OK…..let’s kick this article off with some facts:
- Aquaculture is an established, profitable, rapidly expanding industry.
- Greenhouse horticulture (including hydroponics) is a highly developed viable commercial enterprise globally.
- ‘Organic’ fruit and vegetables are in high demand and realize substantial price premiums in most Western markets.
Commercialized iAVs represents the symbiotic integration of 1, 2 and 3 above. The economic outcome is greater than sum of its parts:
The big stumbling blocks to organic certification of ‘aquaponics’, it seems, are the various soilless plant growing ‘systems’ being advocated. While a couple of bold certifiers have overlooked this part of the organic credo, the majority of organic certifiers have made it clear that if it isn’t growing in soil, then it isn’t “organic” – and it won’t be getting certified. iAVs uses inert sand (Silicon dioxide) as the growing media.
Sand + organics + microbes = soil.
This means that the soil ecosystem (media) used in iAVs is consistent with organic certification – without all of the argument that will invariably attend soilless culture.
Another important factor is that of the 2 – 3 year withholding period from the first expression of interest to the time one can actually hang out their organic shingle.
If you can demonstrate, however, that the sand is derived directly from a pristine rock source (‘virgin’ granite or quartz) – and subsequently is contained in an impervious food-grade liner inside a controlled environment (like a greenhouse) – it seems logical that you should be able to reduce the withholding period to as little as a few months.
The point is that you’ll have to satisfy the certifiers that there is no risk of contamination with existing soil – nor potential contact with other pollutants (such as carcinogens, GMO pollens, herbicides, insecticides, heavy metals, ozone, radio-isotopes, etc.)
To the moist, oxygenated sand is added complex organic nutrient precursors (fish ‘wastes’ ) plus water.
The super oxygenated sand plus organic ‘wastes’ results in a complex interactive rizosphere and vibrant soil ecology comprising hundreds (if not thousands) of micro/macro-fauna species.
Together, this matrix of moist inert sand particles, plus complex organic compounds, plus supercharged aerobic soil organisms = soil.
Why is all of this important?
Organic produce wholesales at two to three times the price of non-organic produce.
So, how does certification impact a business model and enterprise viability?
For the answer to that, let me refer you to Mark.
“Non-organic CEA-GH profitability – presuming competence and developed markets – is an established, proven enterprise model.
Any given production area (A), times the mean yield rate (Y), times the mean unit price received (P) = Gross value produced per unit interval.
(A x Y x P) = G
Gross sales (G), minus Fixed costs (F), minus Operating expenses (O) = Net profit (N).
G – (F + O) = N
The direct relative comparisons below presumes similar location(s), same land, structure, energy, finance, regulatory and labor unit costs, fish feed ≈ soluble nutrient costs, same post-harvest and distribution/marketing unit costs, etc.]
For a state-of-art CEA Hydroponic tomato venture:
- set values: A , Y and P each (all) to 1 (100% of any area, yield and price values you’d accept as reasonable/valid.)
- therefore, G = 1.0 (100%) – at whatever scale, yield and unit price you ‘want’ (presume)
- set F to 0.3 (30%) and O to 0.6 (60%), relative to gross production value derived:
- therefore, N = (1 – 0.9) = 0.1 = net margin of + 10% of gross sales (approximate best case scenario for hydro grown tomato)
For a state-of-art CEA iAVs tomato operation, relative to above CEA Hydro tomato production:
- iAVs Scenario A (without any fish sales or any fruit yield gains – or intercrops):
- set values A = 1, Y = 1 (same as Hydro) and P = 2.5 (median premium received for Certified Organic product)
- therefore, G = (1 • 1 • 2.5 ) = 2.5 = 250% (of prevailing non-organic production gross value)
- set F [relative to Hydro G above (typ.)] = 0.4 (to incl. added cost of aqua related devt./equipment)
- set O [relative to Hydro G above (typ.)] = 0.7 (to incl. added cost of aquaculture operations)
- therefore, N = (2.5 – 1.1) = 1.4 = net margin of +140% (14 times the profitability of non-organic.)
- i.e., employ $1.1 to generate $2.5, ‘keep’ $1.4
- iAVs Scenario B – median case – ( with fish sales at 10% of gross, +10% fruit yield gain, median premium)
- set A = 1, Y = (0.1 + 1.1) = 1.2, and P = 2.5
- therefore, G = (1 • 1.2 • 2.5) = 3.0
- set F = 0.4 and O = 0.7 (as above)
- therefore, N = (3.0 – 1.1) = 1.9 = net margin of +190% (19 times the profitability of non-organic.)
- i.e., employ $1.1 to generate $3.0, ‘keep’ $1.9
- iAVs Scenario C – worst case – ( with fish sales at 5% of gross, 10% fruit yield reduction, low price premiun)
- set A = 1, Y = (0.05 + 0.9) = 0.95, and P = 2.0
- therefore, G = (1 • 0.95 • 2) = 1.90
- set F = 0.4 and O = 0.7 (as above)
- therefore, N = (1.9 – 1.1) = 0.8 = net margin of +80% (8 times the profitability of non-organic.)
- iAVs Scenario D – best case – (with fish sales, +20% yield gain, and top premium (skilled marketing) received
- set A = 1, Y = (0.1 + 1.2) = 1.3, and P = 3.0
- therefore, G = (1 • 1.3 • 3.0) = 3.9
- set F = 0.4 and O = 0.7 (as above)
- therefore, N = (3.9 – 1.1) = 2.8 = net margin of +280% (28 times the profitability of non-organic.)
- apply/employ $1.1 to generate $3.9, ‘keep’ $2.8
- iAVs Scenario E – socially responsible case – (with fish sales, +10% yield gain, low price premium received plus better than ‘living wage’ w/ benefits including medical paid to laborers (vs. minimum wage ‘slaves’)
- set A = 1, Y = (0.1 + 1.1) = 1.2, and P = 2.0
- therefore, G = (1 • 1.2 • 2.0) = 2.4
- set F = 0.4 and O = 1.0 (to include increased wages and benefits paid)
- therefore, N = (2.4 – 1.4) = 1.0 = 100% net margin (10 times the profitability of non-organic.)
- apply $1.4 to generate $2.4, ‘keep’ $1.0, ‘contribute’ $0.3
Clear as a septic tank? Right?
OK…..if you’re like me, you might find a graphical representation useful.
Area of the squares (below) are directly proportional to the dollar value produced (G = market value) per unit area/time.
- Fuchsia = the proportion of gross income that is a Fixed cost
- Orange = the proportion that is an Operating expense.
- Green = the relative Net margin (profit).
Gross G = 1X represents a typical commercial hydroponic tomato grower’s costs and returns. The larger areas represent some of iAVs scenarios explained above.
What the graphic illustrates is that the effect of doubling (or greater) one’s sales price has a FAR greater positive effect than merely doubling the bottom line (profitability).
Optimising marketing has a far greater effect on favorable investor returns than does the grower’s ability (expressed in terms of the yield level).
So, why is that important?
As an investor, would you rather receive a 10% return on your capital – or 100% – or 300%?
Let’s be clear, there are no yield claims or unit value assumptions applied here. It’s a simple direct comparison of one methodology – and the range of unit market value – relative to the other.
If it is not already obvious from the above, note that the value of fish production in iAVs represents from 5 to 10% of the total Gross valuation generated. Therefore, it is my/our assertion that iAVs is economically dominated by “Organic Olericulture”, aka Horticulture first, second and probably third. In economic terms, the fish production is largely irrelevant excepting the benefit provided by their ‘waste’ products following botanical-availability (bio-conversions) occurring in the soil ecosystem.
If commercial hydro-grown tomato is profitable, then from 8 to 28 times GREATER profitability per unit area/time is the difference that organic certification makes.
And the aquaponics methodology best suited to organic certification?
You guessed it…..the Integrated Aqua-Vegeculture System – iAVs.