The industry is better positioned than most agricultural industries to withstand adverse climatic conditions.
Melbourne, Australia (PRWEB) December 18, 2013
Hydroponic farming involves growing crops primarily without soil, either under cover or outdoors. The ability of hydroponic farmers to grow crops with higher water efficiency and under controlled conditions has enabled them to better withstand unfavourable weather conditions that have plagued the agricultural sector. The Hydroponic Crop Farming industry is flourishing, with revenue forecast to increase by an annualised 6.4% in the five years through 2013-14. Adverse weather conditions have affected the crop supply of soil-based farmers, and thus reduced competition in retail markets. The reduced competition has increased demand for hydroponic produce, thus boosting revenue. Industry revenue is forecast to rise by 3.0% in 2013-14, to reach $933.0 million.
Industry profit margins have expanded in the past five years, as increased capital investment has gradually reduced unit costs. IBISWorld industry analyst Nick Flores states “investment in automation to regulate variables such as temperature and moisture is increasingly being undertaken to optimise the cultivation process and improve yield and quality.” Also, supermarket chains Coles and Woolworths have increasingly become a key sales channel for fruit and vegetable produce. This has particularly benefited the larger players, which are able to supply large quantities and are more likely to attain economies of scale. The smaller players benefit from grower-run cooperatives that consolidate their output to meet minimum supply quotas. The industry has a multitude of small owner-operator enterprises, but is exhibiting moderate levels of consolidation as firms that spend on capital investment gradually obtain smaller unit costs and larger margins. A rise in health consciousness is projected to support industry growth over the next five years, as consumers are increasingly made aware of the benefits of having a balanced diet and an active lifestyle. According to Flores, “the industry's focus on reducing the use of pesticides and chemicals will boost the profile of the industry.” Enhanced production methods and better storage and transportation are expected to support export growth in the next five years. Australia's geographic proximity to a rising Asian middle class, armed with growing disposable incomes, represents an opportunity for industry players.
There are no major players in the Hydroponic Crop Farming industry. As such, market share concentration is low, but is gradually growing given the rising capital investment and research and development in the area. The industry is characterised as having several small players that tend to specialise in certain crops and geographic locations, and are able to use to smaller patches of land near capital cities. The use of this land gets operators closer to their markets and lowers transport costs. For more information, visit IBISWorld’s Hydroponic Crop Farming report in Australia industry page.
Follow IBISWorld on Twitter: http://twitter.com/#!/ibisworldau.
IBISWorld industry Report Key Topics
Hydroponics is a method of growing plants without soil, using mineral nutrient solutions in water or using different forms of media. Operators in the industry grow crops under protective cover or outdoors.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Basis of Competition
Barriers to Entry
Technology & Systems
Regulation & Policy
About IBISWorld Inc.
Recognised as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every Australian industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Melbourne, IBISWorld serves a range of business, professional service and government organisations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com.au or call (03) 9655 3886.