Farming Magazine - April, 2013


Opinion: When the New Farming Rises High Above the Old Economics

An agricultural forum for the progressive farmers of the Northeast.
By Martin Harris Jr.

Here are two numbers. The average value per square foot (sale price, not construction cost) for a three-bedroom condo or co-op apartment space across New York City's Manhattan Island was $1,450 in 2010. The average value for farmland across the nation was $2,140 per acre, or 43,560 square feet at 5 cents per square foot.

Photo courtesy of keha76/morguefile.com. 48 |

In parts of Manhattan, some of the most expensive residential real estate in the country is being used to raise crops that can barely make a farmgate profit when raised on some of the least expensive. In this sector of agriculture, old notions of agriculture as primary economic sector wealth generator, and newer notions of food as a government-managed essential to be priced as low as possible to nonfarmers and/or as a basic "entitlement" to be furnished cost and labor-free by means of tax redistribution to those who can't provide for themselves, are now looking increasingly obsolete.

If you were growing corn on 5-cents-a-square-foot land, and if you equaled the national average of 160 bushels an acre, and if you sold it for, say, the recent $7 price, you grossed 3 cents per square foot, before considering your input costs. A normal urbanite can grow tomatoes using a square foot on the balcony or in the library and gross about $20 in avoided cost, if 10 pounds of fruit were harvested from two plants and therefore not bought at the local market price of, say, $2. By that measure, farming on elevator or walk-up acreage is 667 times as profitable as farming on cropland acreage. But land isn't the major input cost for corn. Land can be rented for well under $300 per acre, so its cost per bushel is well under $2, and when cropland is owned mortgage-free, it isn't counted as any cost at all under standard farm bookkeeping, and it isn't counted as a major input cost for urban farming either, where the square footage used by two tomato plants could just as easily be taken by a faux elephant foot umbrella holder of zero productive value.

The major input cost is labor. For 2012 corn, Iowa's budget showed $30 per acre for 160 bushels of corn, along with $222 for land, $258 for machinery, and $358 for inputs like fertilizer, seed and herbicides, the latter two purchased from manufacturers at prices reflecting their own high labor costs. For urban tomatoes, labor is nominally free, equipment is maybe a hand trowel, and a few ounces of inputs are bought with pocket change. Crop transportation, zero for the balcony grower, was around 10 percent of all commercial commodity farmgate-to-retail costs, before recent fuel price jumps, and is now about 12 percent, same as the traditional farm average share of the eventual retail price.

However, the "average" high-rise condo owner or co-op member is in a higher income bracket than can be earned through sole-practitioner tomato cultivation. Therefore they are investing their time in growing tomatoes for reasons of product quality, pride of production, relaxation/entertainment, or even "prepper" fear of a local tomato gap via national supply disruption. All are valid reasons, the same typically deployed for all the new grow-your-own operations that can't be justified in traditional price-cost terms under the "old" dollar-denominated economics.

It's historically interesting to recall that, after the patriotic reasons for World War II-era Victory Gardens had faded away and the lawns-to-gardens movement was still young, it was argued for a long time that supposed cost savings for food was a good reason to grow your own. Food cost is a low percentage of the typical family budget (now less than 10 percent), and general recognition of this made it critical for more credible reasons, like pesticide or GMO fear, to be put forward. A recent argument has been "locavore," as if food can be moved locally by fleets of nearby pickup trucks with less total energy use than cross-country, fully loaded 18-wheelers (it can't), and the most recent one is E. coli avoidance, based on a few instances where commercial table crops were contaminated by migrant workers in a sequence of events unlikely to play out for suburban or exurban growers, and even less likely to take place for apartment balcony arugula growers practicing grow-your-own, or for the new architectural trend in vertical farming: high-rise urban greenhouses. The former is somewhat interesting, from an economics-based, costs-versus-returns point of view, because some intangibles (what's an executive's spare time worth?) and some tangibles (square foot value of high-rise floor space) are ignored. The latter is more interesting, because commercial high-rise greenhouse space is subject to the same rigorous market analysis as any other for-profit occupant of expensive high-rise floor space.

Presently, it's showing up in two architectural forms. One is the purpose-built high-rise urban greenhouse (a 12-story pyramid-shaped building under construction in Link<0x00F6>ping, Sweden, is an example), and the other is the mixed-use high-rise apartment building, part living space for humans and part growing space for their food crops, each function in a tower connected to the other. This latter form is a design model called "agro-housing" and is presently up and running in major Chinese cities and Vancouver, B.C., Canada.

The publicity descriptions for agro-housing are filled with the usual mentions of urban population growth versus rural cropland shortage, "independent living," gray water recycling, and even the possibility of "providing additional income." For the former, writers focus on avoidance of "delivery trucks guzzling fuel" and "food prices skyrocketing" because of droughts, which, of course, don't happen within greenhouses.

The written releases don't say much about returns on real costs. Such high-rises probably cost some $200 to $300 per square foot to build, exclusive of urban land costs. For the greenhouse-only model, it would be much more than outdoor farmland in grower-labor cost, although perhaps less in mechanized farm equipment cost. Ultimately all these costs must be incorporated into apartment dwellers' rent or condo price, consumer purchase price, or some combination of the two - unless the real costs are covered, in whole or part, by other taxpayers not living in or getting food from such vertical farming. The real cost of energy for an all-glazed exterior in a middle-Sweden latitude isn't even mentioned, but there are hints about costs.

In a fairly detailed Wall Street Journal analysis from October 15, 2012, reporter Owen Fletcher mentions "for-profit enterprises," perhaps using the same value-pricing template that enables Whole Foods to charge premium prices for organic produce. He also mentions "nonprofits promoting environmental causes," "governments boosting domestic security," and the undescribed hopes of vertical farming enthusiast and Columbia University professor Dickson Despommier that "technological advances will make greenhouse farming cheaper."

The Swedes are somewhat more specific. The Link<0x00F6>ping greenhouse will house ground-floor corporate offices, generating rents subsidizing the table crop levels above, but we're not told how much of the "real" crop price ("cost of production plus a reasonable profit," to quote an old National Farmers Organization slogan) will show up in the artificial, subsidized retail price. On one side, it's a relatively modern economic phenomenon that now applies as much to traditional farm crops from traditional farmland moving to urban markets for traditional retail purchase as to the "new farming" crops moving through farmers' markets and organic retailers from backyard, community or high-rise sources, where various input costs aren't counted for various reasons. On the other side, it's the ancient serf-householder practice of domestic food production alongside food for the castle and church (the feudal pattern) or alongside a nonfarm job or trade (the early American pattern) coming back into wider use.

Two things seem clear. One is that a 98 percent urban consumer majority can, does and will shift costs and subsidize food production any way it wishes, ranging from governmental transfers to individual contributed labor, and that will now include vertical farming. The other is that, for vegetative crops and some small animal crops (like poultry and fish), the new indoor farming is more reliable weather and pest-wise, more productive square foot and edible quality-wise, physically closer to consumers, and more construction-investment-demanding and more amenable to end user hand labor than large-scale, weather-dependent, remote-location traditional farming. Not that the basic commodity flat farming model will shrink in scope anytime soon (although overall acreage use is declining), but it is already sharing a fraction of the retail market with grow-your-own and farmers' market sources and will soon share the ever-increasing urban consumer market with a fast-growing vertical farming production model as well. No matter which model you see, the absence of traditional full-cost pricing will be there, but will be less than easily visible.

The author is an architect and former farmer.