ECONOMIC ASSESSMENT OF HYDROPONIC LETTUCE PRODUCTION

William Daly, Joseph Fink, and Gina L. Shamshak, Ph.D.

Goucher College, 1021 Dulaney Valley Rd., Baltimore, MD 21204;

Departments of Biology, Economics and Environmental Studies

Abstract Table 1: Key Assumptions of the Enterprise Budget

Hydroponics refers to a form of production where plants are grown in a
nutrient-enriched water solution, rather than in soil. There are a number Crop Variety Total Growth Period (Days) Germination Period (Days)
of benefits and costs associated with hydroponic production versus
MaxiGrow Plant
traditional soil-based agricultural production, both in terms of economic Rex Butterhead Lettuce 42 14
Food, 1.20%
performance and environmental impacts. In order to specifically assess Kilowatts used, 1'' Horticubes
the economic performance of our current hydroponic lettuce production Germination Rate Price Per Head of Lettuce Hourly Wage Per Worker 20.09% Medium, 3.77%
system at Goucher College, we developed a computer-based enterprise
98% $1.50 $7.50
budget using Microsoft Excel. The spreadsheet model incorporates the Explicit Variable
Costs, 9.34%
production costs and expected returns associated with the hydroponic System Capacity Years of Useful Life Labor Costs,
Gallons of Water Required 70.52% Rex Pellet
system that was developed this summer as part of this research project. (Heads of Lettuce) for Capital
Butterhead Lettuce,
The spreadsheet model also allows the user to assess a variety of 112 80 7 4.37%
alternative production scenarios (for example, changing the species
Water in
raised, changing the number of plants raised in the system, or changing Water in
Germination Pit,
the duration of the production cycle) in order to assess the impact of Table 2: Annual Costs of Production for Current System Hydroponic System,
0.03%
0.03%
those changes on various economic performance indicators. In particular,
Explicit Variable Costs Unit Quantity Price Per Unit Annual Production Figure 3: Variable Costs of Production With Existing Hydroponic System
the model identifies the annual profit, break-even prices and break-even
quantities associated with various biological and economic parameters. Rex Pellet Butterhead
Seeds 1,334 $0.04 $47.76
Lettuce Table 3: Break-Even Prices at Different Production Levels
Materials and Methods
MaxiGrow Plant Food Tbsp 60 $0.22 $13.16
The vertical hydroponic system is comprised of six Schedule 40 PVC pipes Break Even Price Break Even Price Break Even Price
Production Level
that are 10 feet long and 3 inches in diameter. Two pipes, that are 1'' Horticubes Medium Cubes 1,334 $0.03 $41.15
(Explicit & Implicit Costs) (Explicit & Labor Costs) (Explicit Only)
designated as the nursery pipes, have 2 inch holes drilled every 4 inches,
56 $1.03 $0.86 $0.26
for a total of 29 holes per pipe. The remaining four pipes have 2 inch holes Subtotal $0.29 $102.07
drilled every 8 inches, for a total of 14 holes per pipe. In total the system 90 $0.71 $0.61 $0.23

can support 56 heads of lettuce per harvest. The system is supported by a Implicit Variable Costs 125 $0.67 $0.52 $0.25
wooden frame that is 8 feet tall and 10.5 feet long.
Labor Costs Hours 102.75 $7.50 $770.63
Figure 1: The vertical Table 4: Annual Profit Above Total Costs at Different Prices
hydroponic system: Water in Germination Pit Gallons 40 $0.01 $0.30 and Production Levels
Test run June 21, 2013 Water in Hydroponic Market Price 56 90 125
Gallons 40 $0.01 $0.30
System
$0.75 -$365.94 $77.64 $232.97
Kilowatt
Total Electricity Used 2,310.57 $0.10 $219.50 $1.50 $600.06 $1,630.14 $2,389.22
Hours
$3.00 $2,532.06 $4,735.14 $6,701.72
Subtotal $7.61 $990.73

Total Variable Costs (Explicit and Implicit) $7.90 $1,092.80

Total Fixed Costs (Depreciation)
Total Costs of Annual Production
Figure 2: The germination pit,
designed as an ebb and flow table Explicit costs refer to costs that require a direct outlay of
that floods every four hours for two
money. Implicit costs refer to costs that do not require a direct
minutes in order to provide the seeds outlay of money. Implicit costs quantify the opportunity cost of
water and nutrients to facilitate
resources used in the production process including the owners
germination and growth. time. This hydroponic system uses electricity and water, and
the cost of those resources is not remunerated to the college.
Also, the system has traditionally operated without wage
payments for the operators time.
Discussion
$239.15
Using an enterprise budget, we quantified the costs associated with our
hydroponic system and determined the profit from selling heads of lettuce
at various market prices. We calculated the break-even price, which is
$1,331.94
the selling price at which all the costs of production are covered under
different assumptions (Table 3). At the break-even price, profit is zero;
however, at prices above the break-even price, profits are generated.
Table 4 demonstrates the change in profit associated with different prices
and production levels, when taking into account the total costs of annual
production.
Acknowledgments
We are indebted to Cynthia Kicklighter for providing us with so many resources for our project. We would also like to
thank German Mora for providing devices to collect data. Finally, thank you to Lydia Truitt and Todd Troester for
sharing your experience and knowledge of hydroponic and agricultural systems. This research was supported by
the Andrew W. Mellon Foundation and the Goucher Summer Research Program.