The Economics of Greenhouse Vegetables Raymond Joe Schatzer ...

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esidual income left after paying all resources an opportunity return including all labor and management. We estimate the total costs of producing tomatoes with the bed culture system as 70.1 cents per pound. With the bag culture system, we estimate the total costs of producing tomatoes as 63.2 cents per pound. The expected return to risk for cucumbers under the bed culture system is $11,719 and for the bag culture system is $23,266. The total costs of producing cucumbers with the bed culture system is 71.9 cents per pound and with the bag culture system is 58.5 cents per pound. From an annual expected profit and lost statement it appears that greenhouse production of tomatoes and cucumbers is feasible. Tables 8, 9, 10, and 11 present for the four production systems the annual cash flows for the assumed twenty year life of the greenhouse structure and an estimate of the present value of each years net cash flow. We calculated the present value using a twelve percent discount rate. The expected net present value of growing tomatoes with the bed culture system is $91,493. For the bag culture system, the net present value is $139,723. The expected net present value of growing cucumbers with the bed culture system is $63,332. For the bag culture system, the net present value is $154,969. The net present value is greater than zero after five years for growing tomatoes with the bed culture system and after four years with the bag culture system. For growing cucumbers, the net present value is greater than zero after six years with the bed culture system and after four years with the bag culture system. The bag culture systems have the higher net present value because less growing medium has to be purchased every two years. Another measure of the long term feasibility of the investment is the internal rate of return. The internal rate of return is the discount rate that makes the net present value zero. The internal rate of return is 38.76 percent for bed culture tomatoes, 52.29 percent for bag culture tomatoes, 30.93 percent for bed culture cucumbers, and 56.45 percent for bag culture cucumbers. Table 12 shows 4
the net present value for alternative discount rates for each production system. We examined the sensitivity of the net present value to changes in the yield and the product price. Results of this analysis are provided in Tables 13 and 14. Since part of the costs are a function of the yield, the net present value is more sensitive to changes in prices than changes in yields. Price (less than 20 percent) and yield (less than 25 percent) can change the least amount for cucumbers with the bed culture system before the net present value goes negative, while price and yield can drop more than 30 percent before tomatoes and cucumbers with the bag culture system. The bag culture system is less risky than the bed culture system from an long term investment viewpoint. Greenhouse production of tomatoes or cucumbers can provide a producer with a positive net return in Oklahoma. Potential greenhouse producers must recognize that the potential income is very sensitive to the prices and yields that they receive. The potential greenhouse producer must have a market that can take his or her production at a price higher than that received for field grown imports from other regions. Reference Al-Abdulkader, Ahmed. Economic Feasibility of Greenhouse Vegetable Production in Oklahoma, M.S. Thesis, Oklahoma State University, May, 1992, 139 pp. Schatzer, Raymond Joe, Ahmed Al-Abdulkader, and Harry P. Mapp. Economics of Greenhouse and Cucumber Growing. Paper AE-9386 of the Department of Agricultural Economics, Okalhoma State University, Stillwater, July 1993, 17 pp. 5
Page 1 and 2: The Economics of Greenhouse Vegetab
Page 3: in Table 1. We estimated the bed cu
Page 7 and 8: Table 3. Schedule of Labor Operatio
Page 9 and 10: 9 Table 5. Variable Cost for Tomato
Page 11 and 12: 11 Table 7. Annual Income Statement
Page 13 and 14: 13 Table 9. Cash Flows, Present Val
Page 15 and 16: 15 Table 11. Cash Flows, Present Va
Page 17: Table 13. Net Present Values for Al

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