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From OP: > Sunshine and seawater. That’s all a new, futuristic-looking greenhouse needs to produce 17,000 tonnes of tomatoes per year in the South Australian d
by dlss 10y ago
From OP:
> Sunshine and seawater. That’s all a new, futuristic-looking greenhouse needs to produce 17,000 tonnes of tomatoes per year in the South Australian desert
> The $200 million infrastructure makes the seawater greenhouse more expensive to set up than traditional greenhouses, but the cost will pay off long-term, says Saumweber. Conventional greenhouses are more expensive to run on an annual basis because of the cost of fossil fuels, he says
From the #1 google result for "cost of a ton of tomatoes" http://ucanr.edu/blogs/blogcore/postdetail.cfm?postnum=15889 http://ucanr.edu/blogs/blogcore/postdetail.cfm?postnum=15889:
> Processors agreed to pay growers $83 per ton in 2014, up from $70 per ton last year.
So assuming 100% profit margins (ie the tomatoes grow themselves, no human labor needs to be paid, nothing needs repairing or replacing, tomatoes deliver themselves to processing plants, etc, etc), the 17,000 tonnes produced would yield ~$1.4M annually. That's an awful (0.7%) annual return on $200M. Much less than you could get by investing the $200M in an index fund.
Which is to say there's a 0% chance it will "pay off in the long-term".
- reitzensteinm 10y agoWell, it's in Australia... > Average costs of production were up sharply for tomatoes to $843 per tonne http://www.ausveg.com.au/resources/statistics/financial-performance/Cost_per_tonne http://www.ausveg.com.au/resources/statistics/financial-perf...
- dlss 10y agowow, 10x more expensive? Well, 7% ROI isn't awful for them, though that's still assuming a 100% profit margins. If margins are less than 50% they're again losing to just investing in index funds.
- Scarblac 10y agoIt's also not unreasonable to assume that the cost of traditional ways to grow tomatoes will go up further, due to water becoming even scarcer, fossil fuel use being heavily regulated, etc. But more importantly, the second of these plants will probably be cheaper than $200m, and the 50th will be a lot cheaper.
- rm_-rf_slash 10y agoWhen the Ogallala Aquifer runs dry, America's vast everythingbasket will be finished. Even without fossil fuel regulations or even climate change itself, our unsustainable consumption will inevitably require solutions such as these.
- SEJeff 10y agoWell the US also has some of the largest fresh water lakes in the world. I happen to live in Chicago right next to Lake Michigan (as a simple example). The Romans didn't have near the tech we have no a days and managed to create some impressive aqueducts. Given the extreme need, we would figure something out.
- Retric 10y agoThe Ogallala Aquifer has more water than Lake Huron and Canada has a rather large stake in the great lakes. So yes, it may add decades, but it's not a long term solution.
- logfromblammo 10y ago...but the rational, sensible solution would be ruined by NIMBYs and political corruption and horribly exploitative rent-seeking. You almost have to fix the problem before anyone even realizes it is a problem to get it done at a reasonable cost.
- deleted 10y ago[deleted]
- koonsolo 10y agoThere is one thing an index fund doesn't give you: food. So it seems logical to compare it to conventional greenhouses instead of comparing it to financial investments.
- evgen 10y agoThe food is the return on investment, so it is completely appropriate to compare it to a standard financial instrument. An index fund gives you money, which you can use to buy food.
- piaste 10y agoPutting money in a financial investment ultimately means lending it to other people so they can make stuff, and it's perfectly logical to compare it against a production investment where you make stuff on your own. Of course, if all tomato growers closed shop and put their money in index funds, we wouldn't have tomatoes any more. But that would make the price of tomatoes shoot up and the return on index funds crash down, making tomatoes a better investment than index funds.
- creshal 10y ago> Of course, if all tomato growers closed shop and put their money in index funds, we wouldn't have tomatoes any more. But that would make the price of tomatoes shoot up and the return on index funds crash down, making tomatoes a better investment than index funds. Unless, of course, angry hordes murder you because they tend to dislike people who watch famines as a normal market mechanism and suggest diversifying into cakes.
- noselasd 10y agoWell, you're looking at the average cost to produce a ton of tomatoes. The average price received was 1,443 AUD (http://www.ausveg.com.au/resources/statistics/financials.htm http://www.ausveg.com.au/resources/statistics/financials.htm). How Sundrop Farms compare to the average production cost at 843 AUD/ton would be interesting though. There seems to also be huge regional differences, in 2008 the price received for a ton of tomatoes was 224 AUD in Victoria and 1809 AUD in Queensland. (http://ausveg.com.au/LiteratureRetrieve.aspx?ID=86338 http://ausveg.com.au/LiteratureRetrieve.aspx?ID=86338)
- elif 10y agoThere is also significantly less risk of the Tomato market crashing, and the potential to sell carbon credits if that becomes a thing in Australia. Or, you know, the ideal notion that having a planet to spend $10 in is better than having a ruined hellscape to spend $11 in.
- peter_retief 10y agoDon't just look at tomatoes, sea salt is very rich in minerals and that could also be extracted. If you where to locate closer to the sea in say the west coast of Africa it could be combined with aquaculture. I have been thinking about this for a long time actually
- DavidWanjiru 10y agoYou'll also notice how they're premising stuff on realities that don't yet exist e.g. improvements in the design will make it fully independent from using the grid, or that it's a backup plan for when global warming makes current tomato growing areas unproductive.
- deleted 10y ago[deleted]
- placebo 10y agoThere's a 0% chance that it will pay off in the long-term is true only if you assume that the current method of agriculture is sustainable in the long term, an assumption which I think is a bit of a stretch given the growing challenges we'll have to face. Of course, "long term" is not a very precise measuring unit, but it's still one I'd place my money on.
- rusanu 10y agoBut the infrastructure cost of $200M can go down drastically on subsequent iterations, think how the cost of solar evolved past 5 years. I'm thinking at this as proof of concept. If it works, there are many rich areas of the globe where fertile soil is at a premium and cannot grow much. Basically, transform oil dollars into local grown food.
- SEJeff 10y agoOr places that lack oil dollars, but have plenty of land ruined due to desertification, a real problem in some parts of Africa.
- MarkMc 10y ago> But the infrastructure cost of $200M can go down drastically on subsequent iterations, think how the cost of solar evolved past 5 years So my $200M inestment will struggle to compete with a $40M investment in 5 years? That is a reason not to invest.
- dlss 10y agoI find it weird this comment was downvoted but my post (GP) wasn't. I completely agree with you here MarkMc.
- regularfry 10y agoIt's a $200M investment to own the company which will be taking $40M off someone else in a few years time to design and build their farm for them.
- z3t4 10y agoYou should count those $200 millions as a sunk cost ... Sure you could buy index funds, but then, what do you have, more then a piece of paper ? If you have lots of money, it's much safer to buy "hardware".
- LaurensBER 10y agoDoes it really works like that? If I invest 200 million in an Australian Index funds I''m exposed to all risks/rewards that the Australian economy faces. If I invest 200 million in a greenhouse then I'm less exposed to all risks and rewards in the Australian economy (assuming that there's a weak correlation between the state of the economy and amount of Tomato's consumed, which seems reasonable) + all the risks in the Tomato business. Now, it might be easier to insure against Tomato specific risks but I still don't think that the Tomato business (as awesome as this greenhouse sounds) is a clear winner here.
- oldmanjay 10y agoI imagine that the people funding this consider it a strategic investment with potential upsides beyond making as much money as possible over some arbitrary time period
- AlexCoventry 10y agoPerhaps their long-term analysis accounts for reduced infrastructure costs due to economies of scale, increased food prices due to prevalent drought, and consulting / IP royalty fees due to having pioneered such useful technology.
- Raphmedia 10y ago> That's an awful (0.7%) annual return on $200M. Is this really surprising in the world of agriculture? You get big loans to get a big lot of earth and pay it over multiple generations.
- acveilleux 10y agoThose prices are for processing tomatoes. Not the kind of tomatoes you'd find at the grocer, rather the kind that will go into a bottle of heinz ketchup or a can of tomato paste. They are grown differently and treated differently because appearance basically doesn't matter. They're also not required to be available for retail year round. They'll be processed within days of harvest in the fall. Greenhouse in the desert can't compete with processing tomatoes. What they can compete is with the green house tomatoes sold in grocery store in the middle of winter.
- thescriptkiddie 10y agoSometimes things are worth doing even if they don't represent a fantastic investment opportunity that will certainly outperform the market. Perhaps if you take into account the negative externalities of growing food in a desert - or worse, shipping it in from another part of the world - the cost benefit analysis reads a bit better.
- the_watcher 10y agoYou're assuming that this method is the final product. This is pretty clearly a research effort that can be built on, adjusted, etc.
- aidenn0 10y agoThat's for bulk field-grown tomatoes. Canadian greenhouse tomatoes sell for around USD1-3/kg (depending on variety, size, season &c.) which is $1000-3000 per metric ton, or 17-51M USD gross. Also the article is unclear if the $200M investment is in USD or AUD, which makes a fairly significant difference.
- Iv 10y ago200M is probably including a lot of research. I expect a duplication of this place to be much cheaper.