2018 ASHS Annual Conference

The economics of water use in the green industry was studied by the economics team of the Clean WateR3 grant project by utilizing an economic engineering approach to estimate the initial capital investment and production costs for baseline and alternative nursery and greenhouse irrigation models. The models simulated representative characteristics of nursery and greenhouse operations and proper irrigation equipment and protocols for the crops being studied. Partial budgeting modeling procedures were then used to measure the costs and potential benefits of short-run changes in cultural practices in the production systems analyzed. This proven technique is used when comparing two or more similar production systems (e.g. a benchmark system and one or more alternatives). All systems compared faced the same conditions, the same fixed or overhead cost parameters, and varied only in explicitly-specified components.

The partial budgeting technique was also used to compare the negative effects (costs added) of applying a new irrigation treatment relative to a base or standard treatment to the positive effects (cost savings) associated with the new treatment. Therefore, this project required the consideration of the returns associated with treatments and changes in the structure of the production/irrigation costs. Aspects of costs and returns that do not change with the treatment relative to the base were not considered in this portion of the analysis. Thus, we examined only the effect of the proposed changes in practice, assuming all other aspects of the green industry value chain remain unchanged.

The overall economic impacts were evaluated by measuring four separate effects including: (1) added costs of production incurred by the use of alternative materials, cultural practices, and/or irrigation treatments; (2) added income resulting from increased levels of production and/or price premiums associated with higher quality crops; (3) costs savings realized through more efficient management practices or reduced inputs; and (4) income that may be lost when substituting one crop for another in the production system. Data will be presented to show the potential impact of such practices on the overall cost structure of the model systems studied.