4 ms·

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 d

by 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).
  - dx034 10y ago
    Those are US prices. Australian prices are much higher. And as you cannot store fresh tomatoes, importing them is costly so that prices vary a lot. As said in another comment, they'll sell them at CostCo for A$7 per kilo, which seems to be a competitive price in Australia.
    - ac29 10y ago
      7AUD/kg is 2.41USD/lb.
- Hondor 10y ago
  Fix it? Are there artificial reasons for food prices to mainly go to distributors or are they just the most expensive part? It wouldn't make sense to distort the market to enrich farmers and encourage inefficient ways of growing. When we can't grow enough food on arable land, prices for production will go up themselves and open the door to new technologies. Nature does a pretty good job of producing food mostly by itself. We may as well take advantage of that where we can before playing in hard mode.

by daveguy 10y ago

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).
- dx034 10y ago
  Those are US prices. Australian prices are much higher. And as you cannot store fresh tomatoes, importing them is costly so that prices vary a lot. As said in another comment, they'll sell them at CostCo for A$7 per kilo, which seems to be a competitive price in Australia.
  - ac29 10y ago
    7AUD/kg is 2.41USD/lb.
Hondor 10y ago
Fix it? Are there artificial reasons for food prices to mainly go to distributors or are they just the most expensive part? It wouldn't make sense to distort the market to enrich farmers and encourage inefficient ways of growing. When we can't grow enough food on arable land, prices for production will go up themselves and open the door to new technologies. Nature does a pretty good job of producing food mostly by itself. We may as well take advantage of that where we can before playing in hard mode.