Q: How do you bring these costs down?

There are ways to bring this cost down, but the results are mixed. When we are asked to consult on custom lighting configurations, or stacked rack systems, we usually decline. We just don’t have the production data to show strong crop yields.

Stacked rack systems in particular can face challenges with air flow, heat and humidity. If you choose to go this route, or build a DIY indoor farm, you may spend quite a bit of time sourcing the parts and testing different configurations.

Market growers should be aware that DIY systems are more risky in the long run, since many problems will not be discovered until you are up and running and trying to make your deliveries.

Growing Indoors – Energy Costs for Hydroponic Lettuce

Lighting costs represent the highest ongoing expense for the ZipFarm.

In the example shown here, we are using 48 LED lighting units, each running at 200 watts.

• 48 lighting units
• 200 watts each to operate
• 18 hours of daily lighting
• Total = 172.8 kWh daily

In 2016, the national average for commercial energy was $0.13c/kWh.

This means that our daily cost for electricity is $22.46.

172.8kWh x $0.13/kWh = $22.46 daily

Costs and Benefits of LED Lighting Technology

Light availability is tied directly to crop yields, so we recommend finding a solution with high enough PAR values to ensure healthy production.

While a higher PAR value will increase energy costs, it will also help you achieve higher crop yields, boosting your bottom line and covering additional energy expenses.

The result is shorter crop cycles and higher yields.

Yield and Commercial Hydroponic Lettuce

We are getting 6.8 pounds of lettuce per ZipGrow Tower on a 3.6-week crop cycle.

If we dedicate half of the farm to lettuce, we will be using 96 ZipGrow Towers for lettuce production. The rest we will dedicate to herbs.

96 towers x 5.6 lbs each = 537.6 pounds each of lettuce and basil over a 3-week period.

Herbs and greens are the most appropriate crops for indoor farming, and they are also some of the most profitable plants to grow hydroponically. (Read more about best crops here. )

We use conservative numbers whenever possible. If you are curious about crop yields, please note that the ZipFarm has been performing above expectations in the field, and most of our farmers find that they have more produce than they anticipated (a good problem to have).

Commercial Viability of Hydroponic Farming – Grow Basil to Boost Your Profits

Herbs are not as big a market as the leafy greens. However, if you can find a market for your herbs they are highly profitable.

As an aside, if you have put together an Italian Pasta recipe recently, you might have noticed that most herbs you find on the shelves are pretty weak.

They often spend a week in transport before they get to the shelf, and then they sit there wilting. They are tired and they taste bland.

Indoor growers have a good opportunity to replace these lackluster herbs with a locally grown variety. In the above video, Ryan Sweeney of Localize farms describes how he is getting big crop yields.

What is the Average Profit Margin on a Hydroponic Farm?

If we dedicate half of the farm to basil and half the farm to lettuce, we will be using 96 ZipGrow Towers each for production. In this case, we are growing Genovese Basil, which performs roughly the same as the Red Leaf Lettuce we are growing.

96 towers x 5.6 lbs each = 537.6 pounds over a 3 week period.

In this case, we will assume that 50% of our production is for herbs, sold at wholesale price of $1/oz, and 50% of our production is lettuce sold a wholesale price of $3.50/lb.

We try to use pretty conservative numbers. We also like to account for a 10% crop loss, especially in the early months of the farm. If you want to check the accuracy of our pricing numbers, we recommend getting pricing information from several sources:

• Retail produce managers
• Food coops and specialty stores
• Whole foods
• Food brokers
• Restaurants

Assuming you have a market for the crops, the general revenue numbers look pretty good. Herbs and greens are the most appropriate crops for indoor farming, and they are also some of the most profitable plants to grow hydroponically.

While indoor production may not solve all the world’s food problems, these are perfect crops for replacing out of state imports and building a small part of the local food economy.

Economics of Hydroponic Farming

There are plenty of places where these crops are in high demand, and the market pricing is healthy enough to justify a closer look.

If you are looking into the economics of commercial hydroponic farming, there are a couple assumptions worth pointing out:

• Hydroponic farms are already profitable. That’s why big corporations have built big greenhouses to grow the crops.
• Greenhouses and, increasingly, indoor farms are also profitable. The barriers are not the economics so much as access to the market.

So far, we have covered:

• Initial startup costs
• Energy costs for operating the ZipFarm
• Production yields for lettuce and basil
• Wholesale pricing for an average market
• Projected revenues on a 3.6 crop cycle

But we are missing a few pieces of the puzzle. Specifically, we need to know how much our overhead costs are. How much does it cost for the labor to run the farm? How about the seeds, packaging, or nutrients? And we haven’t talked about rent or mortgage payments.

If you are looking for more details, check out this introduction to the ZipFarm, where we will cover these costs.

In particular, we will be answering several frequently asked questions:

• What are the average costs of running a hydroponic farm?
• How much labor is involved to bring the crop to harvest?
• What about lighting and energy costs?
• Are the crop prices realistic?