In this study, we conducted an economic analysis of high tunnel and open-field production systems of heirloom tomato (Solanum lycopersicum) based on a two-year study at the Center for Environmental Farming Systems (CEFS) located in Goldsboro, eastern North Carolina. The research site was transitional organic using organically certified inputs and practices on land not yet certified. Production costs and returns were documented in each system and provide a useful decision tool for growers. Climatic conditions varied dramatically in 2007 compared with 2008 and differentially affected total and marketable yields in each system. Profits were higher in the open-field system and the high tunnels in 2007 and 2008, respectively. Sensitivity analysis was conducted using a range of market prices from $1.60/lb to $3.60/lb and a range of fruit marketability levels from 35% to 80%. Both systems were profitable except at the lowest price point and the lowest percent marketability level in high tunnel in 2007. At $2.60/lb, seasonal average sale price reported by growers for this region, and depending on percent marketability levels, the payback period for high tunnels ranged from two to five years. Presented sensitivity tables will enable decision makers to knowledgably estimate economic potential of open-field and high tunnel systems based on expected local prices and fruit quality parameters.
The demand for heirloom tomato varieties has increased consistently over the last couple of decades, driven by sprouting farmers markets, growing interest in organic produce, and local food movements. Heirloom varieties are valued for their improved flavor, diverse colors and shapes, as well as their legacies (Jordan, 2007). Heirloom tomato varieties are typically open pollinated, and many were released more than 50 years ago (DeMuth, 1998).
Heirloom tomato varieties are often chosen by small-acreage growers who cater to local specialty markets because of the limited shipping potential due to thin skins and lack of shape/size uniformity (Grassbaugh et al., 1999; Lin et al., 2008). The selling price of heirloom tomatoes in specialty markets can be as high as $7/lb (Jordan, 2007), and organic produce can garner additional price premiums (Stevens-Garmon et al., 2007). However, production of these varieties is difficult. In the southeastern United States, heirloom tomato production is especially challenging because of severe disease pressure as many heirloom varieties do not have disease resistance deployed in modern hybrid tomato varieties. Many foliar diseases of tomato are also favored by the frequent rain events characteristic for this region, and these diseases can be particularly severe on heirloom varieties that not only lack resistance, but also require a longer growing season. Organic production of heirloom tomato varieties is especially challenging as host resistance is a crucial asset of an integrated pest management program (Chellemi, 2002).
High tunnels, also known as hoop houses, are relatively simple polyethylene-covered structures generally without electricity, powered heating, or ventilation systems (University of Kentucky, 2008; Wells and Loy, 1993). High tunnels are often used to modify the microclimate to extend the growing season in cooler climates (Lamont et al., 2003) and to protect crops from excessive precipitation in warmer climates. They potentially also offer protection from some insect, disease, wind, and wildlife (Arya et al., 2000; Blomgren and Frisch, 2007; Bomford et al., 2007; Carey et al., 2009; Conner et al., 2010; Demchak, 2009; Knewtson et al., 2010); reduction in pesticide use (Arya et al., 2000); and improvement in labor efficiency (Blomgren and Frisch, 2007; Everhart et al., 2010). High tunnels are used extensively for the production of high-value produce in Europe, Asia, Northern Africa, and the Middle East (Everhart et al., 2010; Knewtson et al., 2010; Lamont, 2009; Waterer, 2003). In the United States, the use of high tunnels is still limited, but ongoing research indicates that these structures may be viable for high-value crops and particularly for tomato production (Carey et al., 2009; Knewtson et al., 2010; Waterer, 2003; Wells and Loy, 1993).
The economic viability of high tunnels relies on achieving improved productivity and quality of high-value crops in limited space and possibly capturing price premiums associated with an extended growing season (Waterer, 2003). High tunnels require additional capital investment (Wells and Loy, 1993), but these structures are durable and typically last over multiple growing seasons. Higher yields, reduced risk of crop failure, and an extended harvest season associated with high tunnel production may improve overall profitability to the grower (Waterer, 2003).
Studies looking at the profitability of high tunnel production show that it varies by location and crop. For example, Waterer (2003) found that high tunnels consistently produced higher gross returns per unit of row length compared with traditional low-tunnel production systems for several high-value vegetable crops in Saskatchewan, Canada, but the study concluded it would take several growing seasons before the increase in gross returns would cover additional capital costs associated with high tunnel construction. Conner et al. (2010) conducted a multiyear investigation into the economic impacts of year-round production of various crops in high tunnels based on nine case studies from Michigan. They found a broad range of outcomes in construction time, labor requirements, and revenue but concluded that high tunnels could be profitable in Michigan after an average payback time of 4.2 years. Cheng and Uva (2008) conducted cost and price analysis of high tunnel production of tomatoes and some other crops in New York. When the fixed costs associated with high tunnel construction were factored in, economic returns varied for different crops and scenarios but, in general, tomatoes grown in high tunnels resulted in positive net returns. Heidenreich et al. (2012) conducted cost, revenue, and annual cash flow analyses for high tunnel raspberry (Rubus idaeus) and blackberry (R. fruticosus) production finding that the structures would pay for themselves in the third year of operation after which a positive cash flow would be generated. Rodriguez et al. (2012) used simulation techniques to compare the present value probabilities of being able to recover the total costs for open-field and high tunnel production of blackberry in Arkansas. They found that gross returns were higher in the high tunnel system, but the present-value distributions of the gross returns did not offset the high tunnel total costs in half of the simulations. They concluded that field production of blackberry was more profitable. Blomgren and Frisch (2007) analyzed several case studies that involved the use of high tunnels and estimated that high tunnel production could be profitable for tomatoes and few other crops. Finally, Everhart et al. (2010) found that economic viability of high tunnels varied by crop with tomatoes, raspberries, blackberries, and strawberries (Fragaria ×ananassa) being the most profitable in high tunnel production systems in Iowa.
In 2007 and 2008, a comparison of high tunnel vs. open-field organic heirloom tomato production systems was conducted through an interdisciplinary collaborative effort at the CEFS located in Goldsboro, NC. Production-related findings of this experiment were documented by O’Connell et al. (2012). The study indicated that with proper management techniques, high tunnels could optimize yields, increase fruit quality, and provide season extension opportunities for organic heirloom tomatoes relative to field production in the region. The objective of this report was to assess the economics of high tunnel production of organic heirloom tomatoes and to determine how the selling price of fruit affects the time required to pay for the construction and use of these structures. This study was specifically devised to determine if high tunnel production is an economically viable system for small-acreage organic heirloom tomato growers in climate conditions similar to eastern North Carolina. We assessed high tunnel construction costs, annual production costs, yields, and revenues, and investigated issues such as potential increases in production versatility, improved protection from weather extremes, and reduced risk of crop failure using standard open-field production as a basis for comparison.
Materials and methods
CEFS experimental design.
Detailed production-related information for the high tunnel and field production systems experiment at the CEFS (lat. 35°24ʹ5ʺN, long. 78°1ʹ53ʺW) has been published (O’Connell et al., 2012). Briefly, the land was transitional organic (certified in 2009) and all aspects of construction and agricultural production methods were covered under the guidelines of the U.S. Department of Agriculture National Organic Program certification standards. ‘Cherokee Purple’ was used for the study. This variety is grown for its flavor in eastern North Carolina, tends to have a peak early fruit load with a modest to high incidence of fruit defects, has no resistance to common diseases in North Carolina, and is indeterminate. Two snow-arch design high tunnels (96 × 30 ft) with 6-ft side curtains, 6-ft hoop spacing, and two layers of plastic were constructed on site in Winter 2007 (Atlas Greenhouses, Alapaha, GA). Two equivalent field plots were established as controls, 50-ft adjacent and parallel to each high tunnel. Treatments (growing system type) were replicated four times. The design included split-plot treatments of grafted and nongrafted plants, and this analysis used data from nongrafted plants in both systems. Crop management and data collection were carried out by block. Blocks were re-randomized each year and unsampled guard rows were included on terminal ends of each high tunnel and field plot. Cultural management practices specific to each system were followed in an effort to optimize system production capability. Planting dates in the high tunnel system were 20 Mar. 2007 and 18 Mar. 2008; while planting dates in the field were about one month later, 19 Apr. 2007 and 17 Apr. 2008 (after the threat of frost had passed). Black polypropylene landscape fabric was used as a weed barrier in both systems and hand weeding was carried out around the base of the plants. Irrigation was provided on an as-needed basis, evaluated twice daily in each system. In the high tunnels, a modified “European-style” string trellis system (Fuller, 1973) was used to hold tomato vines upright, whereas in the open field, the stake-and-weave system was used (Ivors, 2010). The data analysis for fruit yield has been published (O’Connell et al., 2012) and was generated using a repeated measures analysis [Proc MIXED (SAS version 9.2; SAS Institute, Cary, NC)]. Within each year, the design was a randomized block, having block and experimental unit variances, and with multiple measurements being made over time within each (block, treatment) combination. Date was added to the statistical model to measure fixed-time effects. A control for autocorrelation showed none, resulting in a split-plot structure with the whole plots in blocks and the split-plot treatment being time. Means for significant effects and their interactions were compared using Tukey’s honestly significant difference test when P ≤ 0.05 (Proc LSMEANS, SAS version 9.2).
Production cost model.
The initial fixed costs required to construct one high tunnel as described earlier were estimated. Even though the high tunnel could be used for many years (e.g., some components such as metal frame could be used for as many as 30 years), it was not considered as a permanent structure for property assessment and taxation purposes as the structure lacks concrete foundation and footing (Blomgren and Frisch, 2007). Therefore, for the practical purposes of budget development, we assumed that metal components would have a useful life of 10 years. On the basis of grower feedback, it was assumed that the polyethylene plastic needs replacement every four years, and baseboards and endwalls need replacement every 10 years (Table 1). The total fixed costs associated with high tunnel construction in the first year were spread out equally over the period of 10 years to estimate the share of these costs per year of useful life for annual revenue analysis.
Estimated construction costs for a 96-ft-long and 30-ft-wide high tunnel with 6-ft side curtains and 6-ft hoop spacing and two layers of plastic.z
Annual variable production cost models for high tunnel and open-field organic heirloom tomato production systems were developed based on trials conducted in 2007 and 2008. Production practices represented in the cost models were based on the results of the experiments at CEFS using customary management practices recommended by North Carolina State University extension and research horticultural specialists, and practiced by growers (O’Connell et al., 2012). The production cost models were also reviewed and verified by growers to identify and address reasonable potential deviations from standard grower practices, and required modifications were introduced based on our production team’s judgment.
In the production cost models, we assumed that machinery and equipment costs reflect machinery components that could be used for other farming enterprises in addition to growing tomatoes. Input prices were obtained from CEFS production records for this experiment and from growers and dealers who regularly supply growers. Because land rental rates vary throughout North Carolina, a land charge was not included in the budget. Wage rates of $11.83/h for hired labor, $16.39/h for the owner/operator, and $58.29/h for professional trade labor were used in the production model calculations. The typical hired employee wage rate in North Carolina is $10.08/h (North Carolina Department of Agriculture, 2009), and we assumed the base rates of $14/h for the owner/operator and $50/h for professional trade labor based on our conversations with producers in the area. However, our rates are slightly higher to account for workers’ compensation, unemployment insurance, FICA taxes at current rates in addition to the base wage rate and assuming 40-h work week, 52-week year, six holidays, and five vacation paid days.
Yields and harvest cost estimates.
The fruit yield and marketability data used for the development of the budgets were collected from the field research trials conducted at CEFS in 2007 and 2008. Fruit was harvested biweekly in both systems and harvest costs reflected the labor, equipment, and material costs of harvesting, sorting, and packing the fruit. The harvest period started 27 May in 2007 and 22 May in 2008 for the high tunnels and 14 June in 2007 and 16 June in 2008 for the field, with an end date of 11 Aug. in 2007 and 9 Aug. in 2008 for both systems. It was assumed that the fruit was packed into 25-lb boxes, with each box costing $1, and it took a seasonal average of 5 min for hired labor to fill the box.
Revenue and price analysis.
Information from the fixed and variable cost models was combined with yield records (O’Connell et al., 2012) to assess annual revenues and viability of high tunnel production, as well as to compare its profitability with the field production system. Because there are several different ways growers market their tomatoes, resulting sale prices may vary. Interviewed growers stated that they sell to a wholesaler, directly to a retailer, through various farmers’ markets, and/or via Community Supported Agriculture subscription programs. Wholesale prices for organic heirloom tomatoes typically varied from $1.60/lb to $2.60/lb, whereas price of these tomatoes sold at farmers’ markets could be as high as $3.60/lb. Because of variability in sale prices for different marketing channels, revenue analysis was conducted at different price levels. To calculate net revenue, we did not account for marketing costs, land rental rates, property taxes, or any other fixed costs except for high tunnel construction costs as these may vary depending on the grower’s situation.
Most costs associated with high tunnel construction are incurred in the first production year while our annual revenue estimates discussed above account only for a certain share of these costs. Therefore, an analysis of net revenue over time, which accounts for all costs associated with building and managing high tunnel in the first year, was conducted. Such an analysis would allow us to estimate high tunnel payback period, time required for net revenue to turn positive (Conner et al., 2010; Heidenreich et al., 2012). For the purpose of this analysis, we assumed that the growers received on average $2.60/lb for their organic heirloom tomatoes. This sales price was the seasonal average from various marketing channels reported by the farmers.
High tunnel construction costs.
Table 1 shows that an initial investment of $12,975 was required to construct a 96-ft-long and 30-ft-wide high tunnel. The materials used in the high tunnel construction totaled $10,906 or 84% of all costs. The metal frame was the most expensive individual cost item ($8549). High tunnel construction is labor intensive as most operations are done manually. As a result, labor cost estimates totaled $1839 or 14% of the total costs. Although the base rate of $11.83/h was used to estimate labor costs associated with most of the construction operations, soil grading (4 h) and electrical work (2 h) were completed by hired professionals who were paid $58.28/h. End- and sidewall installation was estimated to take 40 h. Other labor charges included 24 h each to set the poles and assemble the metal frame; 12 h for purlin installation; 10.4 h for soil site evaluation, soil preparation, and laying of water pipes; 8 h each for pulling plastic and baseboard treatment and installation; and 2 h for channel lock installation. Machinery was used only for soil preparation and setting the poles and accounted for $229 or 2% of total construction costs. On the basis of our assumptions, the cost of high tunnel structure per year of its useful life was estimated at $1410 (Table 1).
Production model for organic tomatoes in high tunnel.
Estimated annual variable production costs (harvest and marketing excluded) required to grow organic heirloom tomatoes in a 96-ft-long and 30-ft-wide (0.07 acre) high tunnel were $1893 per tunnel (Table 2). The costs were separated by the different months of the growing season to facilitate comparisons to field production. Operations in March were the most expensive, costing an estimated $436 per tunnel (24% of all costs). Over the growing season, materials accounted for $430 per tunnel (or 24% of all costs), labor costs were $1330 per tunnel (or 69%), and the costs linked to owning and operating the equipment were $133 per tunnel (or 7%).
Estimated annual variable costs to produce organic heirloom tomatoes in 96-ft-long and 30-ft-wide high tunnel (harvest and marketing costs excluded).z
Production model for organic field tomatoes.
For the comparison, a cost model was also developed for a 1-acre field crop of organic heirloom tomatoes. The numbers presented in Table 3 were scaled down to 0.07-acre field plot to make them directly comparable to those presented for a 30 × 96-ft (0.07 acre) high tunnel. The total variable costs (harvest and marketing excluded) to produce organic heirloom tomatoes in the field were estimated at $1004/plot or $14,343/acre. Monthly cost breakdowns reveal that April was the most expensive month in terms of production ($311/plot or 31% of all costs for the field system). Over the field production season, materials accounted for $422/plot (or 42% of all costs), labor for $505/plot (or 51%), and equipment for $76/plot (or 8%).
Estimated annual variable costs to produce organic heirloom tomatoes on 0.07-acre field plot calculated based on 1-acre production model (harvest and marketing costs excluded).z
Yields and harvest estimates.
Yield data from the trials in 2007 and 2008 used to assess economic returns are presented in Table 4. O’Connell et al. (2012) conducted statistical analysis of the yield estimates in the two systems and found that yield data from this system experiment exhibited strong interaction between year and system. Following their example, we analyzed each year separately. In addition to the total and marketable yield estimates, Table 4 presents harvest labor and material costs based on mentioned earlier assumptions: fruit packed into 25-lb boxes, 5 min needed to fill the box, and each box costing $1 to the grower.
Yield and harvest cost estimates for organic heirloom tomatoes grown in 96-ft-wide and 30-ft-wide high tunnel and in equivalently sized (0.07-acre) field plot.z
In 2007, the total fruit yield was similar in the high tunnels and the open-field systems (O’Connell et al., 2012). Unusually dry conditions [cumulative precipitation during tomato growing season was 13.52 inches as compared with 24.72 inches for the 12-year average according to the North Carolina State Climate Office (2012)] may have made the open-field growing system more productive than in a typical year because the plants did not experience frequent periods of leaf wetness and therefore had low levels of foliar disease. At the same time, there was high incidence of fruit cracking and blossom end rot in the high tunnel, which reduced fruit marketability and is discussed in detail elsewhere (O’Connell et al., 2012).
Rain events were more frequent in 2008 (cumulative precipitation during this growing season was 23.91 inches), representing more typical climate conditions for the region. Total yield in the high tunnel remained similar to 2007 but fruit marketability improved. Total and marketable yield in the field was lower as compared with 2007 (O’Connell et al., 2012).
Revenue and price analysis.
The analysis of annual net revenues from growing heirloom organic tomatoes in high tunnel and field plots is presented in Table 5. Gross revenues were obtained by multiplying marketable yield estimates (Table 4) by each sales price. Net revenue estimates accounted for annual production and harvesting costs for both systems (Tables 2, 3, and 4) and a one-year share of construction costs for the high tunnel system (Table 1). These results generally indicate positive net returns in both systems, except for the high tunnel system based on 2007 yields at the lowest price analyzed. These estimates do not reflect marketing costs, land rental rates, property taxes, or any other fixed costs except for high tunnel construction costs as these may vary depending on the grower’s situation.
Net revenue estimates and price analysis for organic heirloom tomatoes grown in 96 × 30-ft high tunnel and an equivalently sized (0.07-acre) field plot estimated based on annual variable production costs and harvesting costs for both systems and one-year share of high tunnel construction costs.z
The net revenue analysis over time to show payback period was based on $2.60/lb average seasonal sale price reported by local growers (Table 6). The first-year results take into account the costs of high tunnel construction incurred in that year (Table 1) in addition to the variable costs (Tables 2 and 4). The results for the following years account only for annual variable costs (Tables 2 and 4). According to these results, the payback period, time needed for annual cash flow to turn positive in the high tunnel production system, would be two years based on 2008 high tunnel yield estimates and five years based on 2007 estimates. For this analysis, we assume that all funds required to build high tunnel were financed at 6% annual interest.
Net revenue over time to establish payback period for 96 × 30-ft high tunnel used to grow organic heirloom tomatoes estimated based on the average sale price of $2.60/lb.z,y
In addition, we estimated yields required in the high tunnel to break even with net revenues in the field. These calculations took into account the additional fixed costs associated with the high tunnel system. These results are presented in Table 7, in which actual observed yields in the high tunnel system are also presented. The yield in the high tunnel would have to be 4715 lb/plot as compared with the observed value of 1929 lb/plot to break even with net revenue in the field based on 2007 yields. Alternatively, 2008 high tunnel yield (3947 lb/plot) was more than sufficient to break even with net revenues in the field in that year (2698 lb/plot required to break even).
High tunnel marketable yields required to break even with equivalently scaled field production of organic heirloom tomatoes estimated based on the average sale price of $2.60/lb.z
Since the high tunnel total yields were consistent in both years of trials (Table 4) but the percent of marketable fruit was different, we conducted additional sensitivity analysis that relied on the interaction of various sale prices and marketable yield levels (Table 8). This analysis was based on the average of the 2007 and 2008 high tunnel total yields, and high tunnel net revenues were estimated at 35%, 50%, 65%, and 80% marketability levels. In addition, the payback period analysis was conducted at these variable fruit marketability levels based on the average 2007 and 2008 high tunnel total yield and the $2.60 sale price (Table 9). Depending on the share of marketable fruit, the payback period for high tunnel at this price point was estimated to range from two to five years.
Net revenue estimates and price analysis for organic heirloom tomatoes grown in 96 × 30-ft high tunnel at various percentages of marketable yield calculated based on 2007 and 2008 average total yield in high tunnel estimated at 5536 lb/tunnel, the average sale price of $2.60/lb taking into account annual production and harvesting costs for both systems and one-year share of high tunnel construction costs.z
Net revenue over time to establish payback period for 96 × 30-ft high tunnel at various marketable yield percentages estimated based on the average sale price of $2.60/lb and the average total high tunnel yield in 2007 and 2008 (5536 lb/tunnel).z,y
In this study, we evaluated whether the use of high tunnels is economically viable for small-acreage organic heirloom tomato producers in growing conditions similar to eastern North Carolina based on systems experiments conducted at CEFS. The information on high tunnel construction and annual production costs, yields, and revenues was collected and summarized. In addition, information for a field production system of comparable scale was presented. These working budgets are useful products to growers.
The distinct climatic conditions encountered in 2007 and 2008 offer insights about the economic potential of each system and allow assessment of issues that growers may need to consider when comparing the two systems. Although the high tunnels had higher production costs, they protected the crop from leaf wetness and subsequent disease epidemics that occurred in the field in 2008 (O’Connell et al., 2012). Through the use of sensitivity analysis using price and percent marketability of fruit, we found that both systems were profitable except at the lowest price point and lowest percent marketability level in high tunnels in 2007 (Tables 5 and 8). Profits were higher in the open-field system in 2007 under high-temperature and water-stress conditions and higher in the high tunnel system in 2008 when climatic conditions were near normal. The sensitivity tables developed will enable decision makers to knowledgably estimate economic potential of open-field and high tunnel systems based on expected local prices and fruit quality parameters.
This study also assumed that most of the high tunnel components have a 10-year useful life, with the exception of plastic, which could be used for four years. In reality, some high tunnel components can be used in production for much longer periods of time (e.g., some components such as the metal frame could be used for as many as 30 years). As a result, our estimates of the annual share of high tunnel construction costs are rather conservative and underestimate high tunnel profitability. In addition, high tunnel space could be used off-season by growers to grow other cash crops (Carey et al., 2009), and any revenue generated from this second crop has not been factored into this analysis. The addition of winter crops could potentially improve high tunnel profitability as it would increase gross revenues and reduce the annual share of high tunnel construction costs for each crop. In addition, growers may consider various yield-enhancing production practices, such as grafting, in their high tunnel heirloom tomato production (Rivard and Louws, 2008). Any impact of such practices on high tunnel viability could be a beneficial area for future research.
One of the advantages of using high tunnels in the production of organic heirloom tomatoes is the possibility of an extended harvest season and potential price premiums. This issue was not fully explored in this study, but a grower who is anticipating any early- or late-season price premiums should refer to a higher average seasonal price presented in the results of this study.
In this study, strict guidelines were used to identify marketable fruit. Growers sell through various marketing channels and may assess the marketability of their fruit differently. The analysis of high tunnel net revenues and cash flow at various levels of marketable yield and at various sale prices, as well as the results presented for the contrasting trial years in this report, offers an assessment of the range of outcomes that may be seen in terms of profit potential and cash flow analysis. The results highlight the need for readily available extension-based information and experience, particularly for new growers seeking to explore high tunnel production systems. This data also reflects the need for growers to maintain diversity in their production systems to reduce risk against unexpected climatic events.
Although these results indicate that high tunnels may potentially become viable alternatives to field production of organic tomatoes in North Carolina, actual costs and returns will vary from grower to grower because of market situation, labor supply, age and condition of equipment, managerial skills, and many other factors. Since every situation is different, we recommend that each grower estimate their individual production, harvesting, and marketing costs based on their own production techniques, price expectations, local supply of labor, and market situation.
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