A Cost-Benefit Analysis of a Hydroponic Lettuce System
As a decades-long hobbyist of hydroponics, designing and building different types of hydroponic systems, I have always wondered whether or not the thousands of dollars I have spent over the years has returned any economic benefit and how I would go about measuring it.
I then thought it would be useful to do a simple cost-benefit analysis (CBA), a process commonly used by businesses to determine whether the benefits of a project outweigh its costs and whether or not it is financially feasible. Since I am a hobbyist, not a business, what value would a CBA have and what use would I make of the information? You will see!
I call one of the hydroponic systems at my home the Lettuce Factory (LF). It utilizes the Kratky growing method, well known for its efficiency in producing high yields of small leafy vegetable crops. I chose it to be the object of this study because, as a small, single crop system with a short growing cycle, the CBA could be done fairly quickly and easily. (Read also: The Kratky Method: A Simple & Fun Way to Grow Hydroponically)
The LF is a passive system comprised of four 24-inch, four-inch diameter PVC pipes each with four plant sites for a total capacity of 16 plants: eight Romaine, four Back-seeded Simpson, and four Bibb. The system is set in a frame to hold them firmly in place as shown in Figure 1. Figure 2 shows the LF at harvest, 35 days after planting.
Figure 1 (left) and Figure 2 (right).
Lettuce seeds were germinated in one-inch, stonewool propagation cubes. Plantlets were placed in two-inch net pots with a few clay pellets and then put into the system. The CBA method, its application to the LF, and use of the results are discussed next.
Hydroponic Lettuce: Cost-Benefit Analysis
A CBA can be expressed as a simple equation: Cost-Benefit=Benefits($)-Costs($). Cost Benefit is the value obtained from subtracting project costs from its economic return. If benefits are higher than costs, the project is deemed a net benefit. If costs are higher than benefits, then the project is considered a net loss.
It is important to explain what and how much data were needed to plug into the above equation. The growing season for lettuce in Southern California is approximately eight months. Over this period, it is possible to plant and harvest lettuce in four separate cycles. By the end of the fourth cycle, eight months would have lapsed.
To complete the CBA in a timelier manner, it was decided to collect data only at the end of the first cycle, about 35 days, and assume equivalent yields in subsequent cycles. Given the regularity of environmental conditions (i.e., temperature, light; humidity, etc.) for growing lettuce in the Southern California climate zone, making this assumption seemed quite reasonable. (Read also: What is the ideal humidity level for leafy greens?)
The CBA calls for gathering two sets of data, one for Costs and the other for Benefits. Cost data, including project start-up costs (Cycle 1) and recurring costs for Cycles 2, 3, and 4 are itemized in Table 1.
Table 1. LF Project Costs
The collection of Cost data for most items was simple and straightforward except for the Item 13 (Nutrient). The LF used a total of 29.9 gallons of water. It takes 300 grams (10.58 oz) of nutrient ingredients to make five gallons of solution and almost six times that (63.27 oz) to make 29.9 gallons of solution. As per the nutrient specifications, the cost per/oz is $0.15.
From here it was a simple calculation to estimate Cost: $0.15/oz x 63.27oz or $9.49 as reported in Table 1. The grand total cost of the LF across all four cycles came to a whopping $154.39.
The CBA defined Benefits as the current market price for lettuce sold in the local, chain grocery store. At harvest the roots and starter cubes from each plant were cut off; dead and wilted eaves were removed; plants were weighed. The total lettuce weight obtained from Cycle 1 was 58.50 ounces. (Read also: The Best Ways to Harvest Hydroponic Lettuce)
Projected over four cycles the LF would have potentially produced a total of 234 ounces (4×58.50) broken down as follows: Romaine (142.0); Bibb (61.6); Simpson (30.4).
All that needed to be done to complete the CBA was to determine the lettuce market price.
The price per ounce of a package of Romaine at the grocery store was $0.379/oz; for what is called Spring Mix, Green Leaf, or Half & Half Blend packages of lettuce each of which contained different varieties of lettuce, the price/oz was the same: $0.758.
The LF would then have generated a Benefit of $53.82 for Romaine and a $69.74 Benefit for Bibb.
Simpson varieties combined for a grand total of $123.56, the estimate used to plug into the CBA equation with the following results:
Cost-benefit = -$30.83 ($123.56-$154.39)
By this calculation the dollar output of the LF system exceeded the cost input by $30.83.
Use of the Results: Rethinking and Reducing Costs
The total cost of the project, more than $150, was unexpectedly shocking! This forced me to think how to reduce costs as well as increase benefits to increase the net Cost Benefit obtained result.
Most of the total cost—87 percent—was for the PVC frame. Replacement of the PVC frame with a low-cost wood structure would greatly reduce the total cost, be easy to do, and move the CBA from a net loss to a net benefit.
On the Benefit side, selecting lettuce crops with a shorter harvest time could increase yield by making room for another seasonal growing cycle. With these adjustments, the LF would begin to accrue measurable, ever-increasing cost benefits and savings over time.
Conclusion
Doing the CBA was instructive. It sensitized me to the issue of cost. The CBA also gave me an appreciation for the amount of work it takes even for a very simple, small hydroponic setup. A CBA performed on a larger, more complex, automated home hydroponic system with multiple crops would be vastly more data intensive.
Finally, as an essentially quantitative exercise, the CBA did not factor into the Benefit component of the analysis any intangible, qualitative factors (e.g., grower satisfaction) as other more sophisticated CBA models do. My LF will live on!
