2014 24.4 Economic Profitability of Growing Lettuce and Tomato in W. Washington

Comparing High Tunnel and Open-Field Production Systems

Introduction

High tunnels are temporary structures covered with greenhouse-grade plastic, generally with no electrical systems, and are used worldwide to protect crops from adverse weather and to extend the cropping season. High tunnels can lengthen the growing season from one to four weeks in the spring, and two to eight weeks in the autumn. High-value crops including leafy greens and tomato are commonly produced in high tunnels in the U.S. and world-wide.

The optimal temperature for lettuce production is 65 degrees F, making this crop well-suited for year-round production in regions with mild temperatures such as western Washington. However, heavy rainfall can negatively impact crop quality. Lettuce (head, leaf and romaine types combined) ranked first in the U.S. in total value of production of fresh market vegetables (U.S. Census Bureau, 2012) and national consumption exceeded 23 lb per capita each year on average between 1980 and 2010 (USDA, 2012). Lettuce production peaked in Washington in 1990 with 1,700 acres, but by 1999 dropped to 800 acres, and has not been tracked thereafter (USDA, 2011). Washington farmers mostly lost market contracts to farmers in California who can supply large quantities of lettuce year-round.

Tomato is a warm-season crop and production is limited in western Washington by the relatively cool summer climate. In 2007, there were 300 acres of tomatoes produced by 409 farms in Washington, with a total estimated value of $1 million to $1.2 million (USDA, 2010; Washington State Commission on Pesticide Registration, 2010).

Lettuce and tomato production occurs on small acreages in essentially every county in Washington, and is predominantly for fresh market. While both are considered minor crops in terms of overall production and value in Washington, they are considered essential produce items at every farmers market, community supported agriculture farm, and other direct or local marketing outlet.

High tunnels provide growers with the potential to increase production, quality, and sales. There have been economic studies done about high tunnel crop production but little is known about the economic profitability of using these structures in comparison with growing crops in the open field. The objectives of this study were to 1) compare the economic potential of growing lettuce and tomato in high tunnel and open-field production systems, and 2) identify the main factors that affect the profitability of each crop within each production system.

Methods of the study

Information was collected for this study through four focus group meetings, each comprised of three to four growers, convened in western Washington between April and November 2011. Each focus group addressed one crop (lettuce or tomato) and one production system (open field or high tunnel). Focus group participants were selected based on their experience and knowledge in growing lettuce or tomato in the open field or high tunnel, and were representative of good/best management practices for the region. All participants grew several vegetable crops, and lettuce or tomato were one of the primary crops they each produced. Their farm area planted with lettuce or tomato ranged from less than 1 acre up to 6 acres, and they sold their produce through direct marketing at a farmers market, food co-operative, and/or community supported agriculture venture.

Focus group participants have different production practices. Hence, each group reached a consensus regarding production parameters for high tunnel or open field lettuce and tomato production. The open-field focus groups defined a total production area of 1.5 acres for lettuce and 1.25 acres for tomato. The growing season for field-grown lettuce was defined as April to October, and for field-grown tomato was February to September. Lettuce harvest was June to October, while tomato harvest was August to September.

The high-tunnel focus groups defined the tunnel as a 20 x 96 feet three-season structure with end walls, set up in mid-April and taken down in November. Additionally, tomato was set out in high tunnels when the minimum nightly temperature was 50oF, which generally occurs by late April in the region. The growing season for both high-tunnel lettuce and tomato was February to October. Harvest season for high-tunnel grown lettuce was April to mid-October, and for high-tunnel grown tomato was June/July to October. Other production parameters established by the focus groups are presented in Table 1.

Based on these parameters, the participants identified main production categories and provided estimates for the variable and fixed costs of production. Consensus among participants was also achieved on the average costs for each production category. Variable production costs included soil preparation, fertilizer and chemical application, planting, other labor, harvest and postharvest activities, maintenance and repairs of irrigation system, machinery and/or equipment, overhead, and interest on operating capital. Fixed production costs included depreciation and interest costs on physical capital, interest and tax on land, farm insurance, and farm management.

Baseline marketable yields were also established: 0.36 head/ft2 for field-grown lettuce and 0.56 lb/ft2 for tomato; and 0.90 head/ft2 and 2.25 lb/ft2, respectively, for high-tunnel grown lettuce and tomato. The high tunnel yields were much greater than the field grown yields; specifically about three times greater than the field-grown lettuce yield and about four times greater than the field-grown tomato yield.

Cost Evaluation

Production costs. Table 2 shows a comparison of the production costs for each crop and production system given the assumed production area. The total costs of growing lettuce and tomato in a high tunnel were respectively five times and eight times greater than those grown in the open field. A breakdown of the production costs by field activity further illustrated the high tunnel’s costly operation relative to open-field production (Table 3).

The total cost of labor accounted for more than 50% of the total production costs for lettuce and tomato in both production systems. The total labor cost for open-field production included field operations, harvest and postharvest activities, and was $0.14/ft2 for lettuce and $0.30/ft2 for tomato. The cost share for labor was similar for lettuce in both systems while it was greater for tomato in high tunnel than in the open field. For high tunnel lettuce production, additional costs of tunnel operation and maintenance were $0.89/ft2, while for tomato it was $12.87/ft2. The cost category of “tunnel operation and maintenance” was $0.46/ft2 for lettuce and $0.91/ft2 for tomato. These results show that the total labor requirement per square foot for high tunnel lettuce and tomato production was 6 and 10 times greater than for open-field production, respectively.

Lettuce profitability. The average price received for high tunnel-grown lettuce was $2.50/head early in the harvest season, and $1.75/head late in the season (Table 2). During the main production season, the mean price received was $1.75/head for lettuce grown in either the high tunnel or open field. Given the marketable yield and prices received during the crop season, it was profitable to produce lettuce in both the high tunnel and the open-field systems. However, the net return for producing lettuce in a high tunnel were 30% less per square foot than the net return for producing lettuce in the open field. Although there was a 150% yield advantage for high tunnel-grown lettuce as compared to the open field, the higher production costs for high tunnel-grown lettuce offset the yield advantage, which led to profit disadvantage.

Tomato profitability. During the main harvest season, the mean price received for field-grown or tunnel-grown tomato was $3/lb, while mean prices during the early and late seasons were $4/lb and $3.50/lb, respectively (Table 2). Given the higher marketable yield and opportunity of selling tunnel-grown tomatoes beyond the main season at a premium price, the estimated net return was three times greater for high tunnel-grown tomato than for field-grown tomato.

Findings

It is economically feasible to produce both lettuce and tomato in either a high tunnel or open field in western Washington. While it costs two times more to grow tomato than lettuce in a high tunnel, the net return from high tunnel-grown tomato is 15 times greater than from high tunnel-grown lettuce. However, high tunnel production is not economically feasible when: 1) crop prices are low, that is, below $2.01/head and $2.05/lb for tunnel-grown lettuce and tomato, respectively; and 2) whenever the yield of either crop is 20% below the base yield. In contrast, open-field production is profitable for all price and yield combinations assumed in this study.

Tomato and lettuce both had higher marketable yields when grown in a high tunnel as compared to the open field. Because of higher costs associated with tunnel production, however, the lettuce yield in a high tunnel was not a sufficient justification to choose a high-tunnel system over an open-field system for this crop. Crop yield, market price of the crop, and production costs must all be taken into account when examining the profitability of any crop and production system.

Additionally, a high tunnel protects a crop from hail, frost, excessive rainfall and high wind, which affect crop quality and marketability. The potential of a high tunnel to minimize risks suggests that high tunnels can be used as a risk management tool for high-value crop producers. The study showed the importance of evaluating production costs and returns in decision-making. To be successful with high tunnels, growers should also consider: the relatively high cost of capital investment, time and effort; experience with tunnel set up and management; horticultural experience with crops requiring high labor input; knowledge to manage and maintain a tunnel operation; and optimal planting dates and varieties for production.

Suzette Galinato, WSU IMPACT Center, School of Economic Sciences; and Carol Miles, Department of Horticulture, WSU Mount Vernon NWREC,   milesc@wsu.edu.  Funding for this research was provided by NIFA Specialty Crop Research Initiative (SCRI) for “Biodegradable Mulches for Specialty Crops Produced Under Protective Covers” award No. 2009-51181-05897.

Further Reading

This article was adapted from the following HortTechnology journal article and Washington State University Extension fact sheets:

2011 Cost of producing fresh market field-grown head lettuce in western Washington. S.P. Galinato and C.A. Miles. 2012. WSU Ext. Publ. FS081E. cru.cahe.wsu.edu/CEPublications/FS081E/FS081E.pdf

2011 Cost estimates of producing high-tunnel tomatoes in western Washington. S.P. Galinato, C.A. Miles, and S.S. Ponnaluru. 2012. WSU Ext. Publ. FS090E. cru.cahe.wsu.edu/CEPublications/FS090E/FS090E.pdf

2011 Cost estimates of producing head lettuce in high tunnels in western Washington.  S.P. Galinato, C.A. Miles, and S.S. Ponnaluru. 2012. WSU Ext. Publ. FS092E. cru.cahe.wsu.edu/CEPublications/FS092E/FS092E.pdf

2011 Cost estimates of producing fresh market field-grown tomatoes in western Washington. S.P. Galinato, C.A. Miles, S.S. Ponnaluru. 2012. WSU Publ. FS080E. cru.cahe.wsu.edu/CEPublications/FS080E/FS080E.pdf

Economic profitability of growing lettuce and tomato in western Washington under high tunnel and open-field production systems. S. Galinato and C. Miles. 2013. HortTech. 23:453-461.

Tags: cost comparison, Cost-Benefit Analysis, Greenhouse, High Tunnels, leafy greens, lettuce, tomatoes

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