Farming’s Biggest Expense…Shipping

Vertical rooftop farms are vertically placed on tops of buildings but that’s not why they are successful as “vertical farms”. The fact that they can add value to their end product creates greater profit potential. How they do it is through sales to local CSA groups and to restaurants located in the immediate vicinity. Vertical integration of sales means that a value is added to the finished product thereby improving the net income for the farmer.

Growing in urban settings is gaining traction primarily because there is greater value in local food but the farmer has more to gain by eliminating the cost of shipping. The cost of freight alone adds upwards of 25% to a lb of lettuce. If that cost is eliminated, the revenue can be kept on-site and increase profits due to transportation as well as reducing shrinkage. If produce can be sold quickly after harvest, there is much less waste. A more fresh flavor and personalized touch also gives urban farmers a chance to turn greens into “green”.

The comments below were taken from a recent NY Times article describing the success of Bright Farms, Gotham Farms and Lufa:

When Lufa Farms began selling produce to customers in Montreal in late April, it signaled what could be the beginning of a tantalizing new era in the gastronomic fortunes of that Canadian metropolis.

For a traditional farm, he said, it is not unusual for lettuce to travel more than 1,500 miles over five or six days to a supermarket shelf, which can cost as much as $1 for a head of lettuce that will sell for $2. By improving the energy efficiency of food production, Mr. Lightfoot contends BrightFarms can change the economics of farming.

After four years of developing the business, building the greenhouse and refining growing techniques, Lufa Farms has started delivering baskets of produce to local subscribers: $22 for a six-pound basket and $30 for a basket weighing about nine pounds.

With more than 400 customers signed up and more joining daily, Mr. Lynn, a 60-year-old technology entrepreneur who founded, ListenUP! Canada, a hearing aid chain, says Lufa Farms can enroll a thousand customers, break even this year and reap a 15 percent profit in the future.

“Unlike a lot of start-ups, we’re not trying to find a market,” Mr. Lynn said. “We know there is a demand for this.”