One – Two – Five – A Million or Cost parity between CEA and field lettuce is within reach for packaged lettuce.

Ahead of the Indoor AgTech Innovation Summit this June, Green Automation Americas share their insights about cost parity in lettuce production.

During the Indoor AgTech Innovation Summit in 2019, we showed how cost parity with the field lettuce had already been achieved in a key volume segment in Finland: https://indooragtech.com/interview-green-automation

We explained that the road to getting to cost parity had been a continuous focus on efficiency in all areas of the operation. What the successful Finnish greenhouse growers all had in common were: strategic location, economies of scale and an efficient growing system.

We further argued that these factors in principle can guide greenhouse growers in North America. Today we would like to provide our specific view on how North American indoor grown lettuce production can be directly competitive with field produce in a highly relevant segment namely, packaged cut baby leaf/small teen lettuce.

 

 

 

 

 

Examples of packaged lettuce

Cost parity with field lettuce and how it can be reached

Quality, sustainability and food safety are huge drivers for the transformation of the lettuce industry. But to make indoor grown leafy greens mainstream, cost parity with the corresponding field grown product needs to be achieved.

We believe that the packaged baby leaf segment of the market is absolutely ripe for disruption by CEA lettuce. By selecting favorable crop varieties, operating a highly efficient and fully automated growing system and choosing a high-tech greenhouse designed with features specific to your location, benchmark cost to field grown lettuce are within reach. Chart A shows what we refer to as “the winning formula”.

Chart A: The winning formula

Before we talk about specific cost targets, let’s agree on the boundaries of this analysis. We suggest dividing the operations into three phases as per Chart B:

 

Chart B: Operational phases for packaged cut lettuce

Our specific cost analysis will focus on PHASE 1 – Growing.

PHASE 2: Processing

  • If today’s CEA facilities have a cost disadvantage over facilities processing field lettuce, then this is because the CEA operation is relatively small and processes significantly less lettuce than a typical field lettuce processing facility.
  • But there is no inherent cost disadvantage. If we assume a CEA facility of a critical size (minimum 20 acres of growing area with more than 20 million lbs of lettuce annually), there is no reason why there should be any cost disadvantage for a CEA facility. In fact, given that washing is typically not needed for CEA lettuce there should be a cost advantage.

PHASE 3: Transportation
This phase is location dependent. Any CEA facilities located closer to the target market than the field area (Salinas and Yuma) should show cost advantages for Phase 3.

One – Two – Five – A Million   – how to reach $1/lbs production cost

20 Acre reference facility

PHASE 1: Growing from seeding to harvesting

  • Our reference facility is large with 20 acres and equipped with a fully automated open gutter growing system. In our example we are looking at a one acre slice or segment of this 20 acre facility and the cost of producing 1 lbs of cut leafy greens.
  • We are comparing all production costs, including labor, for growing and harvesting baby leaf lettuce.
Chart C: Production cost for cut lettuce

The entire growing process (PHASE 1) can be achieved with 40 members of staff (full-time equivalent) including all growers, operators and maintenance staff. This translates to two employees per acre to produce an annual yield of 1 million lbs of cut lettuce/acre. 

We would argue that at this facility a production cost of $1/lbs of cut lettuce can be achieved today. Again, this is for (PHASE 1) without any packaging.

Chart D: Production cost for CEA cut lettuce/lbs in a 20 acre reference facility

While we will not make any statement about the amortization time, we make the statement that for PHASE 1, for every 1 million lbs of annual production a CapEx of about $5 million should serve as a benchmark number.

CONCLUSION
A production cost of $1/lbs at the cutting machine of a high-quality CEA grown cut baby/small teen leaf lettuce is achievable with technologies available today.

We strongly believe this number should serve as a benchmark and guidance for any operation attempting to play a significant role in the CEA space beyond the niche / high-end / hyper local market.

A very large facility is a key requirement for the competitiveness of both the packaging and processing as well as the growing operation itself.

What is the roadmap to get to cost parity with field grown lettuce and how do we reach the target of $1/lbs production cost? In our opinion an efficient, proven and automated growing system installed in a large facility will be one key factor in achieving this.

Join the Green Automation America’s team at the virtual Indoor AgTech Innovation Summit. Tune into a live roundtable discussion on ‘Full Automation: How It’s Done’ led by CEO, Patrik Borenius on June 24 at 3pm EST. Later on in the day, the company will host an exclusive virtual innovation tour that will unveil its Finnish technology dominating the greenhouse market at 4.30pm EST. 

For more information on Green Automation Americas, visit greenautomation.com or follow them on Facebook, Twitter and LinkedIn