US Greenhouse Trends - Comparison to Netherlands and Finland

May 28,2019

Peter Tasgal: The author is a consultant focused on the agriculture space with previous experience as CFO and board member of a $100 million CPG business headquartered in Montreal, Canada prior to which he was an investment banker for over 10 years. 

His contact information is as follows: Peter Tasgal, ptasgal1@gmail.com, 617-794-4058.

The United States has over 10,000 vegetable and herb growing greenhouses according to the 2017 US Census of Agriculture. However, the majority of production occurs in only a small slice of these. A mere 296 of these greenhouses (2.7% of the category), make up what is termed as the “Large Commercial Greenhouses” category - characterized as being 40,000 square feet or larger. However, the Large Commercial Greenhouse category represents 68% of total square footage and sales. United States production is highly concentrated and much of the growth in vegetable greenhouses has been in “Small Greenhouses” – characterized as being less than 10,000 square feet. As of 2017, there are 9,658 greenhouses of less than 10,000 square feet, a 3.5x increase from 2002, when there were just 2,726.

The United States is “under-greenhoused” when it comes to vegetable production. Below is a comparison of the United States, The Netherlands, and Finland’s greenhouse vegetable production on a per capita basis:

• United States: 0.35 square feet of greenhouse per capita

• Finland: 4.12 square feet of greenhouse per capita

• Netherlands: 31.4 square feet of greenhouse per capita

The reasons for the significant discrepancies among countries include Finland’s climate being much less conducive to outdoor farming than the US, and in the case of The Netherlands, it is a significant exporter around the world. However, these discrepancies are massive. Finland has 12x the production of the US per capita and The Netherlands has 90x the production of the US per capita. Why is this and more importantly how do we increase US production in a significant way?

Commercial Greenhouses – US

The focus of this document is commercial greenhouses, which I classify as those 10,000 square feet or greater. 10,000 square feet was chosen as the US Census shows an average sales figure of just over $6 per square foot for greenhouses of 10 to 20 thousand square feet, implying a minimum $60,000 revenue per greenhouse in the category. Please note this is a minimum and there are farmers doing hundreds of thousands of dollars in revenue in greenhouses less than 10,000 square feet. For analytic purposes it is useful to delineate those greenhouses which are 10 to 40 thousand square feet (“Medium Commercial Greenhouses”) as compared to Large Commercial Greenhouses, those over 40 thousand square feet. The following table summarizes data from the 2017 Census of Agriculture for:

“Total greenhouse vegetables and fresh cut herbs”:

The 1,191 commercial greenhouses represent 81% of greenhouse vegetable production. Within commercial greenhouses, those defined as medium sized are quite small, averaging less than 17 thousand square feet. A 17 thousand square foot greenhouse selling product at a rate of $6 per square foot is generating in the range of $100,000 in revenue per annum. As in any analysis, these figures are averages, and many greenhouses are doing far more in revenue on a per square foot basis. Like anything else, greenhouses are not all the same. Revenues are dependent on crop types, cycles per annum, efficiency of farm, location and sales method.

Benchmarking “Best of Breed”

Finland

Given that Finland is one of the world’s northernmost countries, outdoor vegetable growth is limited. This makes Finland ideally suited for greenhouse production, as well as imported products. Finland imports significant amounts of outdoor grown produce from the likes of Spain, Italy, Greece and other parts of the world. However, there is a significant concern from the Finnish people regarding pesticide levels of imported fruits and vegetables. According to the Luke Natural Resources Institute of Finland, the country is more independent in terms of greenhouse vegetables than it was 10 to 15 years ago.

According to the Natural Resources Institute of Finland, as of 2018, there were 484 enterprises involved in greenhouse vegetable production. This represents 2.1 million m2 of production. 2.1 million m2 equates to 22.8 million square feet of production and an average of over 47 thousand square feet per enterprise. As a comparison, the average vegetable producing greenhouse in the US is just over 10 thousand square feet.

The Netherlands

The Netherlands has been the leader in greenhouse production for decades. In a September 2017 article in the National Geographic it was noted that The Netherlands is the “globe’s number two exporter of food as measured by value, second only to the United States, which has 270 times its landmass.” Comparing US greenhouse production to The Netherlands’ is difficult as the Dutch made a national commitment toward sustainable agriculture in the early 2000’s. However, it does give the US direction as to production and methodologies for the future.

According to Statistics Netherlands, there were 4,990 hectares (approximately 537 million square feet) of vegetable production under glass in 2018 across 1,180 greenhouses. This represents an average of over 455 thousand square feet per greenhouse. For comparison purposes, the average size of a Large Commercial Greenhouse in the US is about 257,000 square feet, just over half the size of the average of all vegetable greenhouses in The Netherlands.

Trends in the US Compared to Best of Breed Countries

When analyzing 10 and 20-year trends in the US vegetable greenhouse industry, findings show them to be in almost direct contrast to the trends for a similar period in Finland and The Netherlands. In the US there has been a rapid increase in the number of greenhouses and total production space, but the average size of each greenhouse has gotten smaller. Similar trends exist relating to commercial vegetable greenhouses in the US, those 10,000 square feet and greater. The number of greenhouses and production space has increased, but the average size of each greenhouse is smaller. In 2007 the average size of a commercial vegetable greenhouse was 118 thousand square feet and in 2017 averaged 76 thousand square feet, a 35% decrease over the decade.

In Finland and The Netherlands the number of enterprises have decreased dramatically. There is a slight discrepancy in terms of average production space. In the Netherlands average production space has increased nominally and in Finland it has decreased, but these trends are much more moderate than those trends in the US. In both the Netherlands and Finland the average size of each greenhouse has risen dramatically over the period. The tables on the following page highlight the long-term trends:

Table 1. US Vegetable Greenhouse Industry

The contrast between countries is quite staggering. The Dutch are the clear industry leaders, distantly followed by the Finnish, and even more distantly followed by the US. Additionally, the trends in each of Finland and the Netherlands are highly consistent on a year-over-year basis over the long-term. Looking to the future of the US commercial vegetable greenhouse industry, similar trends are expected to those that Finland and The Netherlands have experienced over the past 10 to 20 years. Looking forward 10 years from now, I would expect the average commercial greenhouse in the US to be significantly larger than 76 thousand square feet.

Basis for Trends in The Netherlands and Finland

Some of the underlying reasons for the trends outlined above for the Finnish and Netherlands greenhouse industries are outlined below:

• Aging Farmers – The farmer population is aging. Those next generation farmers who have chosen to remain farmers have invested in larger greenhouses with more modern cultivation technology which will allow them to compete on a global scale.

• Professionalism – Maintaining a competitive presence requires professional operations, especially in the highly competitive export market.

• Mergers / Alliances – Given that economies of scale are reached through larger facilities; there has been significant merger / alliance activity. In Finland, for example, there are currently 3 to 4 entities representing 70 to 80% of the production of lettuce and herbs.

• Desire for Local – In Finland there is less dependence on imported produce than 10 to 15 years ago. People want local produce. At those times when local is not accessible, consumers still want to know the origin of their produce. There is a major concern in Europe regarding levels of pesticide use by outdoor farmers in the major European growing areas - Spain, Italy, Greece.

• Renewable Energy Sources – The latest technology in greenhouses is expected to utilize “renewable energy resources”, potentially making greenhouse production carbon neutral. This would quell a lot of the discussion regarding the balancing act between greenhouses using less water than outdoor growing; but using more energy resources for lighting and temperature maintenance.

  The basis for trends in The Netherlands and Finland are directly relevant to the United States applying to:

  • Aging farmers

  • Desire for locally grown food

  • Concerns as to farming practices of food exporters

  • Pesticides

  • Energy usage / Ability to use renewable energy

  • Environmental volatility

  • Population growth

  • Water scarcity

    A significant number of these could be mitigated through the building of technologically advanced greenhouses and other forms of CEA within the United States. There are highly experienced commercial greenhouse manufacturers in the United States, The Netherlands and around the world who can bring the latest technology to the US market (See Appendix A – Overview of Greenhouse Manufacturers).

Summary:

Currently the United States is “under-greenhoused”. There are many reasons why it is important and possible for the United States to have more greenhouses over the near and long-term. The United States can be an efficient operator of greenhouses, similar to best of breed countries - The Netherlands and Finland, if some trends over the past two decades are steadily reversed. Growth in vegetable greenhouses will need to be focused on Large Commercial Greenhouses as compared to Small Greenhouses. The technology and capital needed to build large greenhouses is expensive. However, the end result of building such greenhouses will help mitigate some of the biggest issues of our time – energy usage, water scarcity, consumer knowledge of food origin, and growth inputs.

© 2019 - The Under-Greenhoused U.S. - Peter Tasgal