5 ms·

To pay for the infrastructure, they will probably need to sell the tomatoes for $100 a pound for twenty years.

by delbel 10y ago

mattnumbe 10y ago
The beginning of most major scientific breakthroughs have high starting costs.
daveguy 10y ago
Well, the articles states the greenhouse is expected to yield 17,000 tonnes per year or 37.47 million pounds of tomatoes. The infrastructure costs 200 million dollars. So if they sell the tomatoes for $5.34 per pound they will pay off the infrastructure in a year. 53.4 cents per pound and they will pay off the infrastructure in 10 years. I expect it will be somewhere in between. Pretty close though.
- ac29 10y ago
  The video states they have locked in an exclusive agreement with a national grocery chain to provide tomatoes for 10 years at a fixed price. My guess is its a win-win for the respective companies.
- mikekchar 10y ago
  Edit: Is my price right??? After posting I began to doubt it and I am having terrible problems trying to find out what the current market prices for tomatoes is... Commodity prices are usually expressed in tonnes. It seems at the moment the price is between $70-$80 per tonne. At $70 per tonne, the price would be about $1.2 million. You also need to pay operating costs. If the infrastructure is $200 million, I don't see how they will possibly pay it back. Even at current low interest rates, I don't think you would be able to pay off your loan. And yes, commodity prices for food are ridiculously low. All of the money goes to distributors. Fix that and we can have nice things like this.
  - jonknee 10y ago
    But they aren't selling processing tomatoes for commercial use (pizza sauce, ketchup, etc), they have a contract with a grocery chain for fresh consumer sales. Amazingly enough it sounds like they ran the numbers before spending $200,000,000.
    - mikekchar 10y ago
      I just figured they had government subsidies. But immediately after posting I decided that the price seemed wrong. There are some references to California producers accepting a contract for that amount, but I have to think it is an error. I can't find a single link for commodity prices of tomatoes. Maybe as you imply they aren't sold as commodities because the shelf life is too low.
    - carterehsmith 10y ago
      Did they spend $200M of their own money? I mean, how much of that is government subsidies.
  - ac29 10y ago
    The USDA claims tomatoes cost from $0.92/lb (canned) to $3.29/lb (grape and cherry tomatoes) on average at retail [0]. No idea what retail produce margins are like, but even if we assume they purchase at 10% of retail cost, that's approx $200-740 per tonne revenue to the grower. If you assume its towards the higher price, and the grower sells at 10% of retail, that's over $1 billion over 10 years (the length of their contract). [0] http://ers.usda.gov/datafiles/Fruit_and_Vegetable_Prices/Vegetables/tomatoes.xlsx http://ers.usda.gov/datafiles/Fruit_and_Vegetable_Prices/Veg...
    - mikekchar 10y ago
      Generally distributors (including the final shop) take upwards of 80% the final price. Unfortunately I don't have time to get you a better link but just to give you an idea: http://westernfarmpress.com/management/food-dollar-going-where-farmers-get-just-12-percent http://westernfarmpress.com/management/food-dollar-going-whe... I think they are taking the worst case there, and the amount going to distributors is highly variable depending on the the food itself. If you google around, you should be able to find graphs of various products (probably including tomatoes).
vacri 10y ago
Here in Australia, we trade tomatoes by the kilogram.
flushandforget 10y ago
They could be a bit more innovative with infrastructure building, like creating glass from the desert sand using solar: https://vimeo.com/25401444 https://vimeo.com/25401444 Not sure if it would do clear panes but could be used for pipe work and scaffolding perhaps.

To pay for the infrastructure, they will probably need to sell the tomatoes for $100 a pound for twenty years.

by delbel 10y ago

To pay for the infrastructure, they will probably need to sell the tomatoes for $100 a pound for twenty years.

mattnumbe 10y ago

The beginning of most major scientific breakthroughs have high starting costs.

daveguy 10y ago

Well, the articles states the greenhouse is expected to yield 17,000 tonnes per year or 37.47 million pounds of tomatoes. The infrastructure costs 200 million dollars. So if they sell the tomatoes for $5.34 per pound they will pay off the infrastructure in a year. 53.4 cents per pound and they will pay off the infrastructure in 10 years. I expect it will be somewhere in between. Pretty close though.

ac29 10y ago
The video states they have locked in an exclusive agreement with a national grocery chain to provide tomatoes for 10 years at a fixed price. My guess is its a win-win for the respective companies.
mikekchar 10y ago
Edit: Is my price right??? After posting I began to doubt it and I am having terrible problems trying to find out what the current market prices for tomatoes is... Commodity prices are usually expressed in tonnes. It seems at the moment the price is between $70-$80 per tonne. At $70 per tonne, the price would be about $1.2 million. You also need to pay operating costs. If the infrastructure is $200 million, I don't see how they will possibly pay it back. Even at current low interest rates, I don't think you would be able to pay off your loan. And yes, commodity prices for food are ridiculously low. All of the money goes to distributors. Fix that and we can have nice things like this.
- jonknee 10y ago
  But they aren't selling processing tomatoes for commercial use (pizza sauce, ketchup, etc), they have a contract with a grocery chain for fresh consumer sales. Amazingly enough it sounds like they ran the numbers before spending $200,000,000.
  - mikekchar 10y ago
    I just figured they had government subsidies. But immediately after posting I decided that the price seemed wrong. There are some references to California producers accepting a contract for that amount, but I have to think it is an error. I can't find a single link for commodity prices of tomatoes. Maybe as you imply they aren't sold as commodities because the shelf life is too low.
  - carterehsmith 10y ago
    Did they spend $200M of their own money? I mean, how much of that is government subsidies.
- ac29 10y ago
  The USDA claims tomatoes cost from $0.92/lb (canned) to $3.29/lb (grape and cherry tomatoes) on average at retail [0]. No idea what retail produce margins are like, but even if we assume they purchase at 10% of retail cost, that's approx $200-740 per tonne revenue to the grower. If you assume its towards the higher price, and the grower sells at 10% of retail, that's over $1 billion over 10 years (the length of their contract). [0] http://ers.usda.gov/datafiles/Fruit_and_Vegetable_Prices/Vegetables/tomatoes.xlsx http://ers.usda.gov/datafiles/Fruit_and_Vegetable_Prices/Veg...
  - mikekchar 10y ago
    Generally distributors (including the final shop) take upwards of 80% the final price. Unfortunately I don't have time to get you a better link but just to give you an idea: http://westernfarmpress.com/management/food-dollar-going-where-farmers-get-just-12-percent http://westernfarmpress.com/management/food-dollar-going-whe... I think they are taking the worst case there, and the amount going to distributors is highly variable depending on the the food itself. If you google around, you should be able to find graphs of various products (probably including tomatoes).

vacri 10y ago

Here in Australia, we trade tomatoes by the kilogram.

flushandforget 10y ago

They could be a bit more innovative with infrastructure building, like creating glass from the desert sand using solar: https://vimeo.com/25401444 https://vimeo.com/25401444 Not sure if it would do clear panes but could be used for pipe work and scaffolding perhaps.