The Potential for Greenhouse Tomato Production Expansion in Florida

The U.S. fresh winter tomato industry and Mexican tomato production have been engaged in a trade conflict since the early1970s. Given that tomato is the highest valued fresh vegetable item, the fresh tomato market in the U.S. is open for rent seeking actions of importers and domestic producers. While importers try to increase their shares by lowering the prices, domestic producers attempt to keep tomato as a high-valued item and at the same time avoid any costly investment in production practices (such as greenhouse production). However, the competition with Mexican greenhouse tomato producers push winter tomato producers (particularly, in Florida) to search for new investment opportunities. This paper utilizes net present value and real option analysis to investigate whether it is beneficial for Florida tomato producers to invest in greenhouse production methods to stay competitive in the tomato market during the winter season

Risk in Investment Decision Making and Greenhouse Tomato Production Expansion in Florida

The outcomes of agricultural investment decisions are affected by the risk in price, cost, and yield outcomes. To examine those risks, net present value models with Monte Carlo simulation are used to analyze the viability of greenhouse tomato investment decisions. The analysis is further extended by utilizing a real options approach. The results indicate that a grower would choose to continue field-grown tomato production due to high option values and risk aversion. Moreover, some policies or market conditions which increase credit availability, decrease energy prices, reduce tomato price fluctuation and/or facilitate effective risk management strategies would make the greenhouse production preferable