Ace Tomato Co. Inc. is a grower and packer of tomatoes in California, the leading tomato producing region in the US,[1] itself the second largest producer in the world, only after China.[2] Ace Tomato ships two million cartons of tomatoes every year throughout North America and Asia. The company is involved in all production processes, from seedling selection to de-greening and packing.[3] Like other California based tomato producers, Ace Tomato has seen its margins decrease due to water costs going up, a direct effect of climate change.[4]
Increasing global warming effects are predicted to worsen the outlook for the fresh tomato industry. The World Bank predicts global temperatures to rise an average of 4ºC by 2050, bringing droughts (or severe droughts in the case of California), flooding of land and extreme weather. This will lead to a decrease in crop productivity.[5] Greenhouse emissions will also go up. Currently, agriculture is already negatively affected by these gases. Ironically, the sector accounts for 25% of its emissions.[6] These changes will happen in a context where the world population will increase to 9 billion, resulting in greater food demand, and transformation of land from agricultural to urban.[7]
Operations in the fresh tomato sector follow a linear model: producers purchase agricultural inputs like improved seed and fertilizer, plant and grow tomato plants in the soil, using irrigation and crop protection, harvest and storage the crops, de-green and pack tomatoes when they are ready to be marketed, and ship them off to clients around the country or abroad.[8]
Companies like Ace Tomato have mitigated part of the negative cost effects of climate change, improving efficiencies in their current model, for example by using higher yield tomato varieties or expanding their facilities,[9] to increase volume and reduce per unit costs. However, these innovations are insufficient to eliminate their production vulnerabilities, subject to climate change effects in the mid- and long run.
A disruptive strategy for Ace Tomato would be to change its operating model, thinking beyond costs and in environmental terms. The company could reduce its negative environmental impact by cutting water consumption, using alternative growing mediums, and reducing gas emissions, decreasing inputs like electricity or fertilizers, or minimizing transport needs. An option for Ace Tomato would be to split its current production facilities in California into smaller production units closer to the customers, using energy efficient greenhouses or urban hydroponic systems.
Hydroponics is an agriculture production method that grows plants in nutrient-rich water that is constantly reutilized in closed cycle facilities, eliminating the need for precipitation, and minimizing water and nutrient loss of irrigated ground systems.[10] Greenhouses have traditionally needed high levels of energy and inputs to maximize production. However, improved facilities can now generate high yields, with low energy and inputs consumption.[11] In the Netherlands, greenhouses provide 10 percent of the country’s power, and will all be climate-neutral and produce zero carbon dioxide by 2020.[12]
By adopting this new model, Ace Tomato could reduce its water consumption, since hydroponic and greenhouse systems are water efficient. It could reduce electricity needs as these systems are becoming energy neutral, or can even produce surplus energy that derive into additional sources of revenue. Furthermore, by locating production near the customers, warehousing and de-greening needs are lower, also reducing energy consumption, especially in terms of refrigeration. Fertilizer and other input needs in these systems also decrease, given their use efficiency, resulting in lower gas emissions during tomato production, as well as lower environmental costs associated with the production of these inputs. Finally, by splitting production plant locations, transport needs would be significantly reduced, also impacting the carbon footprint.
[1] California Tomato Growers Association, http://www.ctga.org
[2] USDA Economic Reserach Service – Tomatoes, https://www.ers.usda.gov/topics/crops/vegetables-pulses/tomatoes.aspx
[3] Ace Tomato Co. Inc., http://www.lagorio.com/companies/ace-tomato-company/default.htm
[4] CNBC “California’s tomato business is rotten – and farmers are seeing red”, 28 July 2016, http://www.cnbc.com/2016/07/28/californias-tomato-business-is-rotten–and-farmers-are-seeing-red.html
[5] World Bank (2012) “Turn down the heat. Why a 4ºC warmer world must be avoided,” http://documents.worldbank.org/curated/en/865571468149107611/pdf/NonAsciiFileName0.pdf
[6] World Bank (2016) “Enabling the Business of Agriculture 2016,”(http://eba.worldbank.org/~/media/WBG/AgriBusiness/Documents/Reports/2016/EBA16-Full-Report.pdf)
[7] World Bank (2012) “Turn down the heat. Why a 4ºC warmer world must be avoided,” http://documents.worldbank.org/curated/en/865571468149107611/pdf/NonAsciiFileName0.pdf
[8] Penn State Extension – Tomato Production, http://extension.psu.edu/business/ag-alternatives/horticulture/vegetables/tomato-production
[9] Ace Tomato Co. Inc., http://www.lagorio.com/companies/ace-tomato-company/default.htm
[10] MIT (2015) “Hydroponics,” http://web.mit.edu/12.000/www/m2015/2015/hydro_agriculture.html
[11] Wageningen University (2015) “Growing tomato in the high-insulated VenLow Energy Greenhouse,” https://www.wur.nl/en/article/Growing-tomato-in-the-highinsulated-VenLow-Energy-Greenhouse.htm
[12] Hortist (2013) “Dutch farmers generate electricity from Greenhouses,” http://www.hortist.com/technology/dutch-farmers-generate-electricity-from-greenhouses
The blog is well written. It touches upon the same topic as covered by Ankur and me in our blog (Need of the Hour) i.e., impact of climate change on the agricultural sector, and picks tomatoes as an example to showcase the impacts.
The most interesting part of the blog for me is the elaborate discussion on the possible solutions to mitigate the effects of climate change on the tomato industry, especially the discussion on the hydroponics method of production.
From its description, the method seems to hold considerable promise and I believe it can be adopted for other crops too.
The only other information that I would have liked to see on the blog would be an example of an industry or geography where this method has been used or is currently being used and has been successful.
Indeed very interesting blog. I had two thoughts when I read it:
First: I learnt about hydroponics just a few weeks ago and am wondering about the scalability of this technology, in particular in this context. Is it really yet at a level that ACE could adopt it, given their size?
Second: Apart from that I was also surprised to read that ACE is exporting their tomatoes to Asia. From an ecological stand-point this seems very unreasonable, not to speak about the economics. I would love to understand this better…
40% of US tomatoes are grown in greenhouses. In theory all greenhouses could use hydroponic systems, and indeed many are switching into this technology. In some supermarket chains, like Wholefoods, one can find hydroponic tomatoes occupying up to 1/5 of the tomato aisle.
A further issue that any agricultural product and particularly greenhouses have is the need for space and the lack thereof. This of course also increases costs tremendously and limits the capacity of the producers.
The firs time I came across hydroponics was actually in the greenhouses of the charity we did our Splash projects in. Their experimentation with seedlings not only included the utilization of hydroponics, but also the multi-stores stacking of the seedlings to significantly decrease the amount of space needed and increase the amount of seedlings grown. The water would be dispersed from the top layer, ensuring that all levels received enough and was then recycled. The plan is to expand this throughout the greenhouse and as a result create a source of regionally grown food within a community as dense as Singapore.
This is a great idea (and well written blog post too). One additional benefit is that the environmental impact of the agriculture is entirely contained within the greenhouse. This reduces the risk of some negative environmental externalities like the introduction of fertiliser and other chemicals into rivers and water tables, or the disruption of natural processes like seasonal animal migrations.
This is a very informative article with a very interesting proposed solution. Reading it, made me think of the challenge that companies in the food/agriculture industry are facing towards becomig more sustainable, given the fact that they internalize a limited impact of the environmental hazard they face. Thus it is critical that governments and international organizations will play a key role in setting the right regulatory framework to provide incentives to companies such as Ace Tomatoe in implementing measures that will reduce their environmental footprint.
Very interesting and informative posting. This is a very good example of mitigating environmentally negative impact into creating additional value such as cost-saving. Food / Agriculture industry has a lot of potential to become environmental-friendly operating models, but not enough attention has been paid. I wonder hydroponics tech is scalable and even adaptable to other agriculture business (other than tomatoes).