Cornell’s Miguel Gómez is one of our charter speakers at The New York Produce Show and Conference. In New York, and at The London Produce Show and Conference, he has presented important work, which we have profiled in pieces such as these:
UNIVERSITY HEAVYWEIGHT PUTS SCIENCE BEHIND OPTIMIZED GLEANING SCHEDULES: Cornell’s Miguel Gómez Talks About How The Produce Industry Can Put Itself On The Side Of The Angels By Reducing Food Waste While Helping The Hungry
The Renaissance Of The Wholesale Sector — Why Those Who Support ‘Locally Grown’ Should Support Investment In Market Intermediaries. Cornell University Professor Miguel Gómez Reveals Research Findings At The London Produce Show And Conference
This year, Miguel has some important work on controlled environment agriculture (CEA), one of the hottest topics in the industry. We asked Pundit Investigator and Special Projects Editor Mira Slott to find out more:
Q: It’s always an honor and genuine pleasure to reap the benefits of your invaluable research and insights. The scope of your in-depth study is notable. Yet, perhaps even more important is your collaborative bent in corralling key players together to overcome challenges and pursue innovative solutions to reach new plateaus.
Let’s jump right in to your intriguing talk for this year’s New York Produce Show, as I want to capitalize on every minute you’ve graciously set aside amid your whirlwind global travel and demanding academic schedule for a sneak preview.
A: I’ve been out of the country and just got back, so I appreciate your patience. The Northeastern U.S. has a short growing season, which, according to mainstream views, limits the ability of the region to meet consumer demand for year-round locally grown food. However, the rapid emergence of Controlled Environment Agriculture (CEA) enterprises is challenging this view.
My presentation will discuss emerging trends in CEA businesses in the Northeast, the opportunities and challenges for the CEA. The primary opportunities are strong demand for local produce and stricter production control to ensure high quality produce.
Intensive capital requirements, availability of skilled and unskilled labor and processing and marketing infrastructures are the main challenges of this growing industry.
Q: Could you provide context and perspective for your involvement in driving CEA in the Northeast?
A: Three years ago, at Cornell University, we developed the Cornell Controlled Environment Agriculture Advisory Board. The team includes academics, produce industry executives interested in investing in cold-climate agriculture, supermarkets, government officials and financiers.
We started having conversations about these issues because more and more people at Cornell interact with the produce industry; we are listening and hearing a growing interest in investing and producing vegetables and some fruits in controlled environments in the Northeast close to consumers.
Our group leader, director Neil Mattson, is an associate professor in the School of Integrative Plant Science at Cornell’s College of Agriculture and Life Sciences, and you will enjoy reading information from him.
Q: Is this CEA group collaboration part of a study you’re undertaking?
A: No, not a study in particular. At Cornell, we felt a very important component of this interest was to develop a space to get together with industry and some financiers to discuss different issues and advance a state for dialogue. We have different committees, one in education, research, financing, and one is in developing organizational structure for the group.
We meet every semester, which is twice a year. It started with 20 people, a few people from industry. We had our most recent meeting in early December, with over 100 people participating, so this is obviously an area of growing interest.
We have been more and more involved in research for what’s happening in the CEA world, and in particular, the north, northeast U.S., this covers New York, New England, Pennsylvania, New Jersey, all the states in the region.
Q: How do you define CEA?
A: It encompasses many technologies to allow for a controlled environment in which produce grows. It ranges from simple low-tech row covers and high/low plastic covered tunnels to fully automated greenhouse farms and converted warehouse factories. Innovative methods seek to create ideal aerial and root zone environments for high plant quality, predictable crop timing, consistently available quantity, and limited environmental impact.
Q: Mexico’s CEA boom and exponential growth continues to shake up the competitive global landscape. But I imagine Northeast producers face unique challenges…
A: These are different controlled environments than what you have in Mexico, because you don’t have severe winters and can employ simple technologies to control crops. The Northeast requires complex hydroponic/soil-less production systems to strictly control temperature, light, carbon dioxide and humidity to achieve optimal plant health and growth.
This is agriculture that mandates a high level of investment and also human capital because it entails a lot of expertise working in these production units.
Q: How new is this phenomenon for Northeast producers? We’ve covered developments at Gotham Greens and Bright Farms, both hydroponic operations, as well as at AeroFarms, which operates through a different technology called aeroponics. Each of these companies has participated in the New York Produce Show, and attendees get to visit facilities during our urban agriculture tours…
A: CEA is growing fast. Today in the Northeast, you see tomatoes being introduced in greenhouses. It’s not new but growing rapidly.
Q: Can you provide statistics?
A: The industry in the U.S. has doubled between 2009 and 2016 for the amount of produce that is produced in controlled environment. You see for example large operations in rural and also urban areas like in the case of Gotham Greens and Bright Farms, which are very close to supermarkets.
While there was modest growth in greenhouse operations (including hydroponic operations) in the U.S. between 1998 to 2009, numbers have spiked dramatically since. According to the most recent Census of Horticultural Specialty, in the U.S., there were 2,521 CEA enterprises in 2014, a 75 percent increase between 2009 and 2014. Total greenhouse production reached nearly 261,000 tons in 2014, with hydroponic production accounting for one third of the total. Annual CEA sales were $797 million in 2014.
Q: And in terms of commodities?
A: Fresh tomato was the Number One crop, accounting for 37 percent of production, and 50 percent of sales. Cucumbers ranked second with 14 percent of total production and 10 percent of sales, followed by herbs and lettuces.
For comparison, CEA vegetable production in Canada is three times bigger than in the U.S., and in Mexico, it is six times bigger than in the U.S.
Q: Have you narrowed down stats to the Northeast?
A: New York State exemplifies the growth of CEA in the northeastern U.S. New York ranked second nationwide in terms of greenhouse vegetable production in 2014. And the number of CEA operations has tripled between 1998 and 2014, while CEA produce sales has increased tenfold during the same period. Still, New York State imports over 90 percent of key products including lettuce, tomato, spinach and strawberries.
Q: So, there is plenty of room to grow…
A: I want to give you some background on why this is happening. You and I know local foods have increased substantially and will increase in the future. One of the biggest limitations in the northeast is a short growing season of about five months. This was viewed initially as a big limitation since supermarkets need to have year-round locally grown supply.
We see more and more businesses challenging this view.
Now we see more and more companies in the Northeast producing tomatoes, yellow, green and red peppers, and micro greens year-round, and these operations are really taking off in our region.
The advantage of CEA enterprises growing is the ability to allow year-round production, through environmental control-led hydroponic/soil-less production.
The stars are aligning. You have consumers demanding local foods. You have emerging technologies in controlled agriculture that allow you to have very high quality because producers will be able to control every aspect locally and year-round.
Q: Is this because they’re not as dependent on Mother Nature, and also have more flexibility?
A: Exactly. There are two important points often ignored. First of all, CEA allows the ability to make use of more rational chemicals and to gain much more control over the production process. The second part is very important: Operators of CEA facilities have a lot of flexibility on where to locate them. They can be very close to consumption areas and urban sectors.
Here we have the perfect combination: the ability to provide year-round produce, freer of pesticides, with lower carbon footprint, and the potential for high quality product to consumers.
That is what is driving the growth in this industry; on one hand consumer demand, but now we are much more efficient with energy and light, and the costs of production are decreasing over time compared to field grown.
Q: Isn’t the cost, involving steep initial investments, a major sticking point?
A: That’s the other side… big investments at the beginning. The capital is intensive and also requires high-skilled labor.
Q: How difficult is it to find that skilled labor, and how complicated is the training?
A: We are working on solutions at Cornell, and other universities are participating. We need to provide the right curriculum and the right labor force for this industry.
When we talk to businesses running these operations, one of the main costs is capital and the other is labor.
Q: Do you get feedback from retailers as well?
A: Yes. Our CEA advisory group participants include retailers as well as produce industry executives doing CEA or planning to do it, companies developing greenhouses, and financiers…
Q: Are these interactions creating new partnerships?
A: We are seeing some initial planning, people getting to know each other, and at least informally, lots more coordination. I can’t speak of special alliances…
Q: How important is CEA to the Northeast produce industry? Do you envision this as incremental in the big picture of produce sales, but an excellent marketing mechanism, or more of a transformational direction? For instance, Whole Foods in Brooklyn has gotten terrific consumer press with its Gotham Greens rooftop greenhouse…
A: There are three parts to my presentation. I want to convince people that CEA is a growing industry in the Northeast and will gain strength in the future. That CEA will be a driving force in how agriculture is changing in the northeast.
I will present examples of how Gotham Greens and Bright Farms are growing very smartly and the relationships with the retailers they sell to. I also will have an example of micro-greens adoption here near Cornell, and how it’s a growing business; and the proximity to New York City is attractive.
I hope to convince people this is important, and we need to pay attention. This will change the structure of the produce industry for produce locally in the Northeast environment.
Q: Have you looked into potential pushback from consumers on the idea that CEA is not authentically local because it’s not field-grown?
A: Yes. That is a significant question we set out to address. We wanted to know if consumers will penalize locally grown in CEA conditions. Many people demand it to be naturally organic with farmers out in the field…
This is different than year-round, good quality availability, which is exactly what restaurants and supermarkets need.
We think CEA will give supermarkets local product they can sell to consumers. The big question will be whether they care if the product is grown in a field nearby or a greenhouse or factory farm nearby. So, we did consumer research, which was paid for by New York Farm Viability Institute. The study was conducted by Neil Mattson, Irin Nishi and myself.
Q: I’m intrigued. What did you find out?
A: The national market for local has expanded from $1 billion to $12 billion in the past 12 years. We wanted to exactly understand consumer willingness to pay for local CEA vegetables, and we focused on tomatoes and lettuce. My curiosity was to determine whether consumers discount CEA.
Then to the point, we manipulated two attributes: origin and production system. One showed the origin in New York or out-of-state, and the second was CEA or field conditions. We wanted to examine how origin and production system affects consumer willingness to pay.
We also wanted to know what happens if you give consumers more information on the type of production, how much employment is generated, and the environmental impact, etc.
We did a controlled study (talking of controlled environments!). We put study participants in computer stations to manipulate these attributes and they actually bought the products. They revealed willingness to purchase based on different product characteristics. In a slide I’ll present, Irin Nishi, my assistant, is presenting the options on different types of tomatoes and manipulating the information.
Q: What was the makeup of participants?
A: The consumers represented in the study are the primary shoppers making the decisions in the family, not regular students. We recruited 150 people in total and included four different categories of tomatoes and lettuces. Subjects indicated their willingness to purchase the different types. We also had them complete a survey at the end of the experiment to gather demographic and behavior data to control differences.
Q: Did the taste or quality of the products come into play?
A: It’s a lab setting, so the products are essentially the same and they look the same. When you give information on field-grown, often consumers think it tastes better. But if they do a blind taste test, there is no difference. As far as I know, scientists have done tests, and there is no difference in taste. It shows how the mind works.
We did six experimental sessions in total. In some sessions, we provided more information. In general, field grown tomatoes come from Mexico or Florida, and field lettuce from California. We estimated footprints, distance, jobs created in Florida and California, both in field and in greenhouse.
Q: Those calculations can be challenging…
A: That’s true. For greenhouse-grown in New York State, we provided the following information: Greenhouses allow growers to control growing conditions to produce NYS-grown tomatoes year-round. Tomatoes produced within NYS travel on average 150 miles to market, and generate NYS jobs year-round (1 job per 40 tons harvested). Conversely, for field-grown in New York State, we said, due to less control over growing conditions, NYS-grown tomatoes are available five months of the year. Tomatoes produced within NYS travel on average 150 miles to market. And they generate NYS jobs five months of the year (about 1 job per 40 tons harvested).
Here is what we found: In the baby lettuce, consumers showed a willingness to pay regardless of the production system. They care about local attributes whether it is in the field or in CEA. Many say CEA lettuce is not natural. But what we found is that you won’t be penalized by CEA for local lettuce.
Q: Is that similar for tomatoes?
A: For tomatoes, it’s a bit difference. The local tomatoes had a premium, but the field-grown tomatoes had a premium over CEA. Overall, consumers are willing to pay 30 percent price premiums for New York State grown tomatoes and 18 percent price premium for New York State grown lettuce.
Q: Why is that?
A: We can make conjectures. Tomatoes are much more of a seasonal product than baby lettuce. There is much more of a connection with production of tomatoes, like sweet corn in certain regions. I want to point out that while there is a difference, statistically it’s still small.
What we learn is there is a huge difference between local and out-of-state lettuce. In lettuce, there is no difference between CEA versus field. With tomatoes, there is a little stronger willingness to pay more for tomatoes grown in the field.
Also, it doesn’t matter if you give consumers a lot of information, the outcomes don’t change. At the same time, keep in mind this is just one study. We need to do more.
Q: You mentioned there are three parts to your presentation…
A: Yes. After the consumer study, the third area I’ll go into is a little about the cost of production.
In that case, I can share what we are finding with spring mixes, micro-greens, and products having to do with leafy greens. They are quite profitable. Tomatoes are profitable too, but it seems like you need to be a large operation; you need the economies of scale. We are developing tools for the industry, so companies are able to reflect their own costs based on different scenarios.
This is super important. Some of the businesses are very sophisticated and don’t need these tools, but some that are interested in attracting investors need to do these kinds of analyses.
It’s a simple Excel tool to play with numbers — labor costs, packaging, utilities, etc., to see how profitability will change. This program is long, and I don’t want to go into too much detail of this, but it is important to combine the tools with the trends.
Q: What are the trends? And what are your projections for CEA looking ahead five years from now?
A: From a product standpoint, we see people very interested in peppers, cucumbers and in terms of fruit, strawberries. My projection is the industry will double within five to eight years, and I think the growth will be spectacular and mostly in metropolitan areas.
Q: What are the key areas that need further study?
A: Our next step we need to understand better is the economics distribution, and all the implications of having food production in metropolitan areas… the labor, and how do you manage waste, make efficient use of energy, and what is the role of robots. Businesses in agriculture don’t want to depend on unskilled labor. There are a lot of issues to follow, but CEA definitively will grow. I get so excited by the prospects.
Q: Do you see the Cornell CEA Advisory Board and its mission broadening to encompass more regions, or being simulated in more regions of the U.S., or even taken to a global level?
A: I’m so glad you asked me that. In our last meeting in November, the CEA Advisory Board decided to create a CEA Global Association. What’s happening internationally is important, but there is much to learn from CEA developments in the northeastern U.S. and the impacts it will have on a lot of consumers.
When we read this, we think how casually California is prepared to destroy production agriculture in its own state. Tougher regulation, higher minimum wages, requirements for overtime, regulations for environmental issues… all these things may be fine in some idealistic world. But, one day, the state will wake up in a panic when it is realized that production agriculture is squeezed in two ways: By imported produce and by CEA operations out of state.
CEA has many issues: It is still not clear how the economics will work out if, say, oil prices double. And it is not clear that the issue is whether consumers are going to accept CEA as local — the issue may be whether activist segments will accept it as local. There was just a movement to prevent product not grown in soil from being labeled certified organic, although that has been held off for now. Just as “big organic” has been vilified, so many CEA operations may find themselves with reputational issues when activists start attacking.
The other thing this issue requires is clarity as it combines many different elements. Much of the CEA in Canada and Mexico is designed for produce grown for the USA. So, even assuming the future is CEA, this leaves at least two questions open: The first is scale; the second is location.
Tiny operations like the greenhouse on the roof of the Whole Foods store in Brooklyn may be a winner – in the sense they generate great publicity and may even provide a halo effect for everything sold in the store.
But it may be more efficient to have giant facilities. Professor Gomez alludes to economies of scale in tomato production. It probably doesn’t end there. Very few of these tiny facilities are audited in the way large field growers are – it is too expensive. One wonders if this waiving of standards will be acceptable as the industry grows.
Years ago, Cornell had an initiative to help farmers convert old barns to CEA facilities. The initiative floundered on a combination of the capital investment required, the technical skills required to operate the facility and the difficult economics for these small-scale facilities.
The other issue is location. Just because you can grow something somewhere doesn’t make it the optimal place. Perhaps large greenhouse facilities located closer to the equator — where sunshine is more consistent, but in higher altitudes, where it is not too hot — may be more efficient, even with transportation included.
Indeed, as autonomous vehicles come into play, many of the costs and difficulties associated with trucking may be diminished. They can drive 24 hours a day, thus speeding up the trip from, say, Arizona to New York.
We find the research indicating that consumers will pay more for local to fall into that category of “interesting, if true” – definitely an area for more research. When we have done qualitative work in this area, we found the opposite is true! Consumers did prefer local, but they actually thought it should be less expensive. In fact, one reason they preferred local was the consumers thought they would save from not having to pay trucking from far away.
And, although some preferred the flavor of local – certainly on fruit that could be picked later, or summer tomatoes. It is not clear that the products mostly grown in greenhouses have this advantage. Fruit picked later may be sweeter – but not lettuce. And although summer tomatoes are famously delicious in places such as New Jersey, it is not clear that greenhouse products have the same flavor profile.
Indeed, CEA products with different flavor profiles may make research on the desirability of local moot. If consumers are asked whether they are willing to pay extra for local tomatoes, and they are thinking of the rich flavor they have traditionally gotten in the summer, but the “local” being priced is actually hydroponic product that tastes different – we may need to go research some more.
As with all great research, Phase One raises more questions than it gives answers. We look forward to hearing about Phase Two at a future New York Produce Show and Conference!
For now, we invite you to join in on this discussion at The New York Produce Show and Conference by attending Miguel’s Educational Micro session on the show floor at 11:45 am.
You can register here
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