueberry industry, it was mostly local 20 years ago. Today, blueberry demand has increased precisely because the industry has become multinational, having a nicely coordinated supply chain from Chile to the Northwest of the U.S.
Q: Are there any interesting trade patterns or global trends you’ll be highlighting?
A: Several. We need to look at the demand for growth in the future, and this is going to happen mostly in Asia, Africa and urban centers, not in rural areas. The increasing population is going to happen in certain areas, and in cities mostly. The rural population is going to decline.
This has implications for production because we’ll have less labor available and on the other hand, we’ll have more need. …
The global industry is growing and is going to continue growing because of population, and it’s a challenge in the industry because you have less resources, like labor and climate change. It’s an exciting yet challenging industry.
Q: Explain some of the competitive market factors you’ll be discussing.
A: When we talk about competitive factors, first in terms of supply, we see climate is key, and climate is changing the locations, weather, the types of supply lines. The level of technology in controlled climate agriculture, efficient use of water, energy and labor are also becoming key.
Of course, the cost of product, which has mostly to do with the cost of labor — this is important and changing. For example, the cost of labor in China is not as cheap as it was five years ago, even. These are things that are not fixed and change over time.
In terms of demand, we need to focus on where incomes are increasing, where urbanization is happening so that we have a middle-class population, which are the engines of demand for the produce industry. Also they are demanding fresh produce year-round, and this is creating year-round demand for a consistent-quality product as a condition to compete.
Also, increasing health concerns are an important factor in terms of demand.
Then there are institutions, which I think are going to be an interesting aspect, and even the prospects of new government policies. The produce industry and consumers of fruits and vegetables have benefitted from free trade and products available year-round at low prices. That is thanks to the industry and the way we have free trade, particularly in North America, because the businesses in fruits and vegetable are no longer local. They span different countries. I think things such as the Common Agricultural Policy, trade agreements with Europe and North America, and trade agreements like the TPP are important for the produce industry.
Q: What’s the concern in the industry moving forward regarding government regulations and trade agreements? Is there anxiety?
A: Yes. I cannot speak for the industry because I am independent, but what I see is that trade liberalization, more integration with our trade partners both with imports and exports, opens up opportunities for the produce business, growers, packers, shippers, transporters and retailers.
In the end, the part of the supply chain that benefits the most are the consumers. We have made a lot of progress on integrating markets, particularly for fruits and vegetables. If there is any change from that direction, I think the industry is going to suffer the cost, and I think at the end of the day, consumers will see higher prices for fruits and vegetables, and as a result, maybe the share of the product category in the whole consumption basket may even decline. So those are some of the concerns I have, looking at the industry as a whole.
Recognizing that when there is free trade, some win and some lose, but the net gains are clear.
Q: With all of those factors in mind, what is the global outlook for the U.S. produce industry?
A: We need to be cautious and wait and see what really happens. But what I think is that the U.S. produce industry is a leader in the world and is going to continue to lead globally, because it is huge in production and huge in consumption of fruits and vegetables, when you consider the global landscape.
There is uncertainty, and the industry may have to adapt, depending on what is going to happen. To be honest, my candid opinion is, we don’t know. I think free trade is going to stay; it is not going to revert.
Q: Given the uncertainty, it must be difficult to provide an outlook.
A: Yes, exactly. But I am definitely planning to highlight why free trade is good for the industry in the presentation from an economic point of view.
The bottom line is that economic specialization, efficiency and trade liberalization have increased global economic growth, improved standards of living, strengthened commercial ties and fostered mutual interests. I think that’s important to highlight.
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Both subjects Professor Gomez intends to discuss pose fascinating issues.
Doing controlled environment agriculture in the Northeast in order to address interest in local is fascinating because it raises the question of what consumers really are looking for when they are looking for local.
If it is reducing the carbon footprint — well, it is not clear at all that this will be accomplished through greenhouses.
And while technology is making greenhouses more plausible, just down the road are other technologies that may mean the opposite. If we can start moving produce via autonomous trucks, that 3,000 mile-journey at 75 miles per hour is only a 40-hour trip… and who says autonomous vehicles will be limited to 75 miles per hour?
Such out-of-the-box thinking is a prerequisite for the Foundational Excellence program, and Professor Gomez’s focus on international trade is an interesting one in a time of resurgent nationalism.
Trade agreements typically restrict the ability of national governments to take action. So if Country A has a free trade agreement with Country B, then Country A typically can’t arbitrarily decide to, say, ban GMOs.
But what if, in a democracy, people want to ban GMOs?
Or what if mutual trade would make two countries both more prosperous, but if one of those countries will use this prosperity to build nuclear weapons, is the increasing prosperity worth it?
The Foundational Excellence program is designed for people with less than five years’ experience in the produce industry — either young people or senior people moving into produce from marketing, food safety or other fields.
You can sign up with this form here.
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